tv Nightly Business Report PBS September 27, 2017 5:00pm-5:31pm PDT
>> announcer: this is "nightly business report" with tyler mathisen we want tax reform that is pro growth, pro jobs, pro worker, pro family, and yes, tax refo refo that is pro america. >> the president proposes one of the most sweeping overhauls of our tax system in decades. what could it mean for you? stalled market. a leading expert does not expect an improvement in the housing market anytime soon. well-known coach rick pitino is put on leave in response to a bribery investigation engulfing college basketball, all on "nightly business report," for
this wednesday, september 27th. good evening, everyone, i'm sue herera. tyler mathisen is on assignment tonight. americans have been waiting for the republicans to put forth their tax reform plan. today they got it. the president calls it a revolutionary change. it calls for drastically lower rates for business, fewer tax brackets for individuals, and a much larger standard deduction, among other things. as ylan mui reports from washington, a lot of details still need to be filled in. >> reporter: president trump, using a receptive crowd in indiana to sell his tax framework. >> we're doing everything we can to reduce the tax burden on you and your family by eliminating tax breaks and loopholes. we'll ensure the benefits are focused on the middle class, the working men and women, not the highest income earners. >> reporter: the plan still
leaves many unresolved questions. but it's got a lot for u.s. businesses. passthrough businesses would get a 25% rate. the plan also allows for at least five years of full and immediate expensing. one of the tradeoffs, the ability to deduct interest would be partially limited, although there's no detail on what that means. the plan does preserve two provisions that are important to businesses, the r&d tax credit and the low income housing credit. but the deduction for domestic production, which is important for manufacturers, that one gets the axe. under this framework, the u.s. would move to a territorial tax system. there would be two rates for money that's brought back, and the plan doesn't specify what those are. but the rate for illiquid assets would be lower than the one for cash. on capitol hill, leader said the focus is on fairness. >> today we are taking the next step to liberate americans from
our broken tax code. this unified framework delivers a new tax code that is simple, that is fair, that is pro-growth, and pro-family. >> reporter: on the individual side, the new streamlined rates would be 12, 25, and 35%. but lawmakers do have a green light to add a fourth rate to the top. the alternative minimum tax, the estate tax, and the transfer tax, all of those would go away. the only personal deductions that the plan promises to keep are the ones for mortgage interest and for charitable donations. oppositions to this plan is already mounting. senator ron wyden, ranked member of the senate finance committee, called this a sweetheart deal for powerful ceos. and he said it violates trump's promise that the wealthy would not benefit. for "nightly business report," i'm ylan mui in washington. mark stever joins us now to talk more about the proposed tax changes and what it could mean
for you. he's the chief tax officer at jackson hewitt. mark, nice to have you here. >> great to be here, great topic to talk about. >> i bet, especially from your perspective. what is your big takeaway on this proposal for the average person? >> i've heard a lot of different opinions today, it benefits one group or another group. what i would tell you is there's a lot in it for a lot of taxpayers. there's a lot of breaks in for the low and moderate and medium income taxpayers, the doubling of the standard deduction, the increased child tax credit. other credits for nondependents that have been proposed, reinforcement of retirement and education benefits. there's also benefits for the high income, those are in there as well. my one big take away is, there's a lot in there. it will be interesting to see how it all gets sorted out. it's a good platform to start with. a lot in the poeroposal. >> it sounds like it.
some of the states will be pushing back, because state and local taxes may be eliminated under this particular proposal. what's your opinion on that? because a lot of people do itemize and take that particular deduction. do some of the other aspects of this plan as it's proposed make up for that lack of deduction? >> well, that's a great question. it certainly did propose to eliminate some of the itemized deductions. i saw that they were going to hold on to the charity and the mortgage, but the others are up for negotiation or possible elimination. that will affect people in states with a high income tax. california and new york have been particularly loud about not liking that particular provision. it will be interesting to see what ultimately gets passed. it will raise taxes on some taxpayers to offset cuts on others. >> right. what do you think it will be for the average individual, the most important part of this plan?
