tv Nightly Business Report PBS March 2, 2017 4:59pm-5:29pm PST
sbusiness report" with tyler mathisen and sue herera. funded in part by -- >> all it takes it a spark. the courage to seek the unknown. to innovate, disrupt. to move us all forward. to explore a different perspective. at nasdaq we connect the world. its ideas, its capitals, its businesses. the people that drive global economy. the future isn't tomorrow, it's right now. all it takes is a spark. nasdaq. >> federal agents search caterpillar's headquarters and shares crumble. >> snap and pop a messaging app
that was once written off is now worth about $35 billion and there are a few reasons why investors scooped up the shares. a sellers market. why timing is everything for the fastest home sale at the highest price? those stories and more tonight on "nightly business report" for thursday, march 2nd. good evening i'm sue herera. >> and i'm bill griffith in tonight for tyler mathisen who is on assignment right now. a rather unpleasant surprise for shareholders of caterpillar today. global industrial suffered their biggest decline in eight months after law enforcement officials raided three of the companies facilities including its headquarters in illinois. certainly something that no shareholder wants to hear about. in response the stock fell more than 4% today making it the worst performing member. morgan brennan tells us what we know at this point. >> reporter: it's a knock on the
door no company wants. law enforcement officials searched three caterpillar facilities today including headquarters in illinois. the u.s. attorney's office for the central district of illinois confirmed the searches and said agents from the irs, the federal deposit insurance corporation and the commerce department were all involved. caterpillar is cooperating with authorities and said, quote, while the warrant is broadly drafted we believe the execution of the search warrant is regarding, among other things, export filings that relate to swiss subsidiary. the matter first disclosed in caterpillar's form 10 k file an updated in the most recent form 10 k filed with the scc on february 15th 2017. the caterpillar's referring to investigation into whether the company tried to evade paying more than $2 billion in taxes by using a swiss subsidiary to sell replacement parts that came from u.s. operations. even with this previous disclosure investors did not seem to like the pictures of federal agents swarming.
pattern signal that the situation could be escalating. for "nightly business report," i'm morgan brennan. >> that decline in caterpillar shares pressured the broader market which pulled back from record levels. material stocks fell along with energy companies and financials. today the closed like this, dow fell 112 points to 21,020. the nasdaq was off 24 and the s&p 500 lost 14. >> and despite today's pullback the stock market is still sitting near record highs are investors ignoring caution signs likewiser interest rates or weaker economic growth. >> reporter: like a great running back the stock market has sprinted from 20,000 past 21,000 with explosive speed but it's also done with considerable strength dragging defenders along the way. the yards have come while stocks have battled a faster rate hike
from the fed and a stronger dlor. it's more than doubled in just the past couple days and the market is increasing priced in a third rate hike this year. made clear that a march hike is a real possibility. >> the economy has behaved pretty much as we expected. in the meantime the balance of risk has really shifted to be even and perhaps lifted to the upside because of the possibleability and the likelihood of some fiscal action. you put all that together and the case for a rate increase has come together and i do think it's on the table for discussion. >> wednesday's 300 plus point rally ignored weaker economic data. powell suggest the u.s. could finally be getting help from broad. >> for the last few years we had considerable global risk and weak abroad and the risks have diminished and growth in europe is a little stronger, inflation's higher. same is true in japan. we see a slightly brighter picture abroad and i think that
will help us. >> it seems likely that's what driving investors is the promise of tax cuts, infrastructure spending and deregulation from the trump administration all of which seem more likely after tuesday night's speech. how the fed could react could become more clear by speeches on friday and chair janet yellen. they're the two most important players on the fed team. for "nightly business report," i'm steve liesman. >> so as he laid out there are many factors driving the market right now. so let's turn to our two market pros. a bull and a bit of a bear for their thoughts on where the market might go from here. mike jones is the chief investment officer at river front investment groups. he's a big cautious on the market and john stol fis is the chief investment strategies and upper hiemer management. welcome to both of you. appreciate it. >> john, let me start with you. we've had an enormous rally in this market since the election. why do you think that there's
