tv Nightly Business Report PBS May 25, 2017 5:00pm-5:31pm PDT
this is "nightly business report" with tyler mathisen and sue herera. >> quiet rally. it hasn't been flashy, hasn't been loud. but the market melt-up has been fairly steady and stocks are breaking out into record territory. oil slick. countries that rely on crude extend production cuts as fears of a global glut persist. arrive early. and get ready to wait this summer as the tsa tests new security measures at some airports. we have those stories and more tonight on "nightly business report" for this thursday, may the 25th. >> good evening, i'm bill
griffith this for tyler mathisen coming this evening from the new york stock exchange. >> i'm sue herera. solid gains on wall street pushed the nasdaq and s&p 500 into record territory. the dow remains just shy of its all-time high. technology stocks led the way as amazon flirted with $1,000 a share. the advance got a surprise list from a sector that's been faltering, retail. more on that in just a moment. first here are the closing numbers. the dow jones industrial average was 70 points to 21,082. the nasdaq added 42. the s&p 500 was up 10. bob pisani has more on the market's climb to new highs. >> reporter: we have a breakout. the s&p 500 and the nasdaq have been hitting new highs recently, but they broke out again today. critics of this rally have complained a small group of big names led by google, facebook, apple, amazon, that's what's powering the rally, and while that's true today, we did see over 200 new highs on the new york stock exchange.
that means the rally is broadening out. the rally is all the more surprising because it's being done without the help from oil. it was down 4% today. despite the fact that opec announced an extension of its oil production cuts for another nine months. the markets seem to want even deeper cuts. another surprise, the sharp rally from last week's declines. traders were deeply worried about the trump agenda last wednesday, remember the dow plunged 373 points then on concerns over president trump's firing of fbi director james comey. once the president left for europe, those concerns seemed to go away. whether those concerns will resurface when the president returns from europe is not clear. for the moment with the dow, s&p and nasdaq up six straight days, nothing is slowing down this rally. for "nightly business report," i'm bob pisani at the new york . as bob mentioned, stocks rallied without the help of energy shares, they were dragged lower by the decline in the price of oil itself after opec
agreed to extend its production cuts for nine months. you would think that the production cuts would support prices, but that was not the case when one oil minister ruled out even deeper cuts. domestic crude fell below $50 a barrel. with that decline of about 5% today. >> steve sedgwick reports from the opec meeting in vienna. >> reporter: it's been an extraordinary day in vienna where ministers from both opec and indeed non-opec oil-producing nations managed to put together an agreement to extend a deal they first talked about in november last year which was supposed to last six months to the end of june. now will be rolled forward a further nine months where the parties involved, 24 oil-producing nations, accounting for around about half the global output, will actually cut 1.8 million barrels a day for the next nine months in order to try and find some rebalancing in the market. outside of opec, though, the
financial markets took it badly and the oil price fell in trading on thursday. i spoke to the very influential saudi oil minister about this, and he said regardless of short-term price moves on the market, this was the strategy that opec was sticking with. >> price is not the key indicator that i'm looking at. we're looking at inventory. and inventories ultimately will drive other indicators including investment, including price, including stocks of companies and operators as well as service companies. so if we focus on the fundamentals that we can control, the market will move in the right direction. >> in terms of what happens next, there are all kinds of concerns about compliance, whether all the members regardless of price will actually comply with the decision, whether there are producers out there they can't control, including non-opec producers such as shale producers in the u.s., will dent the price and create the need for more affirmative, more
aggressive action from opec and their non-opec allies. but for now in vienna it's been quite an extraordinary day where the oil-producing nations have come up with what they call a historic deal. this is steve sedgwick for "nightly business report" in vienna. rob sumhold joins us to discuss what opec's decision will mean for the oil market and where he sees oil prices heading. he's portfolio manager at tortoise capital advisers. rob, good to have you here with us. you heard steve sedgwick's report right now. i think it gels with what you're expecting, which is oil prices that steady out between about $50 and $60 a barrel? >> yep, exactly right. we agreed exactly with what steve said and the opec minister here at tore advertise. we think this was a very constructive thing that opec did. basically they have now set us up for an environment where we're going to have global oil inventories back at the five-year average level. we haven't been there at the
