tv Nightly Business Report PBS June 9, 2017 5:00pm-5:31pm PDT
>> announcer: this is "nightly business report" with tyler mathisen and sue herera. tech tanks. retirement rule. it could mean big changes for your savings. tipping point. if you're in the market for a new house, a new report says you might want to think twice. those stories and more tonight on "nightly business report" for friday, june 9th. good evening, everyone, and welcome. i'm sue herera. tyler mathisen is off tonight. the best performing sector of the year had one of its worst days in a while. after hitting a record early in the day, the mood shifted suddenly and without warning. and those same stocks that accounted for more than 40% of the s&p 500's advance this year
reversed course. by the end of the day, amazon, facebook, alphabet, apple, and netflix all lost 3% or more. in the end, it was a tale of two markets. the dow jones industrial average closed at a record, up 89 points to 21,271. the nasdaq lost 113 points. and the s&p was off two. bob pisani takes a look at the hit the tech stocks took. >> reporter: finally we got a little volatility as some traders came forward to begin to question the valuation of some of these big tech names. facebook and amazon and apple and microsoft and alphabet were down about 3 to 5% today. goldman sachs, in a note this morning, made a very simple but important point. these big tech names are traditionally cyclical growth stocks. in other words, they're volatile. but everyone has been acting like they're boring consumer staple stocks, usually not
volatile, and everybody bought them aggressively assuming they would go up with no risk at all. they warned the stocks have gone up so much the trend could quickly reverse. they're right, it's a good point. and that's exactly what happened today, with the big names, as well as the semiconductor names for example nvidia and advanced micro. what does all this mean? it means kind of what it always means on wall street. when you have stocks that keep going up, it attracts a whole other class of buyers. we call them momentum players. and essentially these momentum players are just along for the ride. then something fundamental happens, you have the mildest of earnings or guidance disappointments, or in this case someone with influence like goldman sachs writes something that says, you know, fellas, this doesn't make too much sense, and you get a selloff that suddenly accelerates. all right. so is this a cause for concern? for the moment, no. i think it's a relief. there are some signs traders are taking the money and buying less-loved sectors like banks and energy stocks.
that would be a healthy rotation using overbought tech stocks as a source of funds to buy underowned bank and energy names. the verdict so far, at least for the moment this does not appear the start of an overall correction. for "nightly business report," i'm bob pisani at the new york stock exchange. the election results in the united kingdom could impact the single biggest economic issue that that country faces -- brexit. wilfred frost gave us the preliminary results last night. he is back for us tonight from london. >> reporter: uncertainty struck the united kingdom overnight as the initial results from the general election revealed the uk was headed for a hung parliament, where no party wins a majority. the dow plunged and theresa may's opponents called for her resignation. >> the prime minister called for the election because she wanted a mandate.
well, the mandate she's got is lost conservative seats, lost support, and lost confidence. i would have thought that's enough to go, actually, and make way for a government that will be truly representative of all of the people of this country. >> reporter: but as the final results emerged, theresa may did win enough seats along with the help of the small northern irish party to return to downing street. prime minister, but her standing much diminished, as she failed to increase her majority as planned. >> i wanted to achieve a larger majority. but that was not the result that we secured. i'm sorry for all those candidates and hard working party workers who weren't successful, but also particularly sorry for those colleagues who were mps and ministers who contributed so much to our country and who lost their seats and didn't deserve to lose their seats. and as i reflect on the results, i will reflect on what we need
to do in the future to take the party forward. >> reporter: the other big takeaway was the brexit negotiations would begin as planned in ten days' time, but with the uk's negotiating team much weakened by this grueling election. that might explain why european council president donald tusk was so keen to get started. in a letter to theresa may today, he spoke of their shared responsibility and named it an urgent task to begin negotiations. he also reiterated the march 2019 cutoff date. he even expressed his congratulations on her reappointment. that line no doubt written with a write smile on his face. the bottom line, may is weaker. the uk is weaker. the pound weaker as a result. for "nightly business report," wilfred frost, london. leaders of the house intelligence committee say they have asked the white house counsel to see whether there are any records of the former fbi
director's conversations with the president. the panel also asked james comey for his notes and memos of that same conversation. and in a fiery news conference, the president forcefully accused mr. comey of not being completely truthful. >> we were very, very happy and frankly james comey confirmed a lot of what i said. and some of the things that he said just weren't true. >> the president also said he would be glad to state his case to the special counsel overseeing the russia investigation. a consumer protection aimed at retirement advisers is set to go into effect today, at least for now. the labor department is still reviewing the regulation and is expected to make some changes later. kayla tausche has more on the effect of the new rule. >> reporter: the so-called fiduciary rule keeps retirement advisers from favoring their commission-based products over their customers' interests. as of today, they have to abide by the spirit of the rule.
