tv Nightly Business Report PBS May 30, 2017 5:00pm-5:31pm PDT
>> announcer: this is "nightly business report" with tyler mathisen exclusive club. amazon does something few have done before. it hit $1,000 a share. but is it worth buying even at this pricey level? increased pressure. can the recent issues with the airlines be traced back to wall street demand? hard lessons. sky high proposal prices in america's tech hub are making it tough on teachers. those stories and more tonight on "nightly business report" for tuesday, may 30. good evening, everyone, and welcome. i'm sue herera. tyler mathisen is off tonight. amazon, the company that revolutionized the way people shop, can add another milestone to its resume. its shares crossed the $1,000
mark for the first time today. it's an impressive feat that only four other u.s. listed companies share. that puts amazon's market value as roughly $470 billion, about double that of walmart. it's more than 15 times the size of target. after hitting $1,000 a share, the stock pulled back just a bit, closing just shy of that mark at $996 a share. but it was enough to put amazon's ceo jeff bezos within striking distance of topping bill gates' wealth to become the world's richest man. tonight, a look at how amazon got to where it is today. >> reporter: may 15, 1997. amazon debuts on wall street. shares were priced at $18 and closed at $23.50, up 31%. four years later, during the t dot-com bust, many internet companies fold, but amazon weathers the storm.
then came the growth. amazon rolls out its amazon prime membership service and guaranteed shipping. tens of thousands of people sign up in the first month. the following year, the launch of amazon web services, a secure cloud services platform for businesses. today, amazon prime is one of the world's most popular subscription services with tens of millions of members. amazon web services is now used by more than 1 million customers and has a third of the market share for cloud spending. may 15th, 2007, amazon turns 10. closing price that day, $60.58 per share. now a decade later, shares break the $1,000 milestone. in the 20 years since its ipo, amazon is the third biggest company in the s&p 500. >> shares of google parent company alphabet are also closing in on a thousand dollars
a share, as a new report shows that most active fund managers are heavily invested in the so-called f.a.n.g. stocks, that stands for facebook, amazon, netflix and google, which have returned nearly 30% this year. a.b. mendez is management investor at frost advisers, thanks for being here. >> good to be here, sue. >> the f.a.n.g. stocks have been on quite a run. >> netflix is a bit of a different animal, but all those companies are creating tremendous value for consumers. pretty clearly they're creating transformations in the economy, in technology, in media, and in many other corners of the economy. so to the extent that they are driving a great deal of value creation, i think a lot of the move in the stocks is justified, although it has been a little bit of a breakneck pace over the
last six months. >> if you are a long term investor, should you trim some of those positions and maybe wait for a pullback before you get back in or do you let it ride? >> it's a great question. we kind of grapple with these issues on a day-to-day basis. but we are long term investors as frost. we've been involved with all these companies except for netflix. netflix we added in fall of last year and it's worked well thus far. yes, i think it's just common sense, when a stock or a group of stocks have had a big run, i think it's common sense and good risk management to take a little bit off the table and to trim those positions and bring them closer to where your target allocation might be. that's how we think about it, at least. >> what about amazon crossing that $1,000 mark and closing just below it? is that significant in your work, or not? >> i don't think so. i think $1,000, investors look at that and try to attach significance to it because it's a round number.
