tv Nightly Business Report PBS April 5, 2017 5:00pm-5:31pm PDT
>> this is "nightly business report" with tyler mathieson and sue herrera. >> rally fizzles. the fed spokes. get to work, by the companies are on a hiring spree coming off the strongest month in job growth in more than two years. lots of dough, while a little known investment firm will pay billions for panera bread. all those stories on more for wednesday, april 5th. good evening, everyone, welcome, sue herrera has the evening off. i'm tyler mathieson. it was a sharp reversal of fortune on wall street today. stocks rose higher the dow rising nearly 200 points,
investors shared private growth, thenned be day, selling took hold and then some. right around the time the federal reserve released the minutes of its latist meetings. the minutes don't tend to move the markets all that often, but they did today. at the central bank's last meeting, policy-makers commented on stockmarket valuations with some members suggesting they're a bad profit. they don't do that. they also talked extensively about reducing the fed's multi-trillion dollar balance sheet, something we have been telling you about. that has a power to spook the market. with that, stocks did get spooked. they dropped hard. major indexes turned negative, resulting in the biggest market turn around top-to-bottom in 14 months. here's how the day ended. the dow jones lost and nasdaq down 34 the s&p 500 lost 7. we have more on today's dramatic moves. >> reporter: stocks rose early
as oil rose up in the '80s, the prime employment report was strong. the markets reversed the initial catalyst from the fed's last meeting. the fed's comments could be interpreted as negative. they don't expect fiscal stimulus until 2018. second, some of the feds see the stockmarket valuations as high, finally, they're considering reducing their $4.5 trillion balance sheet. that's right effectively as an additional tax hike. none of this was helpful for the stockmarket. then, shortly after the fed minutes, house speaker paul ryan was quoted in a reuters story saying tax reform could take longer than the health care overhaul, what does all that mean? the stockmarket cares about the trump agenda, second about interest rates and third gross and the right valuations for the stockmarket. all three of these ideas got passed around this afternoon. can you see this issue bought the the markets going by looking
at volume. it's the volumes have been terrible the last three weeks. not today. big, broad trading funds, etf had very heavy volume. so, for example the russell 2,00030% above normal volume. the nasdaq 60% agree would have normal value. for "nightly business report." >> we have been reporting unwinding the fed's balance sheet, insignificant because of its size and the impact it could have on the markets and the markets are clearly very touchy about it. let's turn to brian ja sobson on the risk it poses, the chief portfolio strategist at wells fargo. good to have you with us. let's talk about reversal first in today's market, something as to worry about or a blip on the radar? >> i personally thought what we saw with the reversal is technical or a trading nature as opposed to a change in the
markets. the reason i say that is because a lot of the contents of the federal reserve minutes shouldn't have been too much of a surprise to hit anybody. president trump and the individual state treasury mnuchin have talked about how tax reform may not happen until maybe late in the year or even into 2018. the federal reserve, a number of officials have been talking about trying to reduce the size of their balance sheet. and as far as on the equity side the fed doesn't oftentimes opine on equity valuation, they have done so before. it seems a short-lived move in the market. so i think that may be more of a technical nature than a move from top to bottom, not necessarily a reversal of trend. >> let's talk about the reducing of the fed's balance sheet and put it in layman's terms, 4-plus trillion as the fed were doing what was known as bond buying, they were buying on securities, putting cash into the marks, so now they hold all these
securities. what happens when the fed reduces the size of its balance sheet and why does the market care about it? >> i think that's really the primary effect is going to be in areas like longer dated treasury security, investment debt and possibly even with mortgage interest rate. the federal reserve has acquired a $4.5 trillion of treasury securities and mother-in-law backed securities. so as the fed tries to reduce the size of its balance sheet to get into a more manageable or normal level, it is likely going to put upward pressure on some of those deals. the fed is going to tiptoe it's way through this minefield it has created. it doesn't want to push mortgage rates too high. because that could be a head wind. >> upward pressure on yields, because in the past, they might have gone bad. we will sort of let those bonds and mother-in-laws mature and roll away, not reinvesting. so that takes a big buyer out of the market, right this.
