tv Nightly Business Report PBS July 13, 2017 5:00pm-5:31pm PDT
this is "nightly business report" with tyler mathisen and sue herera. >> show me the money. the dow closing at a record and ek peckations are high that earnings season will be strong, but there's a lot of think. >> warning from washington. and social security face financial challenges in a new report has new dates on when the programs will be b depleted. >> cash is king. why americans are filing money into their checking accounts. those stories and more tonight on night "nightly business repor thursday, july 13th. >> good evening and welcome. it is the eve of earnings season. the report card on corp. rapt s health comes at an interesting time. investors are looking for evidence that the high prices
are justified by profits. that's big request. strong results could send the market even higher. poor ones could have the opposite effect. and yes, we've gotten some guidance already. in fact, an upbeat outlook today came from a surprising place. retail. target said more customers were coming to its stores and it expecting sales to be up and raised its profit forecast. tomorrow, we hear from three of the biggest banks in america. jpmorgan, wells fargo and citigroup and expectations are high and growing. bob pisani reports. >> stocks are holding up well because earnings have been improving since the earnings recession ended last year. we're expecting 7% growth for the second quarter and revenue growth has returned, expected b to be up almost 7% this quarter. the markets are relying on growth for its two biggest s sector, technology and tech's worry about names like facebook b as well as google.
the biggest banks are expected to report good numbers. stocks an bonds have improved and while long-term rates are not up, that will also be a positive trt sectors. we're also exp oil stocks taking a big boost. profits fell apart in the second quarter of last year, but with no rally in oil, earnings e stimates have been coming down. declining. besides oil, there are several issues that could impact earnings in the second half. first, a rally in the dollar would make exports more expensive. second higher wage, janet yellen today noteded again today that the labor market was tight and might lead to pressure on wages. finally, tax cuts. analysts are expecting a cut in profits to improve earnings by 8 to 10%. they know it's why they said earlier this week, they were committed to getting tax reform
completed sooner rather than later. that means this summer. i'm bob pisani as the new york stock exchange. joining us now with his predictions is mike thompson. nice to have you here. let's start with the key sectors that we're going to be fos tomorrow. how important are financials? >> very important. second most important growth. expecting about 7%, but more importantly, the financials offer leadership in terms of earnings growth and they're a harbinger of good things to come. particularly when we see strong earnings, we see it consistent with strong earnings from this sector. >> i think your prediction is overall profits will grow 9 to 10%, but a lot is it not true, .ike, comes from energ you've got energy going up 64%.
if i strip out energy, are profits as healthy as 9 to 10%? >> well, just to kind of right set, currently, the consensus is b about 6%, but what happens is analysts tend to guide low. compan guide lower generally and analysts take their numbers lore. fear of unz performancing and that's something that they have to watch out p for. the key thg here is that energy is a small sector. even if the earnings growth is good, it shaves away 11 or 2%. with the surprise factor, if you go from 6 to 8 and take away a point to two points because basically, you're netting out the effects, the positive ekt, you're still in very good territory. you know, anything 6 to 7% with an economy with an economy like this is very good, it's okay. >> technology has been a leading
sector in terms of equity performance, so i would assume that might translate. you have about 11%, that would translate to q2 earnings that are strong. >> again, when you have energy, technology and financial working together, very big components. that's again, another dpood sign. we don't have any real roubl spots. obviously, we have the little bit of concern around the consumer discretionary. down almost 3%, but i wouldn't read into that too much. because that is more of a function not about the health of the economy, because it's divergent from the strong in your opinions numbers you see in
retail sales. we think these earnings look good. if you look for the next three quarter, you have strong ek peckations come frg the analysts. that's drifen by what companies are talking about their near term outlook. this earnings cycle looks like it should for the kind of economic situation we have. >> excellent. thank you, mike. proe te and we're going to have him back at the end of earnings season to see how thipgs faired. >> and maybe in anticipation, wall street today, stocks ground higher ahead of those bank earnings. shares of financials were up, helping push the blue chip dow index to the record. dow jones gained to 21,553. nasdaq up 13. s&p 500 higher by four. >> in washington, a warning about the financial health of the nation's two largest entitlement programs. the annual report card on the
