tv Nightly Business Report PBS February 16, 2018 5:00pm-5:30pm PST
report" with tyler mathisen and sue herera. >> stron rebound. ocks have their best week in years as the bulls appear to have regained control of wall street. > coke's fizz. what this blue chip american company idoing to battle a shrink market for its core products. hollywood game anger. why a new super hero movie could be a turning point for the film industry. those storiesnd more o "nightly business report" for friday, february 16th. geenk, everyone, and welcome. i'm sue herera. tyler mathisen is off tonight. comeback the s&p 500 posted its best weekly gains since 2013 following week that saw the biggest drop in stock market history. limb higher was not only
big. it was broad. after a big run mp thisning stocks pulled back when special counsel robert mueller indicted several russian organizations and individuals for allegedly interfering with the 2016 presidential election. but the decline was grief and the dow and the s&p posted the sixth straight day of gains. the dow rose 19 points to close at 25,219. the nasdaq fel 16 x. the 500 add one. mike santoli takes a a lookt what could test the market next. >> reporter: the stock market's impressive comeback this the st week has been almost enough to make investors forget the shortharp drop that we preceded it. it's now up morehan 2% for the year to date. as encouraging as the rebound habeen investment strategists say there are a few tests ahead
of the market that will signal whether stocks are back on stable footing. stocks initily recover one half to 3/4 of the ground lost before faltering again. the s&p 500 is in the zone where it might be expected to stall out if this pattern were going the second test is valuation. the market correction made stocks appear less expensive relative to corporate earnings that are sll growing nisly. during january this year, stocks during this bull market had never been as highly valued when compared to bond yield. if the ten year treasur yield stays near 3% investors need to she they will tolerate it. and finally volatility needs to calm down.af r one of the calmest years on record in 2017 volatility
swept the market. and even with the measures of rebound markets are jumpy andic need to ie a return to stability. while the bull market has won back the benefit of the doubt with one of its strongest weeks in years it ispremature to sound the all clear for a new rush to fresh market highs for stocks. let's talk about the strongs rebounds thacks managed to stage this week and what might be ahead. here to talk about that is john augustine of huntington private bank. john, nice to see you, welcome. thanks, su nice to see you. >> what did you think of what happened over the past two-week period. a lot of people are saying it is the end of the bull market, beginning of increasedty volati others disagree with that. wheredo you come down o we are now? >> well, what caught our attention was the catalyst t bring us down a week ago friday
or so was coming from of strength. it was coming from a better than expected jobs report. that kind o brought all markets down. not just in particular stocks, but commodities, gold, and bonds well with bond yields going up. so that was the first thing that caught our attention. then we all learned about the vix and how it can accelerate to the downside a week ago monday to o, which was a surprise us. so out of that, what our thoug was was once the stock market regained its footing, time to rebalance --again, all markets had kind of come down. so we were surprised by the vix. we knew we were coming in from a position of strength. we didn't see a big asset allocation adjustment taking place. so our counsel begin to look at one of rebalancing, then look at moving into positions of strength with stocks that have been takenn d sharply. that was our view coming in, sue, when we saw the volatility first pick up. >> were you doing some buy flag
and do you feel as though, perhaps with more volatility, the market can ce to move higher? >> yes. so, yes, and yes. we were doing om buying our equity teams were looking at stocks they had been looking at that hadn't come down very much. amazon was one of those stocks new corps steel was one of those stocks. lockheed martin was one of those stocks. they were looking atupading stocks that had never given them buy.break, so to speak, to that was first and foremost. our equity teams were active. secondly, in volatility. in volatility, just so one asset class in our view isn't getting picked onen relation to others, they all kind of came down this time but stocks got accelerated from the vix, in that moment then we saw vix start to lower. so in summary ther we are starting to see the vix back in the tns. could i go back in the 20s?