looking back at the stock over the last five years, today it's on a five-year average. there's nothing out of whack there, it's actually below average as they are converting earnings into free cash flows. >> how do you feel about the market overall? >> things can sometimes get a little bit dicey heading into summertime when there's less volume and some of the traders and investors are away from their desks. you worry about a geopolitical event with what's going on in north korea, other parts of the world. but other than that, you know, i think that -- i'm not going to say it's a goldilocks economy. we have a good strong economy here, at least in the u.s. it seems to be improving in other parts of the world. so, you know, relatively benign i would say. >> all right. we'll leave it there. a.b. mendez with frost investment advisers, thanks so much. >> thanks. on wall street, the s&p 500 and the nasdaq snapped their seven-day win streak. but a rise in some toque stocks helped cap those losses. declines in banks and oil stocks
contributed to the loss. the dow jones industrial average lost 50 points to 21,029. nasdaq was off seven. s&p 500 fell two. but in this holiday shortened week, there is a lot on the calendar. dominic chu takes a look. >> reporter: it's a holiday shortened trading week on wall street. but that doesn't mean we won't get some fireworks on the heels of memorial day monday. on the macro front, among the important data points to consider that are coming out, we'll get pending home sales tomorrow, which measures how many previously owned homes are under contract for sale but haven't yet closed. now, it's seen as a leading indicator for existing home sales. on thursday we'll get manufacturing data as well as auto sales numbers for the month of may. that leads up to friday, when we get the may jobs report considered by many to be the most important economic release each month. we're pretty much done with
earnings season this quarter, but some notable reports have yet to be released. michael coors and palo alto networks are among those that, the this week. canada goose gives its first ever report as a public company. many companies are on vacation, and as a result markets could be more volatile since it might not take as much positive or negative news to sway of fewer number of traders involved. for "nightly business report," i'm dominic chu from the new york stock excha a federal reserve official today said he expects the central bank to raise interest rates two more times this year, while at the same time reducing the size of its balance sheet. >> we can do two rate hikes and begin the process of reducing balance sheet. and the individual tactics meeting by meeting i think are less important than the overall pan. >> the dallas fed president said
he was concerned about weakness in inflation data, a concern echoed by leyla brainard. >> today there's little indication of a breakout of inflation. rather, the latest data shows inflation has been lower than expected. the puzzle today is why inflation appears to be slowing at a time when most forecasters put the economy at or near full employment. >> many investors expect the central bank to hike again at next month's meeting. consumers spent at their fastest pace at four months, perhaps bolstering the case for an interest rate increase. the commerce department reported a 4% rise in april in personal consumption expenditures. it may be because americans had more money to spend. personal incomes rose last month, also up .4%. home prices are also higher, they rose in march at their fastest pace in nearly three years. according to schiller national
index, supply shortages helped drive prices up 6%, significantly outpacing income growth. credit scores for u.s. consumers hit record levels in april, according to "the wall street journal." americans are enjoying improving credit scores as the economy fell and people's recession wounds continued to heal. the average credit score hit 700 around the country, the highest since 2005. what does that mean for the overall economy? gus le shea joins us to talk about that, good to see you, gus, as always. it sounds like pretty good news for th >> that's right. what we're seeing is people are in better financial shape. they paid down a lot of debt after the great recession. and then also what we have is people, the bad events from the great recession, foreclosures, bankrup ba, those are gradua disappearing from
people's credit histories. >> when do we start to see that impact the economy, or are we already seeing it? >> i think we're already seeing it. auto sales are strong, we have more auto loans as people's credit scores improve. we have more people moving into home ownership. some people have been delayed becaus they have a bad correred history, as their credit scores improve they'll move into more homes, that's very good news. >> debt levels are also going higher, as we've reported on "nightly business report." are you worried about that? even though credit scores are up, debt is increasing as well. >> i'm not that concerned about that. if we look at debt as a share of income, it's near a record low. the total debt level is about back to where it was before the great recession. >> the economy is much larger. so i think if we -- we need to look at it as a share of income. it's a sustainable pace right now. i think that consumers are being much more cautious with credit
than they were doing the housing boom. >> is this investable, do you think? i mean, when you say that it's going to trickle down or is trickling down to the economy, does that argue for maybe investing in the banks, investing in the auto companies, as their sales of either loans, mortgages, and/or cars continues to grow with better credit scores? >> you know, in terms of autos, i think it's tough to see sales moving a whole lot higher. they're near record high right now. people have been buying a lot of cars over the past few years. we may see an improvement in the housing market so people are better able to get mortgages. and there are a lot of people who have been wanting to purchase homes but haven't been able to do that. i think housing related industries in particular are going to benefit from these higher credit scores. >> gus, thank you so much. pleasure to have you with us as always. >> thank you. >> gus le shea with pnc financial. ahead, the airlines are doing better financially. is that performance coming at a