finances of mediciare and socia security show that tt pays mear 2029, a year later ill run out than thought. the social security program will remain solvent until 2023. treasury secretary says reform and economic growth will help shore up those progrn to normal of 3% or higher gdp growth means trillions of dollars into the economy and additional revenue to meet our obligations, persistent and strong economic growth can help bring these programs to sustainable solvency. >> elon m u uy is in washington pr us tonight. where's this conversation over how to fix social security and medicare? what where does it stand now? sfwl well, the adminal right now. on the campaign trail, president trump had promised he would not
touch those two popular program, however, what you're hearing from congress is that the budget they're expected to introduce will likely include changes to those social securities and mediciare. they s to keep them secure in the long return, so there's an interesting dynamic and conflict setting up between what the administration wants to do and what capitol hill wants to do. i tried to press the treasury secretary today and he declined to answer what the president might do if congress sent him any legislation that made changes to those programs, whether the president would even veto them, butcertainly, it will be interesting to see. >> when we talk about those date, 2029, for the depletion of medica medicare, 34, i believe it was for social security, does that mean that the programs literally run out of money or do they begin spending more than they're taking in?
that year? in other words, they begin working off gnawing down at whatever trust fund there is. >> right, so it's a little bit of a misleading term there. what it really means is that those are the years in which those the report actually estimates that the trust fund will pay out about 75% of benefits through 2090, so for many decades to come, you'll still get something, swrus not the full amount that you were promised previously. >> on this note, thank you so much. >> new analysis of the white house budget shows it would not eliminate the budget over ten year, although it would be redu reduced. the defici billn in 2027. this contrasts with estimates that say cutting taxes and
spending would grow the economy and larnl largely solve the cou budget issues. senate republican leaders unveiled a new version of their health care bill. but as clay repokayla report, d still remains. >> after weeks behind closed door, mitch mcconnell took the wrap off a new health care bill. >> so it's time to rise to the occasion. the american people deserve better. than the pain of obamacare. they des and the time to deliver that to them is next week. >> the bill is a balancing act of proposals meant to bring together disparate wrings of the it adds $45 billion in funding for o p pioid treatment. $70 billion more to stabilize insurance markets at the state level and the ability for
insurers to offer lower cost plans, that allowance is stopped by senators who wanted to nix mohannandatory coverage areas t insurance -- the industry's lobbying group saying the proposal would fracture and segment insurance markets. that would lead widespread adverse selection. senators ted cruz and mike lee pressed for the change. cruz says they'll vote for the bill to proceed, but lee and half a dozen of his colleagues are still undecided and two senators have set their firm noes, leaving no room tr error. susan collins of maine -- >> most troubling to me is that the rewrite of the afford bable care act is being used to totally revamp a vital entitlement program. early next week, the
congressional budget office will be releasing its score of the impact of the bill. konl leading the meeting with moderate republicans told reporters we will be voting on this next week. still ahead, can a german grocer shake up the american supermarket business? >> i'me opening of a new store that could bring pressure for lower grocery prices across the board. i'll tell you where i am and why coming up on "nightly business report." president trump say he's considering tariffs to deal with
the problem of steel bumping by china. he made the comments today on air force one. he said there were two ways. quotas and tariffs and added of u.s. steel both. companies higher today. the federal reserve chair was back on capitol hill. this time, in front f f a senate committee testifying on the economy. today, janet yellen was pressed on how to increase economic growth, now, recall that growth target set by the current administration, she told lawmakers it would be a challenge to reach. >> and the economy that is grown over the last number of years by about 2%. per year. and 2% has been sufficient to create a very large number of jobs and a tighter labor market. of course, it's good to have more jobs and a tighter labor market, but the fact that that could be accomplished with 2% economic growth points to what