merrill lynch gave customers a choice to move to a different platform or pay a fee. wells fargo offering different products. ubs is changing broker compensation. ameriprize has dropped hundreds of funds. some independent firms have frozen assets while the rule is under review. retirees are affected if their money is managed by commission-based accounts. customers may opt back into this accounts. the obama administration estimated the rule would save americans $17 billion in fees. but it will likely change again before a final january deadline. the labor department still reviewing it and the department has 38 political appointments vacant that will be important here. managers are traditionally regulated by the fcc, who will want a say in how it's written
and enforced. the wild card, how congress tackles large scale financial reform and if they decide to roll back the rule completely. for "nightly business report," i'm kayla tausche, new york. chris corosa joins us now to discuss what that new fiduciary rule will mean for you. he is founder and fiduciary expert at corosa asset management. good to see you, welcome. >> hi, sue. >> bottom line for me, what are consumers going to see and investors going to see that will look or appear or be different? >> well, it's likely that they won't see anything dramatic right away. over time, primarily those who are rolling over iras from their existing retirement accounts will begin to see new language in the agreements, which is called a best interest contract exemption. and that discloses to the new rollover that there may be an
opportunity for the provider to offer products that would normally contain what's called conflict of interest fees. this is a way for the client to sign off on that and allow them to do it provided it's still in their best interests. >> it doesn't sound like it's written in an easy way to understand. >> maybe, maybe not. there's no really formal template for how this language will appear. my thinking is it will probably be maybe a paragraph or two. but that doesn't mean that's how it will be. >> okay. what questions do investors need to ask, as this rule rolls into effect? we won't see the changes immediately, but as we get closer to the final version and it does go into effect, what questions should they be asking their financial fiduciary? >> remember, the actual name of the rule is the conflict of interest rule. and i think that's what investors should focus in on. they should ask their adviser,
what types of fee arrangements do we have? are they traditional conflict of interest fees such as commissions, 12-b-1 fees? sometimes they're disclosed in the mutual fund but not all times, because the sec doesn't require a clear disclosure for revenue sharing. you have to ask the adviser if that's the type of fee that you're paying. then you might want to consider whether or not that's the type of fee you want to pay, because you don't have to. >> i assume you need to ask those questions, because when you look at your statements and your financial plan, sometimes it's a little bit difficult to find out where those fees and those other exemptions are in the physical document. >> that's true. in 2012, the dol came out with a rule called the 401(k) mutual fund fee disclosure which was supposed to address this. unfortunately, again, they didn't provide a template so we have all different forms of
disclosure, which are often very difficult to read, even for professionals. >> on that note, that means we'll have to have you back when they finally finish it up and we get the final product. chris, thank you very much. >> thank you. still ahead tonight, the 51st state? investors will be watching a key vote this weekend. >> reporter: we spoke with residents, investors, and government officials here in puerto rico about a big statehood vote this sunday. we'll tell you all about it, coming up on "nightly business
an historic vote in puerto rico this weekend. 100 years after being granted u.s. citizenship, puerto ricans will vote on whether to become the 51st state. it comes at a time of deep financial uncertainty for the island. leslie picker is in san juan. >> reporter: flags adorning the bright rows of colonial buildings underscore the idea of statehood in puerto rico. you'll see puerto rican flags by themselves, with a lighter shade of blue. that signifies independence. this question of status will be the focus of a vote taking place on sunday. puerto ricans will go to the polls to determine whether or not they want to become a u.s. state, sovereign nation, or remain a commonwealth, which is something in between. puerto rico has been in a
