tv Nightly Business Report PBS June 12, 2017 5:00pm-5:31pm PDT
this is "nightly business report" with tyler mathisen and sue herera. schachange at the top. the ceo of general electric is stepping down. a ge veteran is stepping up. and investors are cheering. techs tumble. the best performing sector this year extends its losses. but what happens next is up for debate. supreme decision. a ruling by the highest court in the land could make copies of biotech drugs available to consumers quicker. those stories tonight for "nightly business report" on monday, june 12th. good evening, everyone, welcome, i'm sue herera. tyler mathisen is off tonight. the sell-off in technology shares intensified. we'll have more on that in a moment. but we begin tonight with a
changing of the guard at general electric. chief executive jeff imelt will end his tenure this summer after nearly 17 years. there is a shift in the company's focus but was under pressure to increase the price of the stock which is widely owned by longtime investors and mutual funds. taking over the top job is john flannery who heads up ge's health care division. investors like the news sending shares up 3.5%. morgan brennan has more on the future of ge, a company that was an original member of the dow >> the change at the top of general electric comes after 16 years. over that time, there have been many grumblings about the stock price, a fact that hasn't eluded the man soon to be in charge. >> no one's happy with the stock price righ or some of the cash, you know, pictures that we've had. we know we can be better at those things. so i'm going to do basically
what i've done in the health care business, spend a lot of time with investors, with customers, with employees, listening, hearing what, you know, people think about the company. >> flannery is a 30-year ge veteran. he's held a number of top posts, including health care where he turned around the flagging business. under disappointing financial metrics, the key will be how he plans to grow the company. >> we're really looking for mr. flannery to really lay out the strategies and where the growth's going to come from, help reassure us on the cash flow, cash generation. we'd also like to see some more information on just where the capital's going to be spent, capital allocation. >> reporter: it also caps a dramatic 16-year tenure for imelt, one that included the 9/11 terrorist attacks, the financial crisis, and a flurry of activity that's fundamentally transformed the dow component. in 2001 ge derives nearly half its profit from its financial
arm. today, thanks to inmelt, roughly 90 comes from industrial businesses instead. >> he's engineered a tremendous strategic change in this company to move away from being a bank, which it was moving towards when he turned over the rains in 2001 and emphasizing high-tech and innovation. that takes time. 16 years is a long time. if i would be critical, i would say move too slowly, but it will be up to flannery to prove the strategies will work. >> reporter: but the stock has performed poorly. down nearly 30% since inmelt took the hell am in 2001. lagging this year on concerns about cash flow and whether ge can reach its 2018 earnings target. but shares did jump today. even as management added some levity to a high-stakes scenario. which talent would you most like to have? >> blues guitar and dunk a basketball. far up on both of those. >> i've gotten over that.
>> i've gotten over there. >> i was hoping for great ceo of ge. >> i thought you already felt that way. >> okay. >> for "nightly business report," i'm morgan brennan. a new ceo isn't the only thing that happened at general electric today. the company also received regulatory approval for its merger with baker hughes. that deal was approved on the condition that ge sell its water and process technologies business. on wall street overall, there was renewed pressure on the technology sector. the nasdaq posted its biggest two-day slide since december, and that took the rest of the market down with it. apple was the worst performing stock on the dow index, following an analyst's downgrade today and a price target cut. dow jones industrial average lost 36 points to 21,235. the nasdaq was off 32, and the s&p 500 fell 2. after outperforming the market this year, some say the pullback in the tech sector is healthy.