is very disappointing namely, the potential of the u.s. economy. is very low. >> and she added that achieving 3% growth would require broad changes. such as tax reform and an improved education system which would add to labor productivity. >> the fed chair also said it was premature to conclude inflation would continue to fall below the fed's 2% target. today, we learned producer prices rose slightly last month and the index for june gained .1%. economists thaukt it would be flat. well, the federal reserve likes the idea of seeing slightly higher inflation. especially given the slowdown recently in price gains. and food prices have also been falling. you might have noticed that drop at the check outline at the grocery store. good news for shoppers, but a thorin and now, there's a new low price store that's expanding and could be a new threat to the
industry. courtney reagan has more from chesapeake, virginia. >> the german grocer opened its 14th of 1100 planned u.s. stores in chesapeake, virginia, with hundreds of excited shoppers lining up hours before doors opened. >> the way the prices are, i won't p shopping other places. >> a lot more economical. >> the stores are abou theize s average u.s. store. there's only ss a big emphasis dpanic, meat, fresh bakery and impressive wine selection. they have their own master who hand picks b about 120 different wines. the no frills store still has a premium feel. they intend to be half the price of competitors, though it varies by product, store location and special sales, still, 89 cents
for dole pineapple and $2.89 for their private label wine are eye catching. a quick comparison with a walmart less than a mile away. they win on eggs, bread and milk pricing. they have nonfood surprises, replenishing twice a week. the grocer keeps prices low in . anyone nine out of ten products over productionte l costs. they have paperless corporate offices, uses more natural light in stores to lower elect rig a b or d buy their own bags. experts expect the pressure to deflation in wer across grocery. and we'll see some grocers who you happen to look or be in your neighborhood dpo broke, but whatever you pay for grocery, you'll get a good deal. so the consumers don't like it and the people who c competitors are on edge.
walmart says it's quote, very mindful. kroger has filed a lawsuit alleging their private label is too close to kroger's 20-year-old private selection and says the german dproeser is purposefully confusing shoppers in order to take advantage of kroger's brand history. while their 100 stores are just a infrastructure of the u.s., the competitive heat in the kitchen is turned up. for "nightly business report", i'm courtney reagan in chesapeake, virginia. >> highers for delta's profit and that's where we begin tonight's market focus. the airline reported a worse than expected drop in earnings, thanks to higher opens reven wa line with estimates. the company said passenger unit revenue kroez and expect that t increase. but shares were grounded. to 54.50. j.c. penny betting big on toys. they're opening toy shops with play areas in all of its stores
in an effort to drive more traffic and sales. company also said it plans to expand its current online toy selection. shares up almost 8%. to $4.98. occidental petroleum hiking to 77 cents a share. ending the day at 59.50. zblncht in a bid to reinvigorate sales, tiffany has made the new ceo who has roots in the jewelry industry. former executive -- will take over the top position in early october. shares were up to 94.04 and after the bell, security software company cyber arc cut its revenue and profit guidance for the current quarter. they said sales will come in lower than ek pechted due to the company's performance in africa and also the middle east. shares initially fell 20% after hours. but ended the regular session up
1% to 51 even. middle class americans are making cash king again, sort of. according to the fdic, which regulate banks, total deposits rose more than 6% last year to about $10 trillion. so, why are americans hoarding cash right now? ryan leavitt is senior investment strategist at oppenheimer funds joins us now to discuss. good to have you with us. >> thank you. >> so, why are americans putting money in c that pay so little? >> well, there's an irony in all of this. eight years ago, we were worried about the amount of debt that households had built up and now, we're having a conversation about the level of cash that they've built up, so this is a better place t. remember, we've had a economic environment where the economy's that's been very good for corporate profit bability and good for the market. c wages.
