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tv   Nightly Business Report  PBS  February 15, 2011 6:30pm-7:00pm PST

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captioning sponsored by wpbt >> susie: the new york and german stock exchanges combine, creating a transatlantic powerhouse. >> we believe that if we solidify our position collectively in the u.s. and europe, as the rest of the world develops and is looking for a valuable, global and diversified partner, we will hopefully be their first choice. >> tom: veteran traders say the merger was inevitable. >> if they had not done this, some other suitor perhaps less well suited to push the point might have come along. >> tom: a look at what this historic deal means for investors. you're watching "nightly business" report for tuesday, february 15. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
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this program is made possible by contributions to your pbs station from viewers like you. thank you. >> susie: good evening, everyone. the big board itself was the big news on wall street today. the new york stock exchange is being bought by germany's giant exchange, the deutsche borse. and tom, this marks a new chapter for the 200-year-old american icon, and everyone here was talking about it.
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>> tom: susie, the combination creates the world's largest financial market, with a presence in more than a dozen european countries and the u.s. the all-stock deal is valued at roughly $10 billion. deutsche boerse will have a 60% stake in the new entity, the n.y.s.e.-euronext will hold 40%. the 17-seat board will have nine members from the german exchange and six from the big board. >> susie: but the two exchanges have yet to decide on a name for the new company. and that's just one of many unresolved issues for this historic partnership. suzanne pratt reports. >> reporter: it's billed as a merger of equals, but no matter how you look at it, the deutsche borse is buying the new york stock exchange. yes, today's news conference took place simultaneously in germany and in new york. still, deutsche borse chief executive reto francioni kicked it off. >> the combined group will lead the way in global capital markets and set the standard for
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growth, quality and market reach. >> reporter: francioni will be chairman of the new company while n.y.s.e. euronext c.e.o. duncan niederauer will keep his title. and it was up to niederauer to handle some of the more prickly questions from the media. how long before you get a name? >> somehow, i knew that would be the first question. we hope not to delay the decision too long, but i can assure you that no name has been chosen. but reto and i have committed to one other that in the next month or two we can put some alternatives in front of our board, our respective boards, and make a decision. >> reporter: both german and american executives repeatedly highlighted some of the reasons for the deal, including annual cost savings of $400 million, opportunities for growth and a better platform for attracting an asian partner. but to better understand why the big board may soon be german- owned, look no further than the
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empty n.y.s.e. trading floor. long-time n.y.s.e. specialist art cashin says in recent years the exchange has increasingly lost business to electronic competitors. >> you could almost say that the motivation behind this merger came from the s.e.c. when they mandated under regulation n.m.s. that we go all electronic. and they tried to inspire competition and they got the competition going. >> reporter: and speaking of competition, today's deal is likely to make exchanges across the globe nervous about lost revenue. morningstar analyst michael wong expects many will soon be busy looking for partners of their own. >> mergers typically come in waves in industries, so we've already seen three announced mergers over the last couple of months, and its likely were going to see some more. >> reporter: former n.y.s.e. executive rich torrenzano says exchanges are playing catch up with their own listings. >> companies, corporations do
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not have geographies, although they may be based in one area. trading environments don't have geographies, and now we're seeing exchanges merge on a national level and international level like they never have before. >> reporter: the goal is for the deal to close by the end of this year, but experts say it is not without regulatory and political hurdles on both sides of the atlantic. as a result, stay tuned-- there may be changes before this marriage comes together. suzanne pratt, "nightly business report," new york. >> susie: so what does this giant global merger mean for individual investors, the people who buy and sell stocks every day here at the new york stock exchange? that was my first question to the big board's c.e.o., duncan niederauer. >> hopefully they shouldn't care too much because nothing really changes for them. the floor will be the way it is. the nyse will be the way it is, and the company that the nyse is a part of, nyse euro nex is about to get bigger, stronger,
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more diversified. hopefully it is the u.s. in new york leading from the front again. but for your viewers, the way they place orders -- nothing is going to change. >> duncan, what happens if there is a market meltdown. is it riskier for the investors now that the nyse is a big, global, interconnected stock exchange? >> no change. you know that the dploabl markets are already connected and the economies are connected. just like the flash crash didn't affect our businesses here today. we're already a global company. a big part of our business and the global company is in europe as it is now, it is just making that piece of our business even bigger. >> susie: you said that the exchange has to be globally diversified. are you going to look for an asian partner? >> for everyone in the exchange business, no one can say they have a truly global business. we can come close. we don't own any exchanges
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in asia, but we have a lot of good companies listed in asia. with a 5- to 10-year view, we hope asia can be a part of it. that's what we think we're creating here, the leading financial capitals of the world running their exchanges together, and hopefully we can be a good partner for other exchanges down the road. >> duncan, there have been many emotional reactions to germany inc. nyse. it is an american icon. what do you say to that? >> the bottom line is the shareholder bases are both very global. in fact, the largest contingent of shareholders will be u.s. shareholders, probably 55%, 60%. it is a very global shareholder base, largely u.s. balanced management team, dually headed in new york and frankfurt. i hope people get over the nationalistic feelings.