significantly more room to run in this market? >> so, really up to say the fundamentals are good. the economic expansion in the u.s. continues to look sustainable and even more so on a month to month basis when you look at the economic data plus we just had fourth quarter reporting for s&p 500 on back of a third quarter that was also positive both in terms of revenues and sales in the fourth quarter. we've got to save fundamentals intact. if anything also the run-up that we've seen since the end of last year through february was only around 5.3% on the dow, 5.7% on the s&p very different than 1987 which a lot of people mention where both the dow and s&p were up 17% a piece in that short period. >> mike, you're not alone in being cautious. some very respected names on wall street are also cautious right now on valuations and
things. my question to you is, what do you think the catalyst will be to break this fever, this rally we've seen since the end of -- since the beginning of the year with the post election period here? what is your biggest fear right now? >> i think my biggest fear, i agree 100% with john that we've had great earnings and that the economic support for future earnings growth is really solid, but even with very importantly stronger earnings expected, that's still putting us at 20 times higher earning expectations and as we saw yesterday the real thing that's driving this market right now is less the fact that earnings are growing and more that we're expecting good things from the trump administration and we're expecting them right now. now, i do believe that the republican congress and president trump are going to agree on tax reform. we're going to get infrastructure spending but we're not going to get it any
time soon. they're doing to tackle health care first, tax reform isn't even on the ayen da until the summer. infrastructure spending isn't until the fall. that means that all those goodies that trump talked about in his speech we're going to have to wait until 2018 earnings to see those reflected in company results and at 20 times earnings and rising interest rates, that just says to us the market's a little frothy here. >> john, what about that because there are other people who agree with what mike's saying, this market is priced to perfection based on the assumption that the trump administration will be able to achieve almost 100% of its agenda and do it quickly. >> sue, what it comes to our thinking on this, we have to say our target for the s&p 500 for 2016 was 2,300. it was realized by the market one month and nine days later this year. it came through in early february.
that said, you know, we think the trump election has been a good tailwind for the market but again we think it's fundamental and in terms of multiples, the average pe multiple of the s&p 500 average 12 month trailing pe all the way back to the end of 1965 is 16.3 times. so at 21 trailing right now, that would seem high but the average yield on the ten year treasury since 1965 is 6.4 to 6.6%. the current yield on the ten year treasury last i looked was about 2.45%. >> so mike, does this mean you're not buying anything right now? are you looking to pick up some bargains at some point? what are you doing right now? >> well, we put a lot of money to work right after the day after president trump was elected. we've taken about half of that incremental money out of the market. we're looking for an opportunity to take the other half out.
we think the market's gone a little too far too fast. we agree with the fundamental underpings but we think optimism's gotten a little ahead of itself. we're looking for an opportunity to lighten up. the only thing that makes me think we may not see a pullback but chop sideways is there have been a lot of people who have missed this rally. there are a lot of frustrated people with cash on the sidelines. that may mean we just get a long period of cons sow addition. >> you get the final word. a little less than 30 seconds. plain vanilla if you will, where would you be putting your money right now? >> we would be diversifying broadly. we would look for opportunities on a global basis including emerging markets and develop markets but we're still overweight the u.s. and we'd be looking to add to small and mid caps which have actually underperformed the large caps so far this year. we think they'll do better going
forward. >> thank you both. appreciate it. >> a lot of action today at the new york stock exchange where shares of snap the parent company of the popular messaging app snapchat made its wall street debut. the stock soared 44%. the biggest ipo since alibaba. >> reporter: snap certainly popped today. the company priced at $17 per share but then it opened at 24, closed at 24.48 that's a successful opening. a 44% pop giving the company a market capitalization of about $34 billion. that's big league. it's in the same neighborhood as big namds like travellers or deere, general mills, even marriott. so while the healthy pop today? there were several reasons for it. first, the markets are trading near historic highs. remember we just saw the dow, the s&p and the nasdaq all
hitting new records and having their best day of trading in 2017 just yesterday. that's a recipe for higher valuations. and a strong market is generally a necessary but not a sufficient factor. you need other things to happen. second, investors have been starved for a high demand ipo for a long, long time. we haven't seen an ipo this big since alley bab about back in 2014. snap say household name and mill len yls have embraced it. they really do understand how it works. finally the number of shares in the company that's been floated is relatively small. it's just about 14% of the total shares outstanding. so there's not a lot of supply out there and that tends to drive up investor appetite for the stock, a lot of tech companies do this. they float 10 to 15% of the shares. can question become can snap finally put the pep back in the ipo markets step? it's not quite clear yet. it's still early but my bet is