yes. unless there was some fundamental change in earnings or inflation or the economy at r shop in huntington we would probably be looking to rebalancn ag and swap into positions of strength. that would be our view right now where the vix and where the markets are. >> john, we'll leave it at that. thank you for joining us. enjoy the long holiday weekend. >> you too. >> john augustine with huntington private bank. dow component coke reported flat sales of its soda. the y'comp quarterly results were helped by stronger sales of things like teas,s, coff and vitamin water. and that helped send shares higher. butat, if anything k this iconic american company do to stem the decline of its product that it's known for? dominic chu takes a look. reporter: when youhink of coke, you think of fizz. but business at the world's largest beverage maker is relatively flat. it is producthe isn't t hot item like it used to be.
there is no growth in coke and diet coke and that's a problem for not just coca-cola but the spire non-alcoholic beverage industry. >> some of it is a realization especially if we are talking out carbonated and sugary type beverages it's realizing you are never going to convince some people. soocusing on other strengths. for coke it's focus more on vitamin water, focus more on smart water. focus more on the carbonated beverages without sugar. >> reporter: it has become ang che for snack and beverage companies. for yolk coala the bright spot was outside of its core products. water, tea, those posted moderate growth. in the come months coca-cola will be focusing on key products and markets. >> they have changed to smaller, like minis. because you might walk into the
store and say i don't want 20 ounces but i a kind of thirsty and i do like the taste of coke so i will take a six ounce version. and they don't -- not only are they getting you to try more occasions and driving volume but oe price perce for that mini is substantially higher than if you were going to pay for a 20 ounce. >> reporter: investors in both coca-cola and rival pepsico will be watching closely to see whether each company with boost sales in the coala version, whether that'sinvesting in those lines or more in otherik items sparkling water. dom set the stage for us. t aarterly earnings and talk about where the beverage giant might find growth. joining us is the equity analyst ar morning welcome. nice to have you here. >> thank you for having me. >> how do you view the company overall? dominic kind of set the stage
with what the core holdings are but how do you feel about it i don't hasu all? >> , we think that their fourth quarter results largely came in line with our expectations. as was alluded to, a lot of drivers of growth are related to pricing and better price and mix strategy. however we were also very pleased to see the company's growth margin expand significantly during the quarter as it concluded the refranchising of its u.s. bottlers. we think that the shift to a concentrats model the company refran chais its bottlers will prove a lot of profit and up side. a lot of the bottling assets were more capital intensive. without those assets, we see a lot of potential for the company to improve its gross profit. >> where do they find continued growth? they have moved into vitamin water. they have moved into non-carbonated drinks certainly but they are still known as coke, and f coke. how do they find that growth? do they have to do acquisitions?
how would you advise them? >> rht now, a lot of growth has beenng driven by pri that's consistent with what we are seeing across the non-alcoholic space. smaller packagi sizes, different chanorls, pizing a smaller bottle in a cooler versus amount of soda on the several. these are great for profits and drive top line growth. also we have seen them ph into categories like coffee and tea, which were up 2% in the quarter. and continued growth in the non-carbonated beverage portfolio should help. >> do you view their potential bigger domestically or internationally. >> for soda i would say the volume potentials exi abroad. in terms of pricing, pricing in north america is up2%hi w abother things?