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no one feels more strongly than i do. i work here every day. i poured my soul into this place. >> there are a lot of misunderstanding about the deal. what is the key point you want to hit home to american people. >> a lot of people think of us as the new york stock exchange. nyse a very global company. europe as always led from the front, and america has always led from the front. this is a chance to team up with a very good partner and extend that reach in a global, diversified way. that's what we're trying to do, lead from the front. >> the chicago mercantile exchange reportedly is interested in making a hostile offer for nyse. if they do, what would you say? >> we've heard the same rumor you heard. we would say we just signed an agreement with a partner who we think is the best partner for our shareholders, for the regulators, for our clients. that's all i'll say about that. >> so what is it about the deutsche boerse deal that you really find most
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attractive. >> we have the premier listings globally. and everybody knows that. we have a growing technology services business. they have a terrific post-rate services business, and a great data business and analytic business. and we both have a terrific derivative franchise. that combination is second to none. >> a lot of people are wondering what happens to the flor trading at the nyse. i know you've been supportive of the traders here. but is that era coming to an end? >> they, and we, both understand this is the most iconic piece of art that we're going to have. we would be foolish to think about anything other than keeping this open. >> you're still calling it newco. >> until further notice, it's newco t. >> thank you, duncan. >> thank you very much, susie.
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hall of fame >> tom: here are the stories in tonight's "n.b.r. newswheel." stocks traded lower despite the big board's big deal. the dow fell 41.5 points, the nasdaq lost 12, and the s&p 500 was off four. trading volume moved higher, rising to 927 million shares on the big board and just over two billion shares on the nasdaq. it was a mixed take for the nation's retailers. retail sales rose 0.3% last month. while that's the seventh straight month of gains, it's half of what economists expected. and the world bank thinks global food prices are dangerously high, up 29% in the past year. the bank fears that could push people into poverty and fuel political instability around the globe. still ahead, the c.e.o. of k.b. home talks about the challenges facing the housing recovery and the builder's efforts to boost sales through energy efficiency. >> susie: a strong defense of his budget today from president obama. he responded to criticism that he didn't make enough deep spending cuts. the president told
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reporters his plan, quote,"running up the credit card." le is confident republicans and democrats can agree on changes to he's confident republicans and democrats can agree on changes in social security and other programs, and he thinks investors and the markets want to shrink the deficit. >> if they see us chipping away at this problem in a serious way, even if we haven't solved 100% of it all in one fell swoop, then that will provide more confidence that washington can work. and more than anything, that's not just what the markets want; that's what the american people want. >> susie: but that's not how republican house budget committee chairman paul ryan sees it. ryan said the president hasn't shown the leadership needed to tame the deficit. house republicans want $61 billion worth of cuts in federal spending this year.
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>> tom, for all of the hoopla about that big merger we've been talking about at the new york stock exchange, the new york stock exchange euro nex stock itself was down today, as was the dow average. >> tom: in fact, a little bit of profit-taking not only in the exchange sector, but most of the equity sectors. let's go ahead and get everybody updated in tonight's "market focus." the major indices spent the entire trading session in
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negative territory, closing with small losses. after the close, the focus shifted to technology with dell computer's latest results. dell's earnings were much better than estimates, coming in 16 cents over expectations. sales to corporate customers were strong and margins improved. the stock was weak heading into the report. after the results, the stock shot up by as much as 7% over this closing price. if that holds until tomorrow, it would take the stock above this range its been in since may. dell's chief financial officer says the corporate technology upgrade cycle still is in the early stages. so, with that optimism, watch other computer heavyweights. hewlett-packard, intel and microsoft were all down during the regular session, but this trio all traded higher in after- hours action.