co? goldman sachs is coming under fire for buying venezuelan bonds. the president of the country's opposition-led congress accused the bank of financing a dictatorship. the accusation follows a "wall street journal" report that goldman sachs bought nearly $3 billion in bonds issued by the venezuelan state oil company. critics say that purchase gives the government a lifeline while
it's starving its people. a spokesman says, "we realize that venezuela is in crisis. we agree there that life there has to get better and we made the investment in part because we believe it will." there has been talk of expanding the laptop ban on airplanes. today the department of homeland security, in a call with european officials, made it clear that a large electronics device ban is still on the table, just as people get ready to go on summer vacation and could mean tighter security at airports. phil lebeau as more. >> reporter: just as a record number of americans are preparing to get away this summer, the federal government is looking at tighter security in airports and in the air. as the secretary of homeland security says, the threat to commercial aviation appears to be growing. >> there is a real threat, numerous threats against aviation. that's really the thing that they're obsessed with, the
terrorists, the idea of knocking down an airplane in flight, particularly if it's a u.s. carrier, full of mostly u.s. folks, people. it's real. >> reporter: because of those threats, the department of homeland security is looking to extend the ban on passengers carrying laptop computers on international flights. restrictions already in place for flights to the u.s. from some airports in the middle east. extending the laptop ban for all international flights in or out of the country would impact more than a half million travelers every day. carriers like united airlines, which have large international networks, are already making contingency plans. just last week, united's ceo oscar munoz said the airline is in regular contact with the trump administration, so it can be ready if security procedures change. would a laptop ban on
international flights prompt some travelers to cancel their trips? perhaps a few. but most experts believe travelers will grin and bear it and adjust to new rules designed to keep them safe in the sky. phil lebeau, "nightly business report," chicago. a power surge is likely at the center of a computer failure that caused cancelled flights at heathrow on saturday, disrupting flights for thousands of people. shares of british airways' parent company fell as experts grew concerned that the company's quality of service may have been undermined by the recent cost cuts there. from overseas to here at home, the airline carriers are feeling the pressure. and according to "the new york times," wall street may be partly to blame for some of the recent problems, as some carries are focused on maximizing profits.
nelson schwartz wrote about it for the paper and he joins us. nice to have you here. >> great to be here. >> how is it different now for airlines focusing on profit than it was, say, five or ten years ago? >> everyone remembers all the bankruptcies and the consolidations and equity holders literally being wiped out. the airlines are new companies now, essentially. and they've remarketed themselves to wall street as a very different kind of investment. so it's a very cyclical industry where you don't cover your biggest cost necessarily, you don't know what it's going to be, fuel. but the airline have kind of said to the street, look, we're going to deliver year-in, year-out steady profits, steady growth, and you can rely on us the way you would on an industrial company or a utility. that puts tremendous pressure on the airlines to deliver what the street expects. >> what about the pay structure for executives? in the past it was very different for the airline industry than it was for some other large scale perhaps more mainstream type companies. has that changed?
>> yeah. in the past, airlines say maybe a third or more ceo bonus and other top executives' bonuses were tied to operational factors like lost luggage, on-time arrivals, customer satisfaction. some airlines like american have dropped that entirely in figuring out the bonus structure. so for american, it's strictly financial metrics like return on investment, profit margin, that kind of thing. the customer doesn't really get factored in. united scaled that back, they scaled back the operational factors. then they had that incident in chicago, a public relations nightmare, in april. they put in their proxy that they'll sort of build back up operational factors, i.e. customer service into ceo pay. but, you know, it's a little late in the game. >> it certainly seems that way. so in essence, if i'm hearing you correctly, the customer satisfaction metric when used to be very important for the airlines is now almost last on
the list because they're beholden to the profit and loss statement that wall street is looking for? >> yeah, exactly. and i think, you know, look, every publicly traded company has to grow earnings, has to deliver to shareholders. we know that. the question is, as the airlines kind of overpromised what they can deliver in terms of earnings growth, the economy is only growing 2%, that's how fast airline travel is. if you promised 5, 10, 15% annual earnings growth and you're only growing at 2%, something's got to give, and that's customer service. >> it certainly has been lately. nelson, thank you very much. nelson schwartz with "the new york times." tivo's shares jump after a favorable patent ruling. an initial ruling by the international trade commission on friday regarding the tivo set-top boxes determined the cable giant comcast violated two tivo patents. a final ruling is expected in september. comcast is the parent company of
cnbc which produces "nightly business report." tivo's shares popped 14% to $18.70. shares of comcast rose fractionally to $41.10. whitebush securities downgraded buffalo wild wings to underperform from neutral, saying the restaurant chain's current strategy will pressure margins and earnings. activist hedge fund marcato hasn't been able to help. shares fell to $145 even. offshore drilling contractor ensco will buy another company to serve a larger group of clients. ensco's shares fell 5% to $6.36. the company they bought, atwood oceanic, took off.