>> absolutely. >> that is the way it works, they are trying to lower interest rates by reinvesting the proceeds so they mature and they just buy more of them n. some ways they're not doing much, it's one buyer out of the market, that should -- >> how big a deal you mentioned it just a moment ago, how big a deal is the possibly as speaker ryan said today that tax reform may not be a straight line to the finish line. if that doesn't upset the markets? >> i think it could. it depends on whether or not we get to the finish line. i think it's okay if it's not a straight line. but if it doesn't get done or say there isn't a possible plan on this summer, i think equity markets could get about 10% annual points, the gains we zhao have seen so far. >> thanks very much. very quickly, we appreciate it, brian jacobson wells fargo funds. despite the downturn in stocks, the job market got a shot of positive news as we
reckoned at the top of the broadcast, labor markets saw the strongest month in job creation in two years, according to payroll processor adp, they added 263,000 positions in march. that was lower than expectations, the third straight month this topped estimates. more on why job growth has been a particular source of strength with the economy. ♪ >> u.s. job growth still seems to be running exceptionally strong. the payroll company adp estimated 263,000 private sector jobs were created in the economy in march, far more than wall street estimates. jobs rose roughly in construction, manufacturing and services. he said this afternoon the data bodes well for the u.s. economic outlook. >> the jobs numbers and the contents number, durable goods orders, i mean, there are a number of things out there, investment plans are starting to move up as well.
>> adp can sometimes be a good predictor of volumes on the jobs report. so they tried to boost their forecast on what they expect on friday. they said on monetary policy, he's with the consensus of the fomc. >> that calls for two more rate hikes and a piggy theback on reduction. it says it's riding back rules and the departure of donald trump may be the successor. there are several candidates, those have been ruled out or withdrawn themselves. so the fed, the former governor or as president trump would like underwriting back regulations, for "nightly business report," i'm steve leishman in walk. the payroll growth was strong across the board. goods producing firms added positions, business services, but the biggest growth area came from small firms, many with fewer than 50 employees, kate rogers tells us why small
business saw such big job gains. >> reporter: small employers with lower than 49 workers have been steadily adding jobs. 18,000 in december. 52,000 in january, 104,000 in february and 100,000 in march. main street optimism hit record highs since donald trump was elected, holding at historic levels for the national independent business and separate business for wells fargo. they hope they would usher in a new era of business-friendly policies and deregulation. >> those are all big positives, because we know small business is the main source of job creation. the question going forward, is sustainability. >> reporter: but main street advocates and analysts pointed out said it hasn't translated into spending and hiring. this month could signal a change. >> as long as they're not fearing an administration that's bashing business and talking about new regulations, taxes they're going to dream up, as
long as they do without that, that's a positive. >> reporter: now it's time to see if small businesses invest in expanding or this is a sugar rush. the largest part of the u.s. economy grew at a slower pace in march. it fell from the previous month as some managers expressed concern about the impact of policy. now washington related to immigration, trade and health care. others were concerned about worker shortages, service sector accounts for about 80% of the economy. investors also kept watch on washington and global events. today, president trump said he changed his view on syrian civil war. at a rose garden press conference with jordan's king abdullah. he confield the chemical attack blamed on the syrian leader. president trump now saying he is reassessing the situation. >> it crossed a lot of lines for me. when you kill innocent children,
innocent babies, babies, because they're babies, with a chemical gas that is so lethal, people were shocked to hear what gas it was, that crosses many, many lines, beyond the red line, many, many lines. >> this coombs as tensions rise around the world. last night, north korea fired another medium range ballistic missile into the sea of japan just as the president prepares to meet with the leader of china tomorrow in florida. still ahead, who's behind panera's deep-pocketed buyer and why this firm is not like it's peers.
amazon won the rights to stream thursday night football games for the 2017 season t. one-year deal valued at $50 million. amazon will stream the games to members of its prime subscription service. investment curve firm called j.a.b. holdings is buying the fast casual soup and salad chain for rovly $7.5 million of buyouts and shares of panera hired by 14%. the buyer is a large, yet little known, european holding company, which has still an aggressive buying spree. they tell us who is behind j.a.b. and why they want this american chain. >> reporter: if it has seven people in a room in you, emburg making the biggest bet on the american breakfast market.