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it was a reversal for energy stocks. after leading the market yesterday, energy shares led the way lower today. crude oil prices in new york trading have been trending lower this month. this is the past 180 sessions. prices spiked in late january during as the egyptian demonstrations began. but since then, oil has slid lower. tonight, $84.32 per barrel is the lowest this year. energy technology firm f.m.c. dropped 3.5%. volume spiked as a number of institutional investors disclosed sales. chesapeake and anadarko dropped about 2.5% each. material stocks also got hit today. fertilizer firm c.f. industries led this sector lower, falling more than 5%. earnings are due thursday. we did see some buying of utility stocks ahead of some earnings calls.
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electric company n.r.g., natural gas firm one-oak and electric and natural gas firm duke each were up by 1%. duke's earnings are tomorrow. oneok and n.r.g. are due next week. lots of talk about the new york stock exchange merger today, but look for a big drug deal possibly tomorrow between sanofi-aventis and genzyme. this deal has been months in the making. the "wall street journal" quotes sources as putting the price tag at $19 billion, or around $74 per share. there may be additional payments in the future if certain sales goals are met. genzyme closed above that $74 level, gaining 3.5% today. earnings are due tomorrow and its thought the deal may be announced at the same time. talk of a sanofi buyout started
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in august, when shares first shot up. sanofi, meantime, gained 2% on strong volume. finally, some heavy volume moves. mortgage real estate investment trust annaly fell 3% on big volume after selling more stock. internet phone provider vonage gained 20% on six times volume after better than expected earnings. same goes for software firm limelight network, and shares shot up 27%. and that's tonight's "market focus." the unemployment rate has been
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heading down and home prices are no longer falling off a cliff. still, home builders remain pessimistic. the monthly survey by the national association of home builders held steady in january at the same level it has been at for four months: 16. a reading over 50 represents more optimism than pessimism. the last time the survey showed that was in the spring of 2006. jeffrey mezger is c.e.o. of k.b. home, which builds and sells homes in ten states and the district of columbia. >> tom: he joins us tonight from the nasdaq. welcome to "nightly business report." nice to see you. >> all right, tom, nice to see you. >> tom: from your perspective, k.b.homes based out in california, selling homes in nevada, florida, and elsewhere, what is your level of optimism or pessimism about 2011. >> i'm definitely a higher rating than what you just shared from the n.a.h.b.. i was smiling as i listened to your comments as we've done some things to change or company and our products that i think
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have us positioned well in any market or any economic conditions. i'm optmistic. >> tom: and we'll talk about one of those new tactics coming up. are you optmistic we've seen the bottom in housing prices for this cycle neighbour-wide? >> i keep reminding people this is a very local business. it is not one macro number. and prices don't move in different parts of the same city, let alone in every city in the country at the same time. so there is many of the markets we're in where we have seen the bottom in pricing. and we have the early signs of stability. and there are others where there is still an overhang of inventory, and jobs aren't occurring. and those will take a little longer. every city has a different story, but far better position than we were, say, a year ago. >> tom: let's look at the past year. cancellations at k.b.homes, and they have been rising quarter after quarter last year. the conditions that contributed to higher cancellation rates last year.
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are those conditions still in place, jeff? >> tom, while we were higher through the year, the first three-quarters three-s we were within the range we had for 20 years. the fourth quarter we saw an uptake in cancellations. it really was a reflection of the mortgage companies tightening down on documentation and requirements and everything they need because of the scrutiny they were under at the time. >> tom: let's talk about this new sales tactic. you're announcing a new energy-efficiency plan. a slap in energy-efficiency rating on new homes that k.b. homes is building. it kind of tells the new homeowner what their estimated electric and natural gas bill will cost. why do this? >> why not. for one, we can. if you think about it, tom, the home is the biggest purchase in people's lives. it is unusual that you can buy something and have no idea what it is going to cost you to operate it until you've been living in the home for a year or more.