>> well, you know, they talk about tax simplification. that doubling of the standard deduction to $24,000, and then the removal of the seven income tax brackets down to three, will certainly be something to watch. in particular, i'm watching the increased child tax credit. a lot of clients at jackson hewitt take advantage of that. that's one we're particularly sensitive to, it touches a lot of moderate and middle income taxpayers. if they increase the child credit, add a new credit for nondependents, those are two to. taxpayers should be that could put immediate money in their pocket if those provisions pass. >> from your perspective, from what we know, does it make your job easier or harder? >> it makes my job better because we get to provide those benefits to all working americans. and this certainly has a lot more in it than they're taking away from most people. so i don't know that it hits the goal of simplification as much as you would like. but it certainly does provide tax benefits which should easy the tax burden for most
americans, as i see it currently proposed. >> thanks, mark, really appreciate it. mark stever with jackson hewitt. on wall street, a rise in bank stocks helped lift the broader market as investors continued to believe that interest rates are headed higher. just last week the central bank signaled that it plans to gradually raise rates. and yesterday, fed chair janet yellen reiterated those projections. that sent the xlf to a ten-year high and helped the major averages. dow jones industrial average advanced 56 points to 22,340. nasdaq was up 73. the s&p 500 added 10. the small cap russell 2,000 index closed at a record. to the economy, where orders for long lasting manufacturers' goods rose last month, thanks primarily to a rebound in the volatile aircraft sector. durable goods orders were up 1.7% and follows a sharp decline in july. within that report, a closely watched gauge of business
investment was higher for the second straight month, offering some hope that manufacturing activity is gaining strength. but a disappointing report on the nation's housing market once again. and that has a leading expert using some strong words about the future of home sales and values. and not in a good way. diana olick has more. >> reporter: buyers signed fewer contracts to buy existing homes in august. that was just the last in a string of sour housing reports for the month with sales of newly built homes falling as well, and prices skyrocketing. it led the realtors' chief economist to a grave conclusion. >> the housing market is stalling. >> reporter: that's right. stalling. and not for lack of demand. buyers are out there. >> the buyers are looking to buy. but just not enough homes available for sale. the contractor signings are not occurring. >> reporter: the supply of
for-sale listings is down 10% from a year ago. the lower level is where demand is strongest, especially from millennials. >> millennials now, surprisingly, represent the biggest cohort of buyers. they've spend $500 billion buying real estate in the last 12 months, the biggest of any generation. millennials are being forced to get creative because there's not that much inventory at their price point. >> reporter: zillow reports a third of millennials are not just using mortgages but borrowing the down payment as well from friend and family. a third are going over budget to get into a home. another telling sign, more than half of millennial buyers are dual tracking their searches, that is looking for both homes to buy and to rent, because they are not sure they'll be able to afford home ownership after all. for "nightly business report," i'm diana olick in washington. let's turn now to mark
vitner, the senior economist at wells fargo securities. nice to have you here tonight, mark, welcome. >> good to be back with you. >> what's your response or reaction to diana's report that maybe we do have a stalling housing market? >> i think that's exactly what we have. it is because of supply concerns. there's just not enough homes out there for sale. and unfortunately, the hurricane hit two very large parts of the housing market. houston and southwest florida. that took more supply off the market. >> what about the overall economic impact, if indeed we don't have enough homes to turn over, that means that we don't have enough homes to basically feed into that feeder chain of the economy, such as, you know, the home depots of the world, if you want to renovate, or if you want to add on. what's the overall economic back the and role of housing in the economy? >> well, housing has a huge multiplier. when you buy a home, an existing
home, typically the person who is selling it is fixing it up. the person that buys it fixes it up. you have the furniture, appliances, services, you insure it, you finance it. there's a huge multiplier throughout the economy. and we're going to miss that. we're going to be lucky for single family housing, existing home sales, to be flat in 2017 with where they were last year which is pretty remarkable, when you take into account there's 10% fewer homes available for sale. >> are there other parts of the economy that are healthy enough to compensate for the lack of housing's contribution? >> well, one of the things that we saw today, we did not get some good news on durable goods orders, business investment seems to be coming back. businesses are a little happier with the geopolitical environment, the regulatory environment has eased up a little bit, that's a powerful offset. but housing is real important, particularly in the south, which is impacted by the storms, which
accounts for over half of all home sales. >> wow, i didn't realize it was half of all home sales. how do you see that playing out, then? rebuilding of new homes, there still obviously is a lot to still sort through. there's an insurance claims. it's going to be a while. but how do you see that particular situation in the houston area, in the southern part of florida, resolving itself? and what could the economic impact ultimately be? >> 2018 will be a better year. but there's not going to be any rebuilding this year. one of the things that happens is when an area is declared a disaster area, even if a home isn't damaged, it's going to have to be reinspected in order for it to be sold. so there are some pending sales that are likely to be drawn out a little bit. and then for homes that are damaged, they're going to have to be repaired. it's going to take some time. you've got insurance settlements. so the supply of housing in houston, and houston is about 5% of home sales by itself, it's a real big market. the number one market for new home sales in the united states.