gilead says its hiv drug did well during trials. gilead says it plans to apply for approval in the u.s. as soon as this year. the shares were up a penny. it is no secret that high tech salaries are driving up housing costs in and around silicon valley. those higher costs were also driving out lower paid workers. and as aditi roy reports, it now appears that teachers are getting squeezed. >> reporter: this teacher has a master's degree, a stable job, and an annual salary of $75,000. yet for the past year and a half, she's spent too many days not knowing where she would sleep at night. >> i just have to kind of be able to stay on the move. i kept everything in the bag, because to unpack didn't make sense. >> reporter: she is a math teacher at a san francisco
public high school. and she said she can't afford to rent a one-bedroom apartment. she's lived with roommates, then moved into a hostel, and at one point even spent a night in a homeless shelter. >> i wasn't prepared for what happened. >> reporter: she is not alone. housing experts say high tech salaries and low inventory are squeezing teachers out of the city. the problem is so acute, san francisco mayor ed lee recently committed spending $44 million towards a teacher housing project in the city, which would offer educators subsidized rents. >> it's a great start. anything that you can do to increase the affordable supply will make a meaningful difference. but it's not enough. this is a national problem. >> reporter: many teachers in the region make on average between roughly 70 and $80,000. but a recent study found there are no homes in either san francisco or silicon valley that are affordable for teachers to
buy. >> people, especially teachers, should be able to find decent housing. >> reporter: this housing development in santa clara, california was built more than a decade ago in the wake of rising rents. teachers who live here pay below market rents. cheeks says she'll be moving again soon, this time to a rent controlled apartment in san francisco. a place she hopes she can finally call home. a spokeswoman for the san francisco unified school district tells me while they're overall retention rate has remained pretty consistent over the last decade, it has become tougher to recruit new teachers. meantime, it could take up to a couple of years for san francisco to build its teacher housing development like the one here. i'm aditi roy, santa clara, californ california. coming up, slow start. hollywood just did something it hasn't done in nearly two decade
here's a look at what to watch tomorrow. the federal reserve releases its beige book, an anecdotal look at economic conditions across the country. a report on pending home sales will tell us how many homebuyers signed contracts in april to buy existing homes. we'll also get the latest read on mortgage application volume. that's what to watch for on wednesday. it was the unofficial start of summer. but for hollywood, the usually
hot movie weekend was unseasonably cold. julia boorstin has more on tinseltown's box office blues. >> everybody is talking about you guys. >> reporter: this weekend was the worst memorial day in 18 years at the box office. despite starring "the rock," this film disappointed with $27 million in the u.s. since it opened wednesday. >> it's a disappointing start, of course. when we see a weekend like this, a prime movie going weekend, not live up to the expectations, we all get a bit nervous. >> reporter: disney's "pirates of the caribbean: dead men tell no tales" won the weekend but had the lowest u.s. opening for all but the first of the "pirates" film. the opening overseas was bols r
bolstered by china. disney tops the box office this year with nearly a quarter of the market so far. memorial day weekend results give hollywood studios more reason to worry about audiences being fed up with movies that recycle the old ideas. there are a couple of factors at play. there could be franchise fatigue as some of these characters stick around for a while, with paramount debuting franchise films in the summer. >> i think film critics are more important and more influential maybe now than they've ever been before. with so many options for your entertainment, options over a weekend, people are looking for quick decisions. and so, you know, they'll look for reviews, help me make my decision, do i go barbecue or go see "pirates of the caribbean"? >> reporter: hopes are high for "wonder woman" when it opens on
friday. it's not all bad news. box office is up 2% total this year, while being down since may. the overseas box office has been soaring, giving international audiences a bigger role in hollywood studios' success. i'm julia boorstin in los angeles. that's "nightly business report." i'm sue herera. thanks for joining us. have a great evening, everybody, and we'll see you back here .
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