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and as we've advanced our technology and our energy-efficiency, we can now project for the homeowner, this is what the utility bill should be in a typical home. and it's a way to compete with resales. >> tom: jeff, any guarantees along with that rating? >> well, there is a hearse rating, and an index because our homes are energy star qualified. we guarantee the herze in detective, and we give the typical utility bill. but it depends if they have six kids who leave every tv on and the fridge open, or a couple who turns every light off every time they leave the room. >> tom: it sounds like you speak from experience by the open refrigerator door. jeff, we appreciate your update on the housing mark. it's gest mezger, the c.e.o. of k.b. home. >> susie: and here's what we're
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watching for tomorrow. january's reports on producer prices, housing starts and industrial production. and we'll see the minutes from the last meeting of the federal reserve's interest rate setting committee. also tomorrow, hilary kramer is back as our "street critique" guest. send your questions for her to streetcritique@nbr.com. j.p. morgan chase offering a mea culpa to the military. it's launching new efforts to help u.s. troops after overcharging thousands of soldiers for mortgages and wrongly foreclosing on some. the bank will: lower mortgage rates for active duty military to 4%; it won't foreclose on active-duty personnel; and it'll donate a thousand homes to military families and vets over the next five years through non- profit partners. >> tom: apple launched a new subscription service today aimed at all sorts of content publishers. from newspapers and magazines to music and blogs, companies can use the tool to sell subscriptions through the tech giant's app store.
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the hitch: they have to charge apple customers the same amount they charge other users. in exchange, apple gets a 30% cut of sales. >> susie: by now, you've probably got a pile of tax documents sitting on your desk, and that means one thing: tax time is just around the corner.
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so we're here to help. all this week, kevin mccormally offers tips to help you get started. he's editorial director at kiplinger's personal finance. in tonight's "tax tips," making the most of the "making work pay" tax credit. >> remember the "making work pay" tax credit, the $400-for- singles, $800-for-married- couples tax cut okayed by congress for 2009? well, that same tax cut applied for 2010, although you might not have noticed since it was delivered in the same way, in dribs and drabs via reduced withholding from your paychecks. and just like last year, you now have to file an extra form with your tax return-- the schedule "m"-- to lock in your savings. fail to include it, and you could effectively give back the savings. last year, so many taxpayers flubbed on this form that the i.r.s. tried adjusting refunds to make sure people got the credit they deserved-- no more, no less. but don't leave it to chance. if you qualify for the credit-- and you do if you had a job in 2010 and your income's not too high-- file the schedule m with
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your return. the credit is gradually phased out if income exceeds $75,000 on a single return or $150,000 for married couples filing jointly. also, children who are claimed as dependents on their parents' return don't get the credit even if they had a job. now, i've got two pieces of good news about this year's version of a tax cut designed to help stimulate the economy. the payroll tax holiday that's boosting our paychecks by cutting the social security tax by two percentage points works for everyone, no matter how high your income or whether or not you're a dependent. and you wont have file a special form next year to protect your savings. >> susie: tomorrow, kevin helps you figure out the rules surrounding taxes on your investments. if you have a question you want kevin to answer, he'll be happy to do that. just log on to our web site, nbr@pbs.org. >> tom: finally, a new honor tonight for billionaire investor
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warren buffett. he received the presidential medal of freedom today for his devotion to philanthropy. president obama bestowed the honor on buffett and 13 others, saying they represent "the best of who we are and who we aspire to be." it's the nation's highest civilian honor. susie, the other recipients along with buffett: former president george h.w. bush; german chancellor angela merkel; and cellist yo-yo ma. >> susan: all well-deserved and quite an honor. congratulations to all. >> tom: congratulations. here, here. >> susie: that's "nightly business" report for tuesday, february 15. i'm susie gharib. good night, everyone. and good night to you, too, tom. >> tom: good night, susie. i'm tom hudson. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:
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this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> more information about investing is available in "nightly business report's" video "how wall street works". to order this dvd, call 1-800- play-pbs or visit online at shoppbs.org. >> we are pbs.
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