and so -- and all of houston is not offline, but enough of it is, that it's going to be meaningful. once you get past september, you really don't sell a whole lot of hometowns in october, november, and december. 2017 already this kind of closes the door on 2017. >> mark, i think we'll be talking to you quite a bit as this situation evolves. thanks for joining us. ahead, what happens if the stock market head so the ceo of marriott says his company is assessing the damage from hurricane maria, and that
hundreds of their guests are still trapped in their puerto rico hotels. marriott, which has 16 properties and employs thousands of workers in the u.s. territory, says it's still too early to tell what the financial impact of that storm will be. >> we've got associates that are trying to figure out how to get assets back up and running. and we've got some first responders and relief workers that are already coming and staying with us, even though they've been warned that there may not be things like air conditioning or some other things that they would typically find. i think it's going to be a long slog, is my guess, that we're going to see many months of work before the destination comes back to where it could be. >> a week after that hurricane, nearly 3 1/2 million u.s. citizens in the territory are still without water, fuel, electricity, and other supplies. in recent days the u.s. has ramped up its response to the island's humanitarian crisis. with stocks near record levels, some investors are
growing concerned that a pullback is due. if you're in that camp, how should you prepare for a potential pullback? dominic chu asked the pros. >> reporter: with stocks continuing a trend of setting and hovering near record highs, it may seem somewhat odd to talk about a possible pullback in the market. but some wall street experts are looking to fine-tune client portfolios to protect against potential losses or at least hold up better if things go south. >> i think in this environment you should have some cash reserves. right now we're overweight cash. however, we are still long risk-based assets. >> reporter: there are lots of definitions for what makes a high quality stock. according to stock strategist christopher harvey at wells fargo securities, he's looking at how things like low levels of debt as well as better trend and profits and margins could define quality. that's among other things. he finds that they have tended to outperform on bigger down days so far this year. but a larger scale pullback may
not be as close as some think. >> historically in the fourth quarter, the market does pretty well. i don't think this year is going to be different. at this time of year, the market tends to trade off a little and bounce back, mid-october to mid-december, maybe we won't have as powerful a rally. i think the reality of the fact that next year, the numbers are going to look pretty good to start, is going to lead to a pretty good fourth quarter. >> reporter: top ranked financial adviser richard sapperstein believes there's other reasons to be more positive on the market, like rising earnings, a global economic recovery, and the potential for tax reform in the u.s., as a long term investor he would be using pullbacks to selectively add to client portfolios. for "nightly business report," i'm dominic chu. we are fast approaching, believe it or not, the end of the quarter. and a big question for investors is what kind of impact those quarterly reports will have on
stocks. bob pisani takes a look. >> reporter: the big debate is this. are we at peak earnings? earnings have been growing all year after growth declined in 2015 and 2016. that was a period that saw the markets move down. the question now, is that growth spurt over? the short answer, it doesn't appear to be. first, profits are still up. >> at a slightly slower rate. overall earnings for the s&p 500 are expected to grow 6.2% in the third quarter. that's a bit slower than we saw in the first half of the year. all right. why the slowdown? some of the sectors that had big moves up are hitting tougher comparisons. principally energy and tech stocks. for example, energy bottomed in the second quarter of last year and had a huge boost in the second quarter of this year. okay. but estimates for the fourth quarter and next year are still higher. in part it's because the economy is continuing to grow. that's the most important thing. this year, analysts expect the
s&p 500 stocks to earn 10% more than last year. for 2018, earnings are expected to grow an additional 7%. that's good news. this growth does not have any tax cut assumptions in it because no one knows what they are. but today we're getting a little closer toen an answer. the effective tax rates, what corporations really say, is about 27% of the s&p 500. each 1% cut in corporate tax generates roughly $2 in earnings. let's assume the rate goes down four percentage points to 23%. that would add $8 to earnings. the 2018 estimates go to $148. that's a big boost. 6% more on top of the 7% expected without tax cuts. that's why the market keeps holding up. the combination of expected improvement in the economy and the tax cuts give indications that we are not yet at an earnings peak. for "nightly business report," i'm bob pisani at the new york stock exchange. ford and lyft team up on driverless cars. that's where we begin tonight's
market focus. the automaker and ride sharing service said they would work together to develop self-driving software that allows ford's vehicles to communicate with lyft's smartphone app. for's shares rose think $11.95. in or abo breach to tell abt you, this time fast food chain sonic. the company said its payment processor identified a breach after noticing unusual activity at cards used at sonic locations. the incident likely resulted in millions of sales on credit card accounts. still, shares of sonic rose to $24.89. micron technology reported results above wall street estimates. and the company's guidance as well, citing strong demand for its memory and storage products. micron also gave an upbeat outlook for 2018. shares rose 8.5% to $39.09.