and i think investors are being cautious as a as a result. >> we're looking at the notes and one of the thipgs you say is that they're fearful for employment. it may be tenuous, yet, we have a tight laeber market. >> we do. my comments around that is not that the u.s. economy's about to roll over and the unemployment rate's about to go up substa remember though, we tend as of us remember a recession and in 2001 and a financial crisis in 2008 and 2009. and that does lead to us to change our behavior as a result of i so, it's not that people necessarily believe that the unemployment rate's going to skyr econom going to roll over. the reality is we're just being more cautious as our wages don't grow. substantially, and we're building up our savings rate as a result. most of the cash accounts as we began this the segment, paying
very, very little. pes per year. basically. do you see that changing anytime soon? krrk d rate, savings rate? >> well, the federal reserve woulte rates, they've normalized, begun to normalize rates from zero to 125 and expectation is that the economy continues to modestly grow. they may raise rates a little bit from here, but given that the ten-year rate is at 230 or 240, it's tough for the federal reserve to be higher. unli to up substantially. now, the good news is even as we talkeded about investor caution and what's going on in checking accounts, we are seeing money come back into the equity markets. some 300 million this year, so investors are taking on risk. in this type of an environment, what are the alternatives. pennies on cash or growth in equities. >> all right. thanks so >> thank you.
coming up, bucks bmean .usiness and they're becomin upper, the fast growing ride hailing company forped a partnership with its rival in russia. uber and yan dex will combine and form a new company which does not yet have a name. the deal recei and reflects som the competition uber has faced in its aggressive push overseas. a french court has thrown out googles more than $1 bil french tax authorities
unsuccessingly argued that google should pay taxes on advertise i advertising which wair which has a low corporate tax rate. court ruled that operations are allows it to be exception. >> there is a revolution underway in artificial intelligence. driverless cars and factory automation, but one thing critics have long argued is that robots lack that human touch. well, a san francisco start up has create botts to work in sales department and the messages they send seem so real people think they're human. eric has our s >> are you single? i love to chat. they may soupd like messages on a dating app, but they're real e-mails that people have sent to sales reps at car dealerships and education firms. the problem, the sales rep is
not human. they're artificial intelligence b orots. >> she has a name. a title. e-mail address and phone numbers. >> alex is the ceo. >> we have over 11,000 companies that use it. they get to choose the name. >> sounds like some names are bet r than othe xwl what we tend to find is female names outperform male names in general and most commonly names that were popular, 24, 25 years ago tend to do pretty well. >> most popular names are jenny, ashley and jessica. jeff has business development at curry toyota in connecticut where they use the technology for a bot named holly. >> she will respond right after an opportunity comes in. to inform us, no vacation, no tas off, she's going. >> she's probably your hardest
worker, right? >> that may cause an argument, but she works pretty hard. >> he says all that work costs much less than a full time employee. getting your own starts at just $3,000 per month. and usual bripgs in a double digit return on investment. >> is there ever a situation where we've heard this at other places, competitors want to hire her. >> she's ours. she's not going anywhere. >> making the b orots seem that life like is wha the personality of this is very friendly, conversational. we even make grammar mistakes on purpose. >> ha means sometimes, cus holl. >> every once in a while, you'll have someone came in, i just spoke with her. you can't tell me she's not here. nine times out of ten, this is jeff, holly's supervisor and it's fine from there. >> that brings us them out for dpiner. >> sorry, you were suckered into talking into a robot.
>> and they say because the technology is so good, the bots get more responses than those from human, but don't worry, humans will still have jobs. he says because the bots can help figure out who's interested gives off an increase leading the more job openings. >> i love you, you look beautiful. those are going to fight. they are going to fight. >> it will be a bot fight. all right. that's "nightly business report." i'm sue herera. thanks for joining us! have a great evening, everyone. watch your bot. see you tomorrow. abc world n.
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