we've seen pepsi and other competitors move aggressively into scks and thing like that. how does coke stay on >>that? see coke staying in the beverage space but we have diversified away toward non-carbonated beverages, like their push intoe cof recently. >> sonja, we'll leave it there. thank you so much. >> thank you. >> sonja voroith morning star. in economic news, consumer nentiment climbed to its second highest level 14 years. according to the latest read from the university of michigan tax cuts offset the recent volatility in the stock market. economists watched the survey closely because, in theory, the better people feel, the more they spend and spending accounts for a large chunk of economic activity. construction of new homes rose nearly 10% and january. that's the second highest level since the great recession. while single family home building increased ltmonth, so did construction of multifamily homes. perms foreground breaking on
multiunit residoasen tdre o s o. and that's creating a bit of a mess in the apartment market. diana olick has our report. >> reporter: scan the downtowns of the cnation's largestities and you are likely to see a staggering array of cranes. most of them are helping to build luxury apartment buildings n. affect, multifamily construction is now at a 40-year high. completions last year yumped a staggering 46% more than doubling the long term average according to real page. the trouble is, developers are putting u the wrong kinds of buildings. luxury, not affordable. >>t's really tough to deliver product at those lower price points. the cost of land. the cost of building the cost of labor, it's really about the same regardless of what product you are doing. and it's just tough to make a deal work financially if you are going toward that mide marke price. >> reporter: developer toby
bazuto faces more difficult financing on every new project. 70,000ave a portfolio of units mostly in the luxury space. his tenants spend a relatively low share o their hi incomes on rent. >> that being a said it is a omle of two cities. in the middle i and the lower income markets, people are spending o proportionally more their rent. so much so that i believe there is ans acute cri headed our way. >> reporter: despite rising incomes, nearly a quarter of all renter households spend more than half their income on rent. that according to harvard's joint center for housing studies. non-luxury rents continue to rise because of the short supply. puthy don't developers just up more affordable products. >> a two by four doesn't care whether it is an luxury building or an affordable building. it cos the same. the differential is rent. and there is a roouj uge disparity between high end rent versus low end reptd. the reality is for us to develop
an economically viable feasible project it has to, my nature, be gh en. >> reporter: not what mosle pe need. it is time to look at sdae of s upgrades and down grades. wendy's was raised. the stock is attractively valued after its recent decline. thearget is 18. it was up 4% to 16.39. argus sites drug trial delays and competition for its multiple sclerosis and alzheimer's drugs. the analyst describes the outlook as challenging. the stock fell 2.5% to $291.87. true car was named to the best ideas list for ve2018at stevens. that firm expects the automotive information website to unveil a number of enhancements to its operations. the analyst recommends buying the stock on anyeaess
wilbur ross says he thought strong measures were necessary. that was enough to send steel stocks higher. kayla tausche is in washington with the details. >> reporter: the commerce department found cheap imports of steel and aluminum flooded the u.s. in recent years. the agency is rec president trump put restrictions on imports to restore u.s.he production80% of capacity. steel plant are running at less than 3/4 ofapacity and aluminum, less than half. there are three categories of blanketed tariffs for all, the second, targeted tariffs. finally a limit on the amount each country could exported to the u.s. the steel and aluminum agencies have urged washington toer considtrict penalties that would preserve their business. the ceo of in a -- of majesti
steel w on capitol hill. >> without a strong industry it is a risk to our whether it comes to national security, infrastructure orra gene economic needs. >> reporter: some worry action would lead to higher prices and escalate trade tensions with china and other u.s. trang partners. in a statement, the business round table said, quote, we are very concerned using this tool will hurt the overall u.s. companies, american workers, and consumers. while the a recommendation for strong action this isn't the end of the story. theryommerce secre made clear not everyone in the administration agrees, andes ent trump has until mid-april to decide what if any action to take. for "nightly business report" kayla tausche in washington. a recovery in america's farmland helped the results over at deer. that's where we begin toent tonight's market focus. the equipment maker is seeing stronger demand r anding sales in its key markets. the company topped alysts
expectations in the recent quarter and raised its forecasts for t year. they are at $169.44. >> campbell's soup was hurt by an ongoing dpute withalmart ter a promessional program. the stock fell 3 46.17. we tailers are sto fewer products made by kraft heinz. and that h that company's bottom line. it comes as competion increases and americans opt for healthier meals. sharesell more than 2% to $70.80. and vf corp., which owns north face and wrangler reported disappointing earnings and said it's planning to sell itsug ic ka business and wants to focus on its best performing labels t stock was off 11% to $74.64 wynn resorts founder eve wynn will not receive any