five-year average level for a couple of years. so that sets up oil prices to rise from here and we think that's a good time for investors to be looking at energy stocks because of oil prices' recent weakness. >> what role, rob, do u.s. producers play in all of this? i can -- they play a greater and greater role in supply, the world supply picture, these days. i imagine they're licking their chops every time the price goes up because opec's cutting production. >> yeah, very good point. so the u.s. producers and their role is really critical in the short-term and the long-term. longer-term even more important. so if you look at what's happening in the global oil markets today, half the global oil supply is really flat to declining. because not enough capital's being invested to grow production for half the global oil supply. who's going to fill that longer-term supply when demand goes up? and half the other global oil supply declines? it's going to be the u.s., it's going to be opec. the u.s. shale producers are really, really critical for oil in the long-term. here in the short-term,
obviously we're going to grow production a little bit. if prices rise too much, there will be a bit of a regulator because oil field service costs will rise as well. that will result in u.s. production probably flattening out a little bit more and not going up as much as people think. >> let's talk names. you say there are different ways that you can play the oil field right now. first the permeon basin oil producers. you like pioneer natural and diamond back energy specifically? >> yeah, so what we like to play, and really any oil price environment are the lowest-cost producers of crude oil and the permeon basin in particular has established itself as one of the lowest-cost producing basins in the u.s., maybe even in the world. so companies like pioneer natural resources, diamondback ener energy, they're going to grow production between 20% and 40% next year, spend within their cash flow, which is key, not outspending their cash flow so they don't have to rely on the capital markets. they're going to grow their production, which grows their cash flow, and generally if you
grow your cash flow the markets respond to that in the form of higher stock prices. >> all right, on that note, rob, thank you, tortoise capital advisers. bill? well, a positive surprise in retail today. it came from a surprising place. sears. the troubled retailer saw its shares rise after reporting its first quarterly profit in nearly two years. the store cut cost busy nearly one-third and it was also helped by the sale of its craftsman brand. sears of course once the largest retailer in the u.s., has been struggling in recent years to turn things around. today's shares rose by 13%. and best buy's turnaround looks to be taking hold. that retailer's revamped stores helped push sales and profit higher in the most recent quarter, blowing past the expectations of wall street. that helped push the stock higher by 21%. courtney reagan has more on what best buy is doing right. >> reporter: what a quarter for best buy. the best-selling category at the
chuck electronics retailer were high-priced computers, connected home items, and gaming thanks largely to the march launch of nintendo's switch game console. the retailer has spent years cutting costs, closing stores, making the company more efficient. that part of its transformation is over. and now it's growing sales and grabbing share. best buy's online comparable sales soaring more than 20%. online strength surprising many as amazon's influence on consumers grows. >> best buy figured out under a new manager team a few years ago, where the store actually makes sense with consumer electronics online. they got closer with vendors, really focused on the bigger tvs, the service in the stores is better. now they're doing more in-home service too. they kind of figured out that part of the consumer electronics cycle where amazon couldn't really play. >> the ceo's tax refund delays did hurt temporarily. but when consumers eventually got the refunds, they spent them at best buy.
appliances also sold well and helped profit margins, even though h.h. gregg and sears have liquidation sales with significantly lower prices ahead of their store closures. some analysts are concern the about best buy's ability to continue to turn in strong sales. particularly on big-ticket items. how many laptops and washing machines do consumers need? >> as great as best buy's doing i do worry a bit on sustainability of sales games. >> then again, the rest of the year is expected to see the launch of new gaming consoles, visht wall reality, and connected home merchandise that could keep consumers turning to best buy for its expertise and in-person service options. there appears to be value of a leaner best buy as one of the last consumer electronics retailers standing, it's in fighting shape to coexist with amazon. for "nightly business report," i'm courtney reagan. and there was yet another bright spot in the retail sector amid all the recent carnage.
struggling teen retailer abercrombie and fitch reported a smaller than expected decline in same-store sales. the company was helped by strong demand for surf ware brand holster. abercrombie and fitch recently put itself up for sale and today the stock gained 9%. still ahead, attention travelers. if you think going through security at the airport is a hassle now, it could get worse this summer. president trump is accusing nato allies of not paying their bills. speaking in front of members of the alliance, the president called out 23 of the 28 countries for not contributing
what the administration says they should to the military organization. >> over the last eight years, the united states spent more in defense than all other nato countries combined. if all nato members had spent just 2% of their gdp on defense last year, we would have had another $119 billion for our collective defense. >> nato members target spending of 2% of economic output on defense, but that is just a guideline. elsewhere, an appeals court has refused to reinstate president trump's temporary travel ban for six muslim nations. the majority of the judges on that court said that the president's broad immigration power to deny entry into the u.s. is not absolute, and they sided with the challengers in this case, the attorney general said late today the justice department will ask the supreme court now to review the appeals court ruling.