we'll see things start to pick up as soon as this spring. that's the middle of april. for "nightly business report" i'm bob pisani at the new york stock exchange. >> the snap ipo was a big topic of discussion at the ypo edge conference made up of thousands of professionals from all across the global. tyler mathisen was there and asked the executive chairman of cisco about snap and whether it's the type of company that reflects the transition from the internet age to the digital age. what will occur over this next two decades, but i have seen the movie before. this is like 1990 to 2010. the internet air and during the '90s we grew at 65% a year. so the key you've got to capture these transitions and they run for a long time. some companies do very well, some have setbacks. >> mr. chambers also said that regulatory changes are needed in this country to support startups and that the country needs five times as much startups going
public to meet economic growth targets. still ahead. why americans are borrowing more than ever to buy a vehicle? the number of americans filing for unemployment benefits last week fell to a near 44 year low. jobless claims dropped 19,000 to 223,000 pointing to a further tightening of the labor market. some experts say labor market tightness combined with rising inflations could prompt the federal reserve to raise interest rates. >> the consumer financial protection bureau born out of the financial crisis is now at the center of the fight in
washington to rollback some of those regulations governing wall street. that expectation of getting rid of some of those rules is in part what propelled the stock market higher. john harwood spoke to the man in charge of that agency known as the financial consumer watch dog, what did he tell you? >> reporter: he was appointed by barack obama but donald trump's washington is entirely different. i asked him about complaints from republicans in business that he is an unaccountable regulator. >> i think it's completely ill founded. there's never specifics in those kinds of claims. but what i would say is accountability is really at the heart of this agency. we're all about holding financial companies large financial companies accountable for complying with the law and treating people fairly. >> reporter: doesn't accountability mean that somebody in government above you can fire you or change your budget? >> what they can do is replace you from time to time. that's the way the independent
agencies work. nobody's talking about firing janet yellen at the federal reserve. nobody's talking about firing other independent agency heads. that's the principal of our government. >> reporter: replace you from time to time. his term runs out in july 2018. the question is whether he'll make it that long. >> that's my question. having said all that, what do you think? will he be fired? >> reporter: here's the question. there are couple of options. one of them is to -- if a legal case comes out in favor of the way republicans want it to, president trump could unilaterally fire him. another way is the for the republicans to simply abolish the agency in a dodd-frank reform bill. a third way is to change the agency so it's a commissioned structure not a singular regulator and having congress control the purse strings rather than having the money flow automatically from the federal reserve. the question is with all the other fights going on in donald trump's washington, do republicans want to take this one on too. elizabeth warren would be a high
profile opponent of course. >> to your second point, there was a survey today that showed just 12% of americans have a favorable view of that agency. so does it have an imagine problem perhaps as well as a political one? >> reporter: for sure and it's part of the government. government itself across the board has a terrible image. the question if you engage a fight with democrats saying no you're going to take away a consumer agency, republicans saying we need to free up business, does that change how that opinion goes? we've seen what happened on obamacare which is that opinion has gotten more positive as republicans have gotten closer to repealing it. that dynamic could repeat. >> thanks, john. >> you bet. >> adele helps put the breaks on sales at barnes & noble and that's where we begin with tonight's market focus. the book store chain says same fell more than 8% citing week demand for adult coloring books but also a tough comparison to
2015 when it had strong sales from adele's blockbuster album 25. profit also fell in the with the company saying things aren't going to improve any time soon. as a result it cuts its earnings and sales outlook for the full year. you put it all together and they fell more than 8% to $9.05. fitch set a challenging and retail environment hurt quarterly reports causing it to miss estimates it will close 60 stores but the apparel chain still expects same store sales to improve this year. that sent shares up 14%. and kroger's earnings and the revenue beat street estimates but the super market operator disappointed investors with an unexpected drop in same stores sale. food price deflation and expects the operating environment to remain challenging for the first half of the year. kroger's shargz were off more than 4% to 30.67.