severance payouts after he resigned fro his post following sexual misconduct allegations. he was atne point eligible for a package totaling more than $300 milln. thasino operateder also said it was considering removing the wynn name from the brand. the stock rose fractionally to $164.28 it is time for our weekly market monitor who has three pks he says have reasonable valuations and can weather this environment of increased volatility. the last time he was on, he chose accentture, and camp val. he is the president and portfoo offbd capital. welcome back, michael. nice to havehe you . congratulations on a couple of those nkpicks. >> tyou. >> let's get to your new ones. your new one is jp morgan. you are helping us negotiate all the volatility that's out there. >> yeah. nalhink that with the addit volatility or volatility back in the market, focusing on high
quality ing go matter going forward. so we are looking at industry leaders. jp morgan is best of breed and has a little bit less execution risk than citi group o wells fargo currently. we like the name. >> you find it fairl valued. yeah, it's actually a little bit undervaluedm where we think that the stock should be. and they are raising the dividend 10% a year. weee a double digit return as interest rates continue to go up. next is united health care. i think you have recommended this one to us before if i'm in the mistaken. >> it's been a couple of years but we still like the stock. we recommended it before at a lower price in terms of share price. the valuation is of a kind of similar level today even though the share prices increased. and they have a first k moverd of advantage in the health care space, in addition t the insurancsiness. and some of the others are trying to catch up. we think they are liky to take market share and are again a
reasonable valuation. >> the consolidation that's i going on that business has been kind of going at breath taking speed. >> ithas. >> you feel as though they have an advantage even with all the mergers that we are seeing with the pharmacy benefit managers and the like? >> we . in fact we think a lot of the merger activity is a resul of the rest of the industry trying to catch up and become more competitive with united going forward. >> the third pick is honeell. lot of people on the street like honeywell. they have managed to execute. as youan see, they are up 24% on a one-year base snis sure. >> what do you see in that company that you sll like. >> they are divesting of some of the old line businesses right now and refocusing on the areao space and defense business. aerospaceas done very well very we. if they continue to execute, we
think they are likely to catchu o the rest are of the industry. they have been raising their dividend at 12% a year as well. investors get paid while they wait. >> we ve been asking all our guests this weekend what they have been doing with their clients over the last two weeks with the market volatility.er whatyou doing. >> as we had cash to depl, we did that. we bought some stocks in the consumer space. we added to the honeywell itposition ae bit for clients that were late. when the market ticke town on onday, down 700, 1200, down 1600 we stood back and took a breath and said something is unwinding tha we don't understand. in that environment, like anyone else we feel it's best to wait until we get additional information. but on whole we wereng bu >> i think you had a lot of companies stepping back and watching. >> that's right. >> michael thanks so much. have a great weekend. michael lucio with fbd capital.
come up, a new film, and a pivotal moment for hollywood. r sig attacks cost the economy as much as $109 billion in 2016. that's accordiep to a newt from the white house. the intelligence community is quoted as saying that russia, china, iran, and north korea are the main foreignsictors respe for much of that malicious activity. google testing a system to help locate 911 callers. it's working with a startup that we told you about a while back called rapid the existing 911 systems that struggled to pinpoint the impact location of cell phones which today me up the majority of phone calls.
google's system was better able to locate people in an emergency reducing the time it takes for ems workers to arrive athe scene. a new movie from disney marvel is kmptded to have a big opening weekend.'s lso expected to usher in a new era for ho bywood. juliaoor citizen explains " >>black panther" is off to aiv masse start, grossing $25 million in thursday night's preview as fandango's fourth largest presaler of all time it's expected to bring in $175 million to the u.s. box office this weekend a. february reco. that's bolstered by rave reviews. 97% positive rotten tomato's critics score, higher than any marvel movie or any super heroes film from rival dc comics. >> i think there has beennc thi n about super hero movies, are they too kind of c
cutter movies and blocking diversity we see in the world around us. i think part of keeping it fresh is migrating into therl diverse d we see. i think this movie is an attempt at that. > the film, which cost a reported $200 million to produce isto expected drive disney to an even bipger share of the box office this perhaps most important, "black panther" is defying assumptions that films with diverse casts don't perform particularly well, especially overse and now industry watchers believe the performance ofhis movie, demonstrating the broad appeal of a predominantly black cost could prompt hollywood to embrace more black prohigonists. >> i this is a watershed moment. i think if "black panther" does what most people think it's going to do, internationally, then studios are gng to reconsider the reluctance in the past to diverse casting on big
budget movies. >> predicting that studio franchise films will start looking different now that hollywood has a template for a successful movie business driven entirely by a diverse ca w. befor go, here's another look at the wild week on wall the dow rose 19 points. the nasdaq fell 16. ddthe s&p 500 one. for the week, the major averages were all up or more. and that is "nightly business report" for tonight. i'm sue herera. thank you for joining us. have a great weekend. we'll see you mond.
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