uniform rental company sintas reported profits that topped estimates. the company credited the gains to an acquisition. shares were higher by almost 6% to $144.01. more fallout today from the ncaa men's basketball bribery scandal. and it was big. university of louisville head coach rick pitino was put on unpaid administrative leave. but pitino's attorney says the coach has been, quote, effectively fired. the school's athletic director was also put on paid leave. and the interim president of the university is not happy. >> i would say that i was more angry than embarrassed. obviously, embarrassment is part of it as well. i think people who have watched what the university of louisville has been busy doing in calendar year 2017 will understand that we've been working day and night, committed to make sure this place is a wonderful place for our students and our faculty and staff.
and we're making a tremendous amount of progress. and when something like this happens, it makes me angry. >> eric chemi is back with us with the big impact this could have on the university. eric, it's great to see you as always, thanks for rejoining us tonight. how big an impact do you think this will have on the university? >> so you've got to look at a lot of factors here. coach pitino, there's a reason he's on leave and not fired, technically. he has a $50 million contract he just signed. that goes on for many years to come. they may owe $44 million as part of a buyout. that's big chump change. that's why he hasn't been fired yet. that's $44 million. they have a $160 million sponsorship deal with adidas that doesn't even start until next year. and so adidas could just say, you know what, this isn't what we signed up for, we're not interested in a school with fbi allegations, they may pull out. if you don't have the coach or the sponsorship, this is a program that makes $100 million a year overall in sports.
what does that do to the university budget? >> the connection to adidas, explain to me again, it starts next year. so that's future revenue that this school would be losing if adidas says -- >> they did an extension in advance. they signed the extension a month ago. and it was going to start next year and run for ten years at $16 million a year. so they're still an adidas school, they renewed. but now what happens to that renewal? >> what about future fallout, recruiting athletes, things like that? >> some of the students already today said, actually we're not going to go to louisville, now that coach pitino isn't there, because they were recruited, so they're high school seniors now, they would start next year. they said, you know what, we're going to reopen our recruiting process but it louisville isn't happening anymore. if you lose these top notch kids, who is watching games, who's paying for tv rights? all of a sudden that budget starts to hurt. >> and it defines, does it not, the town, to a certain extent, the city. lost revenue from people coming to the games. >> right.
>> i would think that would have a big financial impact as well. >> exactly. when you look at the b spon spon deals, louisville is not the same size as the other schools. they may not be able to handle that much of a disruption to their revenues. it's primarily known for its basketball program more than anything else, perhaps. >> eric, thank you so much. you're going to be back soon, because this isn't over. >> it's a long story. >> it's a long story, eric chemi, thank you. coming up, adventures in baby sitting and how one entrepreneur turned it int the city of hartford's debt
default is a virtual certainty, according to standard & poor's. the rating agency knocked down the city's bond rating for the second time in two weeks. the downgrade came after hartford's mayor held a conference call with bondholders and suggested that he did not want to refinance the city's debt. hartford needs at least $40 million in financial assistance from the legislature this fall. and without it, that city faces bankruptcy. from a big city to small business. business owners are attending the iconic conference presented by inc. magazine and cnbc. that gathering is designed to help entrepreneurs network and share strategies. it also gives us a chance to find new startups working to put their ideas into action. kate rogers is in santa monica, californ. >> reporter: every parent knows how hard it can be to find reliable childcare, especially on short notice. >> hi! >> reporter: helpers bringing
experienced sitters to families in a pinch. >> you can book a sitter the way you book an uber. >> we have a lot of screening. you can get consistent baby-sitters through the app. we call that continuity of care. >> reporter: the startup was launched in early 2016 by casey edwards and becca richter. they met at the university of california santa barbara, where they launched their first childcare business, university sitters. today helper has 8,000 clients in los angeles and san francisco, and plans to expand into chicago and new york this year. sitter rates begin at $25 an hour and the company works to fulfill on demand requests. >> are you ready to play? >> yes. >> reporter: helper's 350 sitters also go through extensive vetting. >> we do an interview process that includes an in-person interview. we check professional references. we call parents, day-cares, camps, wherever they may have worked in the past. we check for cpr certification, social media review, as well as a background check. >> reporter: they're also working with a dozen companies
including snap to offer childcare services as a benefit to employees. >> we're seeing not a lot of paid maternity leave, not a lot of paid sick leave. we're really trying to push culture into the space of supporting all of those working parent conditions. >> reporter: helper is hoping to get to the point where childcare is offered as a universal benefit across the country at companies large and small. for "nightly business report," i'm kate rogers in santa monica, california. and that is "nightly business report" for tonight. i'm sue herera. thanks for joining us. have a great evening and we'll
>> this is "bbc world news america." >> funding of this presentation is made possible by the freeman foundation and kovler foundation, pursuing solutions for america's neglected needs. >> planning a vacation escape that is relaxing, inviting, and exciting is a lot easier than you think. you can find it here, in aruba. families, couples, and friends can all find their escape on the island with warm sunny days, cooling trade winds, and the