etrade has joined the list of brokerage firms cutting fees. a number of firms have lowered investor cost as they try to remain competitive. etrade said it would slash trade commissions to 6.95. shares also dropped today down 3% to 35.03. >> anhighser bush said the weakness in his brazilian market caused annual profits to fall for the first time ever. brazil is the largest market after the united states. company also posted lower earnings in the latest quarter while revenue edged up slightly. bud shares down more than 3.5% to $105.85. gcp applied technologies had a worse than expected profit and drop in sales. still shares rose following news that the german consumer goods company submitted a binding offer to takeover one of gcp's
businesses for more than a billion dollars. gcp shares soared by 17% today to $31 a share. >> and late today costco said its raising his membership fees that's its primary profit driver. the increase will offset higher cost. the free increase is the first since 2011. it takes effect june 1st. effect 35 million members. same store sales missed estimates and that sent shares down initially in after-hours trade. it closed the regular session with a slight gain. >> if you're considering how much more it will cost you to buy eye new car compared to a used wrun here's something to keep in mind. on average people taking out auto loans are borrowing $11,000 more for a new car than a used one. not surprisingly, it's the reason why americans are borrowing more than ever before to buy a vehicle. phil lebeau has more. >> reporter: it is costing more
than ever to buy a new car or truck. in fact, the average price paid in dealerships last month was almost $35,000. the jump in prices is due to the fact more people are buying pickups and suvs which typically cost more than cars. as a result expeerion the average loan for a new vehicle is now at a record high of more than $30,000. compare that with the average loan for a used car which is also at a record high but under $20,000. that's the largest gap ever between new and used auto loans. because buyers are paying more they're looking to stretch out the length of their auto loans. in fact, almost a third of all new vehicles come with loans stretching payments over more than six years. is there a limit to how much mier prices can go at the dealership? if there is, we haven't seen it yet which is why the u.s. remains the most lucrative auto market in the world for
companies selling cars and trucks here. phil lebeau "nightly business report" chicago. >> and to read more about the record gap between new and used car loans you can head to our website. nbr.com. >> coming up. thinking of listing your home there are two weeks during the year where it may sell the ? there are two weeks during the year where it may sell fastest. >> the senate confirmed former rick perry has secretary of energy today. the vote was 62-367 including 11 democrats that voted thumbs up. perry said he would pursue sound science as energy secretary and he acknowledged that human activity contributes to climate
change. >> retired ben carson was also confirmed as secretary of the department of housing and urban development. support for dr. carson was primarily along party lines. carson will be responsible for driving housing policy and will oversee programs that provide assistance to low income americans. carson ran for the presidential nomination in 2016 against donald trump. >> rates for home loans fell slightly in the latest week according to freddie mac the 30 year fixed rate mortgage averaged 4.1%. rates this year have not followed the typical patterns. they have not been tracking the yield on the 10 year treasury as closely as they once did and they've also not been rising as many predicted and that is helped keep refinancing activity steady. >> so if you're thinking of selling your home this spring, you probably know the housing market is hot pretty much everywhere. but when exactly is it the hottest time to list in your neighborhood?
diana olick has the answers. >> reporter: this spring housing market is barely underway but it's already one of the most competitive in years thanks to low supply and high demand. sellers are in the driver's seat but if they want to drive faster sales and even bigger prices timing is key. homes listed between may 1st and may 15th sell nine days faster. not only do they sell faster but they sell for a $1,500 premium, why? because of the competition. many home buyers who started looking for homes in the early spring will still be searching months later. by may some may be getting anxious to just get it over with and in turn be more willing to pay a premium to close the deal. that's a national read but, of course all real estate is local and homes in some markets move faster during other weeks. washington and atlanta homes move fastest in the first two weeks of april. boston, phoenix and los angeles homes are hottest during the second two weeks of april.
for sellers in detroit, pittsburgh and much of florida, getting the house listed early in march will result in the fastest sale. researchers also said homes listed on saturdays garnered the most views online but in real estate broke rage thursday is the going theory for getting the most eyeballs. redfin says more people preparing for weekend open houses start looking on thursday and are already out shopping by saturday. for "nightly business report" i'm diana olick in washington. >> and if you want to read more about the best time to list your home, you can always find diana's store on our website. >> thursday's the day. >> apparently. and you go to the open house on saturday. >> but you've already seen that house. >> online. got it. >> that does it for "nightly business report" tonight. i'm sue herera. thanks for joining. >> i'm bill griffith. we'll see you tomorrow. >> announcer: "nightly business report" has been funded in part by --
>> all it takes is a spark. the courage to seek the unknown. to innovate. disrupt. to move us all forward. to explore a different perspective. at nasdaq, we connect the world, its ideas, its capitals, its businesses. the people that drive global economies. the future isn't tomorrow, it's right now. all it takes is a spark. nasdaq.