others say it is not. so we asked bob pisani to lay out both sides of that debate. >> this sudden movement is generating a lot of healthy debate about whether the great technology run of 2017 is over. tech, of course, has been the big mover this year, up 17% and far outperforming the 8% gain for the s&p 500. there are arguments on both the bull and bear side on this. the bears argue tech is overall oversaturated or crowded trade. it's all true. particularly the so-called faang names. but the big tech names are better capitalized and have more stable profits than their old counterparts during the dotcom boon. these are traditionally cyclical stocks, which means they can be volatile. investors are treating them more like old-fashioned safety stocks with no volatility. that's a mistake. we saw that on friday. the bulls' main argument is this, valuations of big names is
not excessive. true, some of the big names, facebook and amazon, they have priced earnings ratios way above the s&p norm of about 18. that's because the market is assuming very strong revenue growth for these companies, which is not proven to be wrong, at least not yet. biggest name of all, apple currently trades at 16 times 2017 earnings. that's hardly inflated. apple's had high valuations in the past, but not today. tech is strong because tech companies have plenty of new business opportunities. think about it, there's the growth of artificial intelligence, there's robotics, genomics, self-driving cars, and the internet of things. no lack of opportunities for tech. for "nightly business report," i'm bob pisani at the new york stock exchange. so, let's turn now to our bull and bear guests for more on technology. we have daniel flax, senior technology at newberger berman, who is our bull, while our bear, charlie is the vice chairman at
ar yal investments, he says some of the tech names do not deserve the run-up that we've seen. gentlemen, welcome, nice to have you here. >> great to see you, sue. >> thank you for having us. >> bob laid out kind of the -- both scenarios for us. you do not own the faang stocks, facebooks, apple, google. why? >> because if there's anything history has shown us, it's that people are too optimistic and overconfident about their ability to seep the future. by definitions, these stocks are trading at 144 times earnings, because people think they're very confident that these companies are going to grow massively in the future. and again, history just teaches us that in technology, yesterday's and even today's leader is not necessarily tomorrow's winner. look at ibm and all the big computer companies, myspace, and microsoft, which was the leader so far ago. it's a tough industry to predict.
therefore, it shouldn't pay 144 times earnings for it. >> daniel, what about that? i mean, you mentioned in my notes at least that if you focus on companies that can disrupt and can look through some of the noise that we're seeing today, a pullback in tech might be a good buying opportunity. >> thanks, sue. look, at newburger berman, we try to take a longer term view on this. while we expect a lot of these shares, including apple, to remain volatile, we think there's certain elements that are underappreciated. so for example, with apple, you have a very strong ecosystem which is underappreciated by the market. as we look out over the next one to two years, we think growth could improve driven by the new iphone 8 which is likely to come in the fall. we would also add that apple's revenue and profit pull is more stable than people appreciate, helped partly by their services growth. >> what about that, charlie. some of these companies do have to use daniel's words an echo
system that is well developed. >> well, sure, that's what they always say. but if we were having this conversation 15 years ago, it would have been about how the blackberry has this wonderful ecosystem. everyone had a blackberry in the business world 15 years ago. now nobody does. the stock is virtually gone. apple is earning more than half of its profits from phones, from hardware, and there is just no predictability that they're going to be the leader in ten years from now, in phones. i'm predicting that they actually won't be. >> interesting. daniel, what about that point? i mean, mentioning the blackberry certainly does bring back those days when everybody did have them. that was the tech stock that everybody had to own. how do you make sure that when you do add a tech stock, or when newburger adds a tech stock to the recommended list, that you are going to have something that has longevity? >> i think which distinguishes apple from blackberry is apple has been able to build a
platform upon which others are able to build and create. and so apple builds integrated systems, which include the hardware, the software and the services, but the key is that the developer community has really been able to build on top of that. and so apple has paid out over $70 billion to developers over the last several years. and so by bringing others along with it, and helping to create a differentiated user experience, this in our view is what's going to help apple attract new customers, and of course, get their installed base to continue upgrading. >> charlie, i know we had a pullback in the nasdaq for the last few days or so. on some stocks it's a little worse than others. but a number of these stocks have been big winners for the year. do you worry about missing out on that kind of growth? >> no. you want to be selling what others have been buying. and buy what others have been selling. clearly, you're absolutely right, apple has benefited from
this big move in the index fund and s&p. apple is the biggest name in the s&p. so when people move money into an s&p index fund, that fund is forced to buy more apple. more apple than anything else. so as money's flown into indexes, it's flowing into apple. that's what pushed all of these big tech names up. when that slows down, and it will, you're going to lose the big tailwind that you've had behind these names. >> daniel, have you been adding to your tech positions with the downdraft that we've seen thursday, friday and today? or no? >> sue, we can't speak to what specific funds are doing. but what i would say is, if you look back over time, many of these technology companies shares have been volatile. at newburger berman the focus is on the fundamentals. for example, we're looking for significant earnings growth out of apple for the next one to two years. alphabet is another name we