regulati recession for ten years and is grappling with debt and unfunded pension liabilities that caused it to seek bankruptcy protection last month. 40% of u.s. municipal bond funds have exposure to puerto rican bonds. residents we spoke with said becoming a state could solve their economic problems. others blame the u.s. for the mess on the island and would prefer to keep their commonwealth status or seek sovereignty. >> there is the feeling, you know, that you can't trust that anymore. that is very hard. >> reporter: not everyone in the u.s. is in full support, wary that they would have to take on a bankrupt municipality if puerto rico becomes a state. governor roseo who campaigned on
statehood defended puerto rico's rights. i'm no fan of bailouts. i think we need to assume responsibility for what's going on here. statehood is an equal playing field for u.s. citizens that reside on the island. >> reporter: puerto ricans are u.s. citizens but they don't have the same access to benefits as those on the mainland. while they can serve in the military, they can't vote for their commander in chief. the topic is so important to elected officials here, they've spent $7 million on this weekend's election, despite being bankrupt. the justice department was supposed to provide $2.5 million in exchange for a say over the wording on the ballots. but that money has yet to arrive. >> this is not about the money. this is more than that. so keep the money. let us express ourselves. that's what we're going to have on sunday. >> reporter: gonzalez is confident that residents will vote for statehood. it wouldn't be the first time. puerto rico had a similar vote five years ago. but it's up to congress to write
a statute welcoming puerto rico to becoming the 51st state. so far there hasn't been willingness in washington to do that. for "nightly business report," i'm leslie picker, san juan, puerto rico. >> and you can read more about what's at stake when puerto rico goes to the polls on our website, nbr.com. the u.s. is mostly clear to provide unfair support to boeing. that's where we begin tonight's market focus. the world training organization rejected claims by the european union and airbus that boeing had benefitted from billions of dollars in illegal subsidies. it also ruled the u.s. failed to eliminate a tax break in a key state. both boeing and airbus claimed victory over that decision. shares of boeing were basically unchanged at $190.03. the federal trade commission staff is advising the agency to prepare a lawsuit to block walgreen's nearly $10 billion deal to buy rite aid. that's according to a report by the trade publication capital
forum. walgreen's initially bid for its smaller drugstore rival back in 2015. shares of walgreen's dropped to $80.99. shares of rite aid plunged 15% to $3. sirius xm will make a $480 million investment in the music streaming company pandora. the satellite radio company cited pandora's large user base and personallyized music experience as tremendous assets. shares of sirius xm dropped 20 cents to $5.20. pandora rose 10 cents to $8.52. the fda has requested endo pharma pull its opioid painkiller off the market. this is the first time the agency has asked to remove a currently marketed opioid drug due to public health consequences of abuse. shares of endo pharma dropped more than 16% to $11.49. time now for our market monitor, who says he's finding value in some underappreciated
names in the stock market right now. it's not the first time on the program for him but it is as market monitor. let's welcome back timothy lesko. welcome back, tim, nice to have you here. >> thanks for having me. >> so you're saying that the market in certain sectors may look fairly valued or maybe fully valued or a little overvalued. but that's not true of the overall market. >> right. and that's typical of the market. usually you have certain sectors leading the marketplace. over the past few years, that's been a combination of the high flying technology stocks and some of the consumer staple stocks that pay a higher dividend. that has really left sectors like financials and energy kind of in the dust. we find value in a lot of different areas in the market. >> you're also looking at the so-called old tech. one of your picks tonight is oracle. why? >> i think that the market over the past seven years has really been searching for secular
growth stories, and leaving behind those cyclical stories that have been undervalued. while facebook, amazon, netflix, and google kept going up, you saw stocks like ibm, or microsoft for a period of time, apple at different periods of time, lagging the market. oracle has been making a long term transition from selling software to people to selling software as a service. you might see top line growth, which the market has been so desperate for across technology. >> you're wading into the energy sector, a fascinating sector to watch but not always an easy one to invest in this year. royal dutch shell is your pick in that particular area of the market. why do you like it? >> that's a great analogy, wading into the energy space. you feel at times that you're drowning in oil. that's been the concern in the marketplace, we have an oversupply issue. we think that will work itself out. oil demand really hasn't wavered