j.a.b. has caught the attention of wall street after announcing a deal with panera today, one for krispy kreme and curegg the year before that. in recent years, they acquired coffee andine tine noah. they hold steaks and luxury brands like bali and jimmy ciho. the ryans as they're known are the direct descend ents recognized as $60 billion european consumer conglomerate that owns everything from lysol to air wick. they were estimated by forbes the combined net worth to be about $16 billion. unlike many traditional private firms, j.a.b. does not splash costs, they're are known for a handoff approach and paying a
high price for the acquisition. they offered $315 per share in xash for panera, which was 20% higher than the company's all time high. also unlike traditional private equity they can hold on to a company forever. that's why panera told cnbc this morning, j.a.b. makes what he calls wonderful partners. >> they are long-term investors, they measure their investments in centuries, not in decades. they're committed to our strategy. they're committed to our company franchise modem. they're committed to our team. >> reporter: they on wall street are wondering what has them so interested? well, it's not immediately clear, their strategy is to find profitable companies and hold on to them for a long time and let them run independently. so it's unlikely we g see krispy kreme donuts in panera any time
soon. the digital technology that made the panera brand a leader in the industry undoubtedly made it attractive to parts of j.a.b.. but what does this mean for casual chains in the near businesses and how may it impact jobs? senior restaurant and analyst at maximjoins us now. obviously, it wasn't technology at which panera in this sphere had been a leader. but other things that attracted j.a.b. to it. what were they? >> well, didn't technology mention, they have been a leader, it's an ingredient in many transparencies. they spent last year removing artificial ingredients. they made an announcement about the expansion of the program, talking about more all natural before annuals. it seems like this makes panera put them at the forefront of dining for americans and instances where restaurants have
it the next couple of years. >> clearly, another place they are headed is into the world of mobile ordering and a sort of digital technology. panera has been out front a bit on that, haven't they? >> i agree with that. i think they were placed into an elite set of companies in the restaurant industry. starbucks are in the elite group that has embraced technology, made major investments in recent years. >> that has made them ahead of their peers in that regard. >> of all the public served or fast crash restaurants going to have to do that or they will be left by the side of the road? >> excellent question. i think ideally with the fast food and fast casual restaurant, they will need and argue to adopt some kind of technology, whether it be restaurants or the mobile order and pay and check-up. this is the kind of thing where we see the service, conveniently, they're very cheap. as much of the past year,
restaurant traffic was down and one test succeeded in recent years, having to stress the technologies. >> it's one thing, isn't it, stephen, to have an app that works that gets the order to the store. it is another thing to have that order ready and waiting for you when you get there and there not be confusion. i've we heard there have been some first snafus at companies like starbucks, where they have been overwhelmed by the number of orders. you got to get the execution right at that point. >> that's exactly right. >> that itself the investment in the back of the house or say the kitchen and labor has been so important. everything has to work together in order for the technology to work. but it's going to be here. >> how is this going to affect jobs? obviously, you still need peernlg i think, to prepare the food. but it means less order takers, it means fewer cashiers, doesn't it? >> you haven't seen the big reduction if jobs. we do believe that over time the
restaurants will need fewer labor hours. but that comes at a time where labor costs are starting to increase in a lot of the big cities, they start to wager $2 an hour or more. this comes with trends in favor of fewer labor hours. >> stephen, have a nice dinner, wherever you choose to eat. >> thanks. general electric may pull the plug, believe it or not on it's light bulbs. >> that is where we gin tonight's focus. the wall street journal says they are considering reviewing this revision. they have a deal with $500 million. shares of ge e off a fraction at 2997. walgreens says a strong dollar hurt sales in the u.s., they saw customers spending less on general merchandise and personal care products. they were building an overall
