tv Nightly Business Report PBS April 24, 2012 6:30pm-7:00pm PDT
captioning sponsored by wpbt >> tom: another blowout for apple: huge earnings take investors on a ride higher in after-hours trading. >> reporter: the big numbers are out. we'll tell you whether competitors are finally taking a bite out of apple. >> susie: and interest rates on student loans are set to shoot higher this summer. what's being done to stop it. it's "nightly business report" for tuesday, april 24. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
>> susie: good evening, everyone. remarkable earnings from apple today. after the market closed, apple's quarterly results blew away even the most optimistic estimates. tom, profits surged 94%. >> tom: these are big numbers. they were remarkable. apelt earned $12