over the past three or four years, despite some predictions by the governing agencies. as demand moves forward, we think it will soak up excess in the marketplace. it's been a nice place for value investors like us to at least get some revenue while we wait for, you know, the oil market to right itself. >> and you're employing a little broader with your last pick. walmart. that's based on their distribution. >> right. that to me is one of the favorite stories to talk to people about. really only because in a world where every retailer fears amazon, there are few people that can compete with what amazon is really good at, and that is the logistic side of it. walmart already has those products in place in your geography. as the world moves toward, whether it be same-day delivery via uber or lyft or drones will land on your doorstep, walmart
has those products in your neighborhood already. they probably have a leg up on a lot of their competition. they've been a logistics juggernaut for years. now they've just had to figure out the internet side of it. and some of the recent acquisitions have helped them do that. >> on that note, tim, have a great weekend. >> thank you for having me. and coming up, is it better to buy or rent in this market? what a new report says about one of the biggest financial decisions you'll ever make. it seems more americans are not paying off their credit card bills. in the past two quarters, banks reported a steep rise in charge-offs, which is debt they cannot collect from their customers. according to a report from
moody's, the increase is the largest since 2009 and is especially unusual since the job market is improving. if you're planning on house hunting this weekend, you might want to do a little math first. for several years, it has been cheaper and more lucrative to buy a home than to rent. but that equation apparently is shifting quickly. diana olick shows us where that change is happening th. >> reporter: after the housing crash, when home prices plummeted, it fast became not only cheaper to buy a home than rent, but it was also a better investment to own in terms of wealth accumulation. now, with home prices still rising quickly, and rents starting to ease, the math is shifting. nationally the rent versus buy equation is heading steadily into the rent territory, according to an index from florida atlantic university, which factors in home prices, rents, mortgage rates, as well as alternative investments to gain wealth. of 23 cities that the index measures, 11 are still in "buy"
territory, some very clearly, like chicago, cincinnati, and cleveland. nine, including south dakota, philadelphia, and l.a., hover right around zero, meaning a toss-up. three cities, dallas, denver, and houston, are in historically high territory for renting being the better option. the main thing is that all of the cities are steadily moving toward rent, because home prices are so high, mortgage rates are expected to rise, and other investments are giving better returns. this may be why another index, measuring home buyer sentiment, is falling. the monthly fannie mae survey found those who said now is a good time to buy fell to its lowest level ever. in addition, fewer were confident about holding onto their jobs. clearly affordability in housing is weighing on the market as more millennials age into their home buying years, demand will surely increase. but affordability may still stand in the way. i'm diana olick in washington
for "nightly business report." the powerball jackpot has grown to $4 million. we decided to take a moment and daydream about what all that money could buy. here's robert frank. >> if there is a winner for saturday's powerball jackpot, the lifetime payout would be $435 million. the lump sum, which is recommended, would be $273 million or only around $200 million once uncle sam takes his cut. state and local taxes and the federal bill later in april could bring the total to under $150 million. but that still leaves you with some good walking around money. you could buy this house in beverly hills, california, with a gold champagne room, a gold rolls-royce and a come lagold lamborghini and two pools. this new bugatti tops 288 miles an hour for only 3 million bucks. you could have bought two of the
most expensive diamonds ever sold, the pink star, 59.6 karats, pink flawless, for $71 million. if you want to quit your job and retire on that yacht, you can hop aboard the $80 million silver fast. it's 250 feet. it's got an outdoor cinema, eight-person glass jacuzzi, dining table for 20, and of course a helipad for going to and from the bank. for "nightly business report," i'm robert frank. and that's it for us tonight. i'm sue herera. we want to remind you, this is the time of year your public television station seeks your support. thank you. we'll see you monday.
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