think has attractive earnings prospect. cisco, where the shares are inexpensi has been a contrarian name, a company we continue to like, driven by changes to its underlying mix. while the indices are at record highs, we are really looking for names that we think can outperform virtually regardless of the market environment. which, again, we expect is going to remain pretty volatile. >> all righty. on that note, gentlemen, thank you. good discussion. >> thank you. >> thank you very much. a second federal appeals court ruled against president trump's revised travel ban. the new ruling from a three-judge panel affirms a march decision to block major parts of the order, which limited travel from six predominantly muslim countries. the judges wrote that the order exceeded the scope of the authority designated to the president by congress. the ruling will likely be appealed to the supreme court, which is already considering a
similar case. there are a few other stories as well out of washington that investors need to be keeping an eye on. not surprisingly. john harwood is here to talk about them with us. john, good to see you, as always. let's start with jeff sessions, the attorney general testifying tomorrow on russia. why should investors specifically be watching closely? >> well, this is key testimony in the investigation for the senate intelligence committee, and it may factor into the special counsel's investigation as well. because jeff sessions, the attorney general, has been involved at both ends here. first of all, he had undisclosed meetings with the russian ambassador that he had not initially told congress about, when he was up for confirmation. and then in addition to that, having recused himself from the russia investigation, he was involved in the firing of james comey, who is leading that investigation. this is a scandal that has the potential to destabilize the administration, and jeff sessions by testifying in public
is raising the stakes. >> yeah, it certainly seems that wa what about the impact that this might have, the investigation, the testimony, et cetera, on the president's agenda, most immediately health care, tax reform, last week was infrastructure leak. how will that be affected, if at all? >> the danger, sue, is that the administration gets in a negative downward spiral. gallup today had the president's approval rating at just 36%. there's a special election coming up in georgia in one week to fill the seat that tom price vacated, the hhs secretary. if you see the president continue to go down, it makes it more difficult for republican members of congress to stand with him on his priorities, like health care, like tax reform, like infrastructure. and you could get into a situation if he continues to erode in his popularity, where it's every person for him or herself in washington, and that is not the kind of unified front that republicans need to push
these agenda items through congress and get them on the president's desk. >> we'll be watching closely, john. thank you, as always. >> you bet. >> john harward in washington. still ahead tonight, did the supreme court just help get some drugs to patients sooner? across the globe, and qatar, financial markets are stabilized after a week of losses. this is as the government shows to keep up and running despite being sanctioned by its neighbors. with an exclusive interview by cnbc, the finance minister stressed his country's resilience. >> we look at what happened,
sometimes a lot of people think that we're the only one to lose in this. i don't think so. qatar is a very strong economy, and it's a big economy. and i think if we're going to lose a dollar, they will lose a dollar also. i think there is a lot of business among everybody around us. so i think -- i like to have a win-win situation, but this incident, it's very unfortunate. it's put a lot of lives, especially human people in difficulties, families are being disrupted around these countries. it was forced on us. it was taken by other countries. but qatar is always open for business. we'd like the people that live here to have all the respects and actually getting in and out of country. >> as we've reported, saudi arabia, bahrain, the uae, and egypt are among the leading arab
governments who have cut ties with doha last week. puerto rico votes to be the 51st state, but the legitimacy of that result is being questioned because the turnout was so low. the governor, however, said that he will create a commission to appoint a panel to lobby congress for statehood. congress now has to approve any changes to the island's political status. puerto rico is in the midst of a financial crisis. it has a debt load of $70 billion, and last month filed for the largest municipal bankruptcy in the u.s. a clothing retailer has joined the ranks of many other of its peers. jim has filed for chapter 11 bankruptcy protection, just weeks after it partnered with a turn-around firm after missing a june 1st debt payment. the company says it expects the move to move through the process quickly and emerge as a stronger organization. imax is cutting 14% of its work force. that's where we begin tonight's market focus. the movie theater company
announced a $20 million cost savings plan which includes eliminating approximately 100 positions worldwide. imax also announced a new $200 million share buyback program. they fell to $24 even. fedex raised its dividend to 50 cents a share. investors liked the news sending shares of fedex up to $209.12. merck said it would pause new enrollment in two late stage studies of the immunotherapy drug used in combination with other treatments for blood cancer. the stoppage was at the recommendation of an external data monitoring committee to allow more information to be collected, to help understand why some patients died given the therapy. it is approved for lung and skin cancer. merck was unchanged in the regular session at $64.39. and shares of coharris biosi
senses plunged after the fda failed to approve a drug that helps prevent infections for cancer patients who are on chemotherapy it finished down nearly 24% at $15.73. a ruling by the supreme court today could have wide ranging implications for the pharmaceutic the court's decision speeds up the time the copycat versions of by yo logic drugs can get to market. it's an expensive class of medicines that can boost sales for the drug companies. biosimilars are copycat versions of those drugs. meg terrell is following this story and joins us here on the set. always good to see you, meg. so, what was the case that the supreme court specifically ruled on? >> that's right. this case is called sandos versus amgen. and essentially it was over amgen's drug that is a biological drug, administered through shots or intravenously.