just in time for the start of the summer travel season. the tsa is looking at tighter security at airport checkpoints. that could mean that you and i will have to take more out of our carry-on bags before they go through the screening machines. phil lebeau takes a look at whether you should expect longer waits and longer lines. >> reporter: after years of watching travelers stuff more and more into their carry-on bags, the tsa is saying, enough. this summer the transportation security administration is testing a new program that will have travelers at certain airports declutter their carry-ones before they go through screening machines. >> they have to weed through multiple things in there. the more stuff you put in there, the more organics in there, the slower the process is going to become. >> reporter: to speed up screening, tsa will ask some passengers to put electronics bigger than a cell phone in a separate bin. that includes tablets and e-readers like a kindle. the goal, make it easier for tsa agents to spot potential
problems in bags. and the new unpacking procedure may go beyond electronics. the tsa says officers may also advise travelers to place other carry-on items separately in a bin. although passengers may experience more bag checks, we are testing quicker and more targeted procedures at these locations. but given how long some already have to wait in security lines, travelers are skeptical unpacking even more bags will speed up security. >> it's definitely a chore to go through, probably the worst part of the experience. a lot of us have tried to do precheck and other things so we don't have to do that. >> i don't know if it will make lines longer necessarily. i think once people get accustomed to understanding that that's part of the process, just as it did with your shoes having to be removed and that kind of thing, i think that people will get accustomed to it and it will change. >> reporter: the new procedures will not be tested in tsa precheck lines. and with tighter screenings raising the possibility of longer lines, don't be surprised
if more travelers pay to use expedited security services like clear which is now operating in 17 airports around the country. whatever security line they use, a record number of travelers are expected to fly this summer. the airlines are adding more flights to meet demand. and many airports will be ready with shops and restaurants hie employees. because there's a physical limit to adding more security lines at most airports, the tsa is trying to make existing checkpoints move faster and more efficientl for now, these changes are limited to ten airports. but if they're successful, tsa is considering expanding the program to other airports around the country. phil lebeau, "nightly business report," chicago. >> and you can read more about airport security this summer onner on website, nbr.com. general motors is being accused of cheating emissions tests. a class action lawsuit brought against the automaker by owners
of duramax branded trucks alleges the company outfitted two of its models with devices that ensure the vehicles passed federal and state emissions standards. gm has responded by saying that the claims are baseless. higher membership fees help results at costco. that's where we begin tonight's "market focus." the warehouse retailer also said strong demand in the u.s. helped same-store sales grow at a faster pace than analysts were expecting. profit and revenue also rose and they were ahead of street forecasts. costco shares initially rose on the after the bell news, adding to a 1% gain during the regular session where they closed at $174.73. the cosmetics chain ulta beauty said strong sales in e-commerce helped same-store sales come in above street expectations, profit and revenue rose both beating street forecasts. shares initially rose in after-hours trading and ended the regular session up more than 4% to $93.04.
cigna jewelers said sales got off to a slow start this year. the company posted revenue that missed estimates saying continued headwinds in the retail environment pressured results. the owner of kay jewellers and jared missed profit expectations, but it did reaffirm its guidance for the year. that wasn't enough to help the st though. shares fell nearly 8% to $50.30. medtronic chopped profit expectations as the medical devicemaker said results were helped by new product launches and higher sales of heart devices. revenue grew and topped analyst expectations. company says it expects adjusted earnings for 2018 to rise now between 9% and 10%. medtronic shares were up 1% today to $85.58. sales fell more than expected at hormel as the heat producer said an oversupply the turkey created pricing pressures. those results missed estimates.
as a result the maker of spam and skippy peanut butter saw profit fall short of street expectations. hormel fell by 6% today to $33.13. and dollar tree is the latest retailer now saying that a delay in tax refunds this year caused customer spending to stall. the discount chain reported a surprise decline in same-store sales but still managed to post earnings in overall revenue that matched analyst expectations. shares of dollar tree rose nearly 1% to $78.80. it was a wild day for bit coin. the digital currency hit an all-time high of over $2,700 today before before it dropped sharply. at its peak midday the currency gained more than 180% so far this year. the price reversal in today's session came as interest in bit coin was rising. apparently overwhelmed some exchanges where the currency can be bought and sold. many of you are probably wondering why there's been a lot of talk about bit coin lately
and what exactly it is. >> reporter: what is bit coin? it's a payment system that uses completely virtual money for online transactions. the digital currency is called a bit coin. it's like cash for the internet, transferred between people via mobile app or computer program. users request and send bit coins to pay for goods and services. but the identities of users and the transactions are kept anonymous. through complicated encryptions. unlike real money, bit coin has no centralized bank or authority that runs the system. instead it operates on an open-source platform that can be skaet accessed by anyone. and it's controlled by the people who use it. and ultimately the power of supply and demand. which brings us to the value of a bit coin. since its creation in 2009, it's fluctuated dramatically. from pennies to now over $2,000.