revenue that missed targets. still, the company said it was launching a billion dollar share buyback program. shares, however, fell on this down day by more than 1%. they finished at 8117. monsanto had strong sales of its corn and soy bean products, posted stronger than expected earnings in what it calls a tough macroeconomy for agriculture t. giant gave a rosy forecast for these profits for the full year, coming in at the high end of guidance. monsanto rose to 11531. they are having trouble selling units for the price expected. according to australian business review the embattled australian based innova pharmaceuticals is receiving luke warm bids under a billion dollars. >> that is below what they want for it. last year valiant said it would look to sell up to $8 billion of the non-core assets to easing
debt load. shares fell 6% $.50. and the law enforcement technology company taser says it's changing its name to axxon as it shifts into the software business. it said it would speak with every police officer in the country with a body camera for free as part of a year-long trial program. as of tomorrow morning the company will trade under the new ticker aaxn. taser shares, you will see taser up there off 10 cents to 2190 payless is the latest retail tore file for bankruptcy. they closed nearly 400 stores and is trying to restructure its debt load t. ceo called it a consistent business driven by the changing retail industry. according to consulting firm alex partners, payless is the tenth retailer to file for
bankruptcy. coming up, why some small businesses get grounded every time president trump comes to town. president trump has been very critical as you probably know of china, especially with respect to stealing american jobs as charged. but some in china say he's got the story all wrong. >> sitting up with president xi, president trump indicated he plans to talk about trade and jobs. president trump has been a
fierce critic of china, accusing it of stealing american jobs but here in china, there are more concerns america could be stealing chinese jobs. the news agency wrote an editorial complaining about this. it specifically referred to a chinese glass-making company that invested hundreds of millions of dollars to remodel plants in dayton, ohio. one of the biggest manufacturers of glass for car windows. we spoke to them and other chinese companies with similar reasons for why they believe the u.s. is an attractive manufacturing destination. lower tax, cheaper brands, competitive transportation costs and easier financing. they said workers are more expensive in the u.s. but that netanyahu america will be coming more cost effective. in fact in the latest manufacturing cost competitive index conducted by fox consulting group the ecc found almost no cost difference at all between the u.s. and china.
so going into the summit the finese have been focused on u.s. investment and the contribution chinese have made to the american economy as a way of less criticism and show the economic relationship with china is not detrimental to the united states. >> the summit that begins tomorrow between the leaders of the world's two largest economies will take place in florida at the president's mar-a lago estate, a place retravels often. all that travel is disrupting local business. here's the report from palm beach. >> reporter: it's no wonder president trump has made palm beach his second home. sunny skies, pristine beaches, elegant shopping. some in palm beach dread his arrival. >> we have 1,200 feet up in the air off the coast of florida president trump calls the winter white house. the president of china xi
jinping later on this week. when the president comes to visit. the entire airspace will be shut down. businesses on the ground are losing money. an attorney flies to see clients all across florida. he's grounded whenever trump arrives, that hurts his bottom line. >> sometimes it's two weeks at a time. i don't know what we'll do. >> reporter: the airport is in the middle of the no-fly zone that extends for ten nautical miles around mar a lago. it will be shut down. palm beach flight training school is about $67,000 this year because of the close years, they're worried about getting their students back. >> they're frustrated, mostly can sell their flights what do i do?
and then you know looking at times when we don't have them. >> reporter: the flight restrictions cut short when he went to the bahamas, they had to come home a day early to make sure they could land here at the airport. >> i fine it extremely inconsiderate to shut down people's business. >> it's restricting us from flying out in a safe manner. >> reporter: not everyone is suffering. the palm beach tourism board says their bookings are up and they hope president xi's visit is a chance to cater to the consumer. >> the chinese market is known for the high percentageer. so i have been here in palm beach, it's just an ideal of an opportunity for them to explore the very best of florida. >> reporter: only time will tell if business here will truly take off or take a nosedive when trump comes to town. for "nightly business report," in palm beach.
and before we go, it was a dramatic finish today on wall street, stocks gave up big gains in a late day sell-off. here's another look at the closing numbers. the dow industrials down 21 points t. nasdaq off 34. the s&p 500 lost seven. and that's "nightly business report" for tonight. for sue herrera, i'm timyler mathieson. have a great evening, everybody. ♪
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