they're manufactured using living cells. biosim lars are the copycat versions of biologics. they argue because of the way they're manufactured they're not identical. we basically think of generic drugs as sort of identical versions of the chemical versions of the drugs. so what this ruling did today is essentially overturn a lower court's ruling that gave a six-month delay before when a biosimilar could be introduced to market after it got approved, it said no delay needed there as long as you give the notice to the manufacturer early, you can launch. it basically wiped out the six-month delay that would still continue to allow accrual of sales. >> what are the broader implications for the drug industry? >> so, this essentially will have implications down the line as a lot of the new drugs are introduced to market. right now we only have about five biosim lars approved in the united states. some of they are working through legal battles. as we see more and more of these biosimilars introduced, they'll come to market a little bit
sooner, and cut into the original manufacturer sales more. >> have you gotten any reaction yet from either the drug companies, or, you know, the broader medical community that is using these products? >> it's interesting, the reaction was a little muted. this is a very long process to figuring out how to get biosimilars to market. it's taken years to continue to figure it out. probably the strongest reaction was from the payer community, you know, the pharmacy benefits managers. however, what we've seen is when these are introduced, maybe they're only introduced at a 10% to 15% discount to the original drug. it's not that gigantic cost savings. >> i was wondering a the drug companies have been under such scrutiny about cost increases, and the pharmacy benefit managers are in the middle of that. so maybe a little bit of a benefit, but not an extreme benefit for the consumer. >> introduced at the smaller discounts than you might expect to see, but people say as we see
more and more of these entering the market, it should bring prices down overall. >> you'll be following it, i know. >> definitely. >> thank you so much, melg. >> thank you. >> meg terrell. coming up, hitting the gas. while uber struggles, rival lyft is quietly making some big moves. here's a look at what to watch for tomorrow. it is day one of the federal reserve's two-day policy meeting. as we reported, attorney general jeff sessions will testify in front of a senate panel on russia. opec will release an update on supply and demand trends in the oil market. and that is what to watch for on tuesday. mcdonald's wants to hire 250,000 workers in the u.s. this
summer. and it's doing it in a very modern way. it's using snapchat. the chain plans to run ten-second videos on the social media service of current employees talking about working at the company, at which point viewers can then swipe to mcdonald's website and apply. there may be a new player in the u.s. grocery market. a german low-cost grocer plans to invest $3.5 billion to expand its store base. it's an aggressive plan that would make it the third biggest supermarket chain behind walmart and kroeger by the year 2022. the investment comes at a time of intense competition in that industry. walmart, which is the largest u.s. grocer, is testing lower prices in 11 states and is expected to spend about $6 billion to regain its title as the low-price leader. uber is chief executive will likely take a leave of absence. no final decision has been made, following a board meeting
the board met over the weekend to consider recommendations from an investigation into sexual harassment and related issues. a close ally of the ceo has left the ride-hailing company making him the latest high-level executive to depart. uber is valued at roughly $70 billion. while uber continues to wrestle with high profile legal and public relations problems, its rival lyft is quietly making some strategic moves. the latest has jaguar land rover taking a stake in lyft and phil lebeau has those details. >> uber may rule the road when it comes to ride sharing. but its rival lyft is putting together an impressive group of partnerships that could pay off in the long run. that includes a new deal with jaguar land rover, the luxury auto brands are investing $25 million in lyft, and will work with the ride share company
developing mobility services. the deal also calls for jaguar land rover to supply some vehicles to lyft drivers. this is the second automaker to take a stake in lyft. following gm's investment of a half billion dollars last year. at the time, many thought it would lead to lyft working almost exclusively with gm. but since then, both companies have branched out to also work with other tech and transportation firms. for example, lyft has also struck a deal with waymo, the google subsidiary that is leading the development of driverless vehicles. and just last week, lyft announced it's working with the tech firm neutonomy in boston later this year. uber is also developing autonomous drive vehicles, testing them i but with the company embroiled in a number of controversies, ranging from the culture of the firm to whether or not it's overcharging customers, the time could be ripe for lyft to gain
ground on uber. especially in one or more of its partnerships takes off, and leaves the company to greater growth. it's estimated the majority of the ride share business in the u.s. goes to uber. lyft says it has nearly 30% of the market. but as lyft continues to expand and add new partnerships, it is slowly gaining ground on uber here in the u.s. phil lebeau, "nightly business report," chicago. that is "nightly business report" for tonight. i'm sue herera. thanks for joining us. have a great evening, everybody. we'll see you right here .
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