>> while bit coin's use is certainly not mainstream, it recently got the attention of fidelity, one of the world's largest asset management firms. so what are the pros and cons of bit coin? joining us tonight, ian sherer, executive editor at c-net, thanks for joining us. given how wildly speculative a bit coin is, i'm even hesitant to talk about what the pros might be. but what are they? >> a lot of them actually revolve around what that segment pointed out, privacy is a really big benefit. people are often worried about whether or not, especially a political dissident or something, being able to have your cash be something that's completely private, it's a really good benefit. the other thing about it is the technology behind bit coin has the potential to really change the way that data is transferred and moved around the world. you know, one of the big things that people really like about it is that because the data is not stored in one place, it's not as easily hacked. that's a really big benefit.
>> let's talk about the cons. first of all, it doesn't function like a traditional currency does. you don't get these wild kind of moves or even slightly large incremental moves in traditional currencies that are backed by a central bank. but also the hackers seem to really like the privacy aspect of bit coin. and that would be a distinct negative. >> yes. well, i mean, the hackers like to use it because when they get their ransoms, for example, like the ransom that happened last week, they ask for bit coins. because it's hard to trace. and they're able to take their money and go and use it. but the other thing about it that is pretty tough that is it's not insured. the fdic has no insurance for this. someone gets into your bit coin wallet is what they call, instead of a bank account, they could take all your money, and that's it, it's over, like a wad of cash was taken from you. that's a really tough part about it. and part of why, one of many reasons why, it hasn't
proliferated further yet. right now it's still a fascination of silicon valley, some wall street banks are looking at it, health care industry. but it hasn't gotten that far because people are still worried about the potential pitfalls of it. >> all right. and let's do that now for the average person out there watching who might be intrig this is not for them to get involved with yet, if at all, right? >> i would not recommend it myself. unless you're really wanting to live on the wild side. you know, there are people who have played with it. there was an alpaca farmer who was found a couple of years ago who was selling stocks and accepting bit coins. some people like to do that and kind of play with it as a fascination. because you don't have to sell individual bit coins. it doesn't have to be $2,000, you can sell fractions just like there are pennies and dimes you can give people. that's something you could do if you want to. i wouldn't expect this to be a place i'd put real money. if you want to play with it, go ahead. but don't expect this to be something serious for quite a while. >> yeah.
thanks for joining us tonight, ian sherer. >> my pleasure. coming up, a painting is worth -- a lot. especially in china. and the reason why may surprise you. the chinese government recently rolled out policies to help stabilize its currencies and promote investment in that country. it means that more money is staying put in china, less is flowing out. and one particular market is feeling the effects of that policy shift. eunice yun is in beijing. >> reporter: to get a picture of how government policy impacts
china's art market, meet artist tai shun jo. at his beijing studio, he's preparing for an exhibit in the u.s. where his art is usually . but these days he says his work is attracting more buyers in china. "antique collectors in china have started to collect my work. i'm happy." china's art market is becoming a popular way for wealthy people here to invest. many have purchased at auctions overseas. but in late 2015 authorities started worrying about money fleeing the country. and imposed tighter controls on capital. that's forced more chinese to look for new ways to invest their money at home. beijing gallery owner and art investor chris reynolds is seeing a surge in sales. >> following the global financial crisis, then the stimulus package in china, which really super-charged liquidity and demand for chinese art, there was a lull after that
period. and so what we're actually seeing in the past year or so is a return to a rapid-growth trend. for example, last fall, if you look at the auctions in china, mainland china, you saw kind of heat and sizzle we haven't seen for five years. >> what's sparking that heat and sizzle? >> we've seen liquidity increases. then at the same time we have capital controls which are getting tighter and tighter. that's actually having the impact of trapping more capital within china which will lead to different sorts of rapid price appreciation and assets. >> reporter: auction houses like china garden are feeling fervor. at its marked auction turnover jumped 50% from a year ago. "the warmup in the market has been quite obvious. we estimate a 30% rise this year in the chinese art market overall." that includes traditional art, antiques, and contemporary pieces.
>> we want to be connected to the world around us. long past beijing's policy decisions today. for "nightly business report" i'm eunice yun in beijing. >> you can find out more about the chinese art market on our website at nbr.com. that will do it for "nightly business report" for tonight. i'm sue herera. thanks for joining us. >> good night, sue. i'm bill griffith. have a great evening, everybody. we'll see you tomorrow. >> night, bill.
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