tv Nightly Business Report PBS October 26, 2018 5:00pm-5:30pm PDT
>> announcer: this is nightly business report with sue herera and bill griffeth. buckle up.is he slumping tech stocks accelerate. now investors want to know if the market can movehe h without them. protect your portfolio, simple ways can you smooth out this rocky market and keep your money working for you. trading places. china and japanighten their trade ties as both face tough negotiations with.s the u those stories and more ton on nightly business report for friday, october 26th. good evening, everyone and welcome. bill griffeth is off tonight. the week on wall street the way is began with wild swings and intense bouts of volatility. it was driven by earnings and anxious ziet over global growth and concerns of higher interest rates. in fact by some estimates the
global selloff has erased $5 trillion from stock and bond markets so far in october. today all 11 sectors of the s&p fell. the s&p 500 briefly fell into correction territory, meaning down more than 10% or mor from the most recent high. and within thee s&p 500 mor than 75% of its components are in correction. the dow jones industrial avera fell 296 points to 24688. the nasdaq was off 151abthe s&p 500 was down 46. the nasdaq is down for four straight weeks. the dow and s&p areown the fourth time in five weeks. bob pisanias more on all of the stock market noangst. >>er volatile day with a morning selloff a late morning rally and ant drift lower the close. stocks are resetting 2019 earningsnd revenue expectations. that's what's going on, particularly after high pro le
misses on revenue from amazon and alphabet. the forward pe multiple below 15. it was 16.5 a month ago. a lower multiple means market participants think expected growth of 10% is in doubt.ve now we ood news here moderate inflation declining unemployment. the market hever has come t believe that a slowing china, tariffs, maybe orly aggressive fed constitute. a modest threat. politic willing issues in washington may playnto the volatilities, president trump's nushlly attacks on the if he had chairman is centering debate with arguments the fed can't back down on the december rate hike without looking weak. multiple tech and internet stocks, the mankato wouldn't be worried about that. the internet names, t amazon, facebook, alphabet. they tend be named sold
immediately with the hint of sell off. semi conductors w are downt appears to be a cyclical downturn in demd. taking hardware and software demands down. finally the electio are another wild card for the market. the assumption is that even if the democrats retake the house the correspondent tax cuts will not be imperilled. but the likely prospect of endless political fights after that may only serve tounder nine confidence. for nightly business report, i'm bob pisani at the new york stock exchange. >> bob just mentioned tech and internet stocks. as you know that group helped ke lead the m higher most of the year. but they've den taken a tumble in october. netflix, amazon be facebook and google all down sharply. and now it seems thatig ther you climb the faster you fall. dominic chu has more on tech's sharp steep decline >>gne of the most concern aspects of the recent downtrend is the underperformance ofey certainechnology and communications services stocks.
namely the fangs. that is to say facebook, amazon, netflix andle parent company alphabet. as the major u.s. sees indices have the worst october since 2008, these are among the stocks moving marketshe most. each of enemy is underperforming the broader s&p 500 so far this month. they also happen to be some of companies in bl the market which means they have a lot more influence on valted indexes like the s&p 500 and nasdaqomposite. over the course of the last few years these stocks led the market higher, pushing not just the values to high levels but the valuations as well. thera o s&p 500 trades at 19 times earnings, meaning an invest pays $19 in stock price for every $1 of earnings it generates. in contrast, alphabet currently trades at 46 timeearnings, netflix trades at 109 times earnings,mandn trades at a whopping 130 times earnings.
facebook had traded at a bigger emium to the market before investors sold shares off in the past few months as the company was embroiled in a data privacy scandal and now trades asset just 2 times earnings. e issue is whether or not the valuations for many of the companies is justified given the outlook for profits and theco overallmy. and the current selling pressure in the markets is the manifestation of the revaluation process taking place. for nightly business report, i'm dominic chu. >> so can the market tur around d turn higher without the help of the big techtos? sarah malik is head of the global equities division at nufen, the investment management of tiaa. welcome, sarah nice to have you here. >> thanks for having me. >> i guess that is the question. can the market turn higher andn ue to move higher without the participation of some of those tech stocks? >> we think that it can, because some ofhn the togy stocks are actually priced for
perfection. and when at thep theyt earning that is aren't perfect you see these declines, especially ihenestors are nervous about other items such as trade, interest rates and inflation. but if you take a step back, economic data remains strong. manufacturing numbers look goodm the empt numbers look good. and if you look at valuations, the market is looking pretty compelling and next year's earnings for the s&p 500, ie mark now trading at under 15 times earnings. so whathie will work from here is what we call quality growth stocks, companies growing sustainably but they have reasonable valuations in areas such as health care, consumer staples and even some beaten down areas that have gotten hit onth like financing pgss where you have strong balance sheets and ch returned to shareholders. >> so i'm hearing from you that you think the bull market still intact. although maybe a little wobbly near-term. >> yeah, i mean investors- it is intact but investors have had a lot of reasons to be pessimistic
this month, worried about trade. we saw third quarter earnings coming in and they were kind of sloppy. what is making people wonder is is thiso cycle goingast as long as we hoped? can earnings continueo grow through 2019? we think earnings can grow atle doigit rates, supported by the strong economic data we seeg that won't c on a dime it remains strong. and that plus earnings growth is going to be driving the market higher from he. >> e, i assume that you are one who expects as many do, the volatility to continue. and in addition to the growth f stocks, we continue to see further weakness in tech if you you are a long-term investor would you add to positions in that area? >> so we would be looking for those technologies that fit that quality nagrowth, reae valuation type of mantra. look for those companies with sustainable growth rates, strong free cash flows, structurally growing businesses but make sure the valuationsmiook png. if you can find that you should
add to any sector including technology we justouldn't overpay when you are late in the cycle like we are now with you you don't want toy overr companies. >> all right on that note sarah thank you. sarah malik with nuveen. >> thank you. >> and a bit later in the program the market monitor willw explain big tech companies are on his buy list. economy.to the the that from you at a faster than expected pace last quarter. the commerce department said gdp expanded by 3.5% during the third quarter. that was less than the previous period but still stronger than economists forecasted. stronach consumer pending a rice in business inventories helped results. before the release of tharo economich report, the head of the cleveland fed said that the central bank's economic forecast suggests gradual interest rate hikes are appropriate. >> financialonditions are still accommodative. nd i think that the economy is still growing above trend. i think the unemployment rate is at the lowest level since the
late '60s and inflations at our target. that's a strong outlook and suggests we probably need to be gradually thinking more about taking back some of the accommodation. >>esster is aoting member this year on the fed's policy making committee and saidld the swings in the stock market are a risk to the outlook but they are not impacting her view at this point. consumer sentiment remai near historic highs despite a slight pullback in october. a survey from the university ofs michigan s stock price declines, rising inflation and interestav rates not, so far, undermined consumer confidence. those whod answe the survey remain optimistic in particular about job growth. it is time to look at of today's upgrades and downgrades. twitter was upgraded to outperform from perform at open heimer, the analyst says the stock is reasonably valued and less execution risk than other
cial media companies. the price target is $37. the stock rose more than 1.5% to 32.36. snap, the parent company. snapat was downgraded to underweight from neutral at jp n mo the analyst cites the decline in daifl active users price target is $6 the stock fell 10% to the billiad rating was cut to neutral from overbating at piper jaffray citing the outlook for revenue growth. the price target is 75, the stock up 1.5% to 69.74. still ahead, getting to work. manufacturing jobs are being created but not necessarily at american companies.
the fbi is reportedly tensifying the criminal investigation into whether tesla misstated model 3 production figures. the "wall street journal" reports that the electric auto maker is facing a deepening criminal probout those projections. but tesla says it has not received a o subpoena a request for documents in months. the company is cooperati with a voluntary request for documents it received from the d.o.j. in september. the trump administration as you probably anow has made push to bring more manufacturing jobs back to the u.s. by the way of tariffs and trade wars. but as ylan muyepts from florida it's actually investments from foreign company that are generating a lot of the new job growth.
>> reporter: in brand-new factory outside of tampa, florida, makesar for gas turbines. it officially oned today, a $140 million facility that will employ 350 workers, exactly the kind of manufacturing that the trump administration wants to bring backo america. the only catch, the company is simons, headquarters are in germany. >> we are a global company at simons. it's important to have a local presence. >> foreign firms are some of the biggest investors in american manufacturing. piling an estimated $1.6 trillion into the sector. and in recent years they generated more than half of new manufact jobs. >> the pay was competitive. the vacation was great.yo ev seemed to be flexible with your work life balance he. so that wa what initially
attracted me. >> but now this company and other multinationals are getting squeezed as tariffs drive. up costs. >> we seero that the third party splis and raw materials and supplyha chains. but we do is combat that is facilities like this investing in technology and innovation helping us bring the costs down, helps us make our business more robust. >> shortening the supply chain. many parts made here will be shipped to their factory in . charlotte, north caroli >> not so much to be protectionist versus not protectionist. in our view it's the right thing to do as we create economic proermts around the world being able to give bac to the local community. >>.she is siemens the biggest mechanic. the frrns tide to the u.s. economy. ylan muy outside of tampa, florida. > the ongoing trade war with washington is creating an unlikelyia ae between china appear japan. a nation the world's second
largest ecomy has often been at odds with. eunice y. un from explains from beiging. >> japanese prime minter shinz ofr abe declares his releases with china are at a turning point. abe is in beijing for a three-day trip a first for a jpz prime mister since sow. a 500 ed here with person business delegation and med with the chinese premiere and the president. the two sides signed multiple agreements to cooperate on infrastructure projects in third ountries and to expand a currency swap line to $30 billion to help safe guard against aan fal crisis. abe's visit is a big break from the past. the two countries hav a lot of historical baggage and relations turned sour in 2012 over a territorial dispute in the east china sea. prime minister abe has come to china at a time when beige something in a trade war with washington. the chiendsave been trying to paint the u.s. as the bad guy
and get more countries on their side. japan, a traditional u.s. ally has been criticized by the whi house but abe has been very wary of china being a proponent of trade packet backed by the u.s. the tpp on this trip abe refrained from makin proglobalization statements or other comments that could have been perceived as anti-u.s. clf to the disappointment of beijing. for nightly busines port, eunice yun in beijing. colgate poll monthly i have warns of weakness and that's where we begin the market hefoc. >> consumer products company expects the emerging marketssi ss to remain challenged. in the recent quarter they reported week weaker than expected revenue and said it's facingigher costs. >>hl gait shares fell 6% to 59.58. charter communications added more than internet subscribers than wall streetxpected in the third quarter. that made up for a drop in video but it was not enough to offset weaker than expected revenue for
the darter. that pressured the stock, which fell 6% to 295.01. phillips 66 benefitted from higher rining margins and topped earnings estimates. ipeline business turned in a strong quarter with earnings at that unit more than doubling. shares rose 1 peppers to 99.4537 auto live, the world's largest maker of air bags and seat belt cut the full year sales growth forecast due to lower demand in china and the impact of tougher emissions test in europe. the company said it's managing the changes and cited growth in the north american operations. the shares rose 2% to 81.77. biopharmaceutical company ultrajennics reported disappointing results for the experimental treatngnt targe a rare genetic metabolic disorder. they said they would discontinue testing the drug for this cause but continues to develop it to
for another disease.no theless the shares plunged to $18.62. now tohe weekly market monitor who is sticking with some of the biggest names in tetech, despi this woke's selloff. he is betting on the clou he is mar teper, president and ceo of strategic wealth parent zbrs. >> thankfor having me. you are brave. stepping into the names that got hit hard. >> yes. >> thit' woke. talk about why. you are picking amazon, which had the worst day since 2014 today. >> right. >> but you are looking longer term. why do you like it. >> perfect timing, right. i mean, so yeah, amazon -- they're just an absolute disrupter. they enter an industry and another industry and mother industry. and they own every industry that they enter. they have an addictive product with amazon prime. anything i want to buy i can pull out the iphone and have it delivered to my doorstep in two
days. it's a great busessmodel. and we are really bullish on the cloud right now and when look at amazon's cloud and advertising, i mean thoseal are the high margin businesses. and those two specific businesses are just growing like crazy, and margins are expanding like crazy. we really think if ty continue focus on the areas in addition to ecommerce we think they c really just eventually move to an even higher level, which is you know, that would br tough a company like amazon. >> right. google is your next pick. it also had a rough week certainly. but. >> yes. >> it has had a lot of success in the area you are focusing on. >> yes, they are -- they are great when it comes to the cloud. but probably the most thing about google is they are online -- ng of online advertising. i mean, you look at facebook as an exampl so facebook was really trying to coat compete with the s, they still are. you but the platform wasn't as
od as google's a year ago. now what you see with facebook is they no longer give advertisers the ability to use demographics to really zero in on the people that they are trying to adverti to. so it makes facebook's advertising lessffective. what we think is going to happen we think a lot of the facebook oivertising dollars are to move over towards google. >> and microsoft rounds out the three that you are looking at. gy do you like it. >> microsoft isd in both the cloud and gaming. and we are bullish on both of them. i've talked about a little bit about the cloud. we see that over the course of the next two to three years we think cloud usages going to double. microsoft is in a uniquau position b they offer a hybrid solution that's really good for thoseigger companies who have invested internally to grow in re i.t. because they might not want to switcpt ab to the cloud. ner doing well there. on the gaming side, gaming is just -- it's a high-growth
industry. you know, esports in phaticular seen 40% of viewership growth over the course of the last year. major league sports in general have seen declining vwers. so you know, we think with them being in both the cloud and p gaming tential is huge for them. >> on that note mark thank you. mark tuper with strategic wealth partne to read more about his picks head to our website. comingp a strategy for long-term investors as market volatility picks up.
here a look at what's to watch for next we can. key earnings reports will be released from facebook, apple, coke, pfizer and gener electric. we'll see if consumers are still shelling out record amounts for cars. with the release of october auto sales. and theeends with government monthly employment report. and that's what to watch for next week. wh stocksown today and volatile for the week we decided to see how all the ups and downs are affecting iividual investors. >> i have some money in like tual funds and afraid it's going down and sort of it's about money -- it's savings i'm afraid i'll lose mone a >> as soon the market gets volatile gets skartdre andes more volatility. >> it dropped and jurpd back. if we keepre going w we go now i don't have too much problem in the near future.
new stupgss get nervous people get nervous and bounces back. >> markets go up and down. i got a long view of it all. >> sohat should the individual investor make of the recent market right now? we are joined tonight by j.j. kin a hand chief stratist at td ameritrade. >> great to have you with us. >> those t sentiments from individual investors is that what you hear from your investors. >> w are. iarticularly like the last gentleman on there he knew what his time fme wa and i think for the folks watching your show tonight, that's actually the key. if you are someone who happens to b more of a trader and you are in and out a lot good for you. volatility is high. you are happy. but for most of the audience they are taking a longer view. they have to keep that in mind. and they have to say okay i'm in this stoor three months six months a couple of years. bhafr the time frame may be. knowing yourself and knowing the time frame when you get into the stock will make a big difference
in your investment success because otherwise weeks like this you are d yourself crazy. there's been a lot of movement. that sa, sue, you know, outside the knowing your time frame. >> -hum. >> it' -- there is something going on right now that's really and that's there is a repricing of what these stocks are worth. you gem to rr -- and i think sometimes people forget that the stock market isfo a ard looking device. what they are saying is in six months we don't know if we valued the stocks right now for that time frame. there is a lcr of hings going on, the election, possible higher tariffs, etay cetera. it mean that we price stocks too high. not the end of the world. it's just a shifting of tne ground undh us a little bit. and it usually takes a few weeks and in this case it may take a month or so for things to settle back down and people to be comfortable with where valuations are. >> you make the point in one of your -- pieces of literature
you put out to clients and traders and investors you have to take at a that broader outlook and couple that with what ceos are saying about their own view for their company and fact all ofhat in. >> and you -- absolutely. you see that with azon and google last night, the guidance was lower. the numbers weren't -- that he weren't bad they were good actually. and this earnings season we are in right now it's all aut wha the ceos see for the future. and if you think the last two earnings seasons, the ceos talked about great growth not onlyn the u.s. but worldwide. in this earnings season many ceosay we can still grow, maybe not at the pace we thought we could three oh or six months ago. it's not the worst thing in the wore. if peoplehe keep longer term perspective and mind where we have come from. it's okay. take ad breath. it's all about buying company that is are good companies. that's not to say that because companies got hammered on earnings which you know, amazon and google did theare not bad
companies. . they still make a ton of pony. but if you still belie in them long-term it's, you know, a way that you can buy them a little bit lower rig now. >> and very quickly j.j., do you believe we still have more room inull market for those who might want to use this weakness to their long-term advantage. >> i do, sue. but i will say this we are not getting there smoothly it's volatile period the next few weeks if you buy now you may want to -- if you have 200 shares maybe you buy a hundred now because you might get them ep cheaper in a weeks or so. >> nice to have you with us. >> alway a pleasure sue. >> j.j. with tflt d amarry trade. let's look at the final numbers from the day on wall street. the dow fell 296 points. the nasdaq was off 151. and the s&p 500own46. the nasdaq is now down for four strait weeks. the dow and s&p down the fourth time in five weeks.
and if these markets weren't this week enough to scare you maybe this there halloween candy getting more expensive. according toar ihst candy prices are up half a% this year after the two yea of price drops. total spending on all of that sweet stuff is expected to total $2.5 billion, the most ever. and that is roughly $20 per household. t andt note that does it for us tonight. proce i'm sue herera. thanks for joining us. have a great weekend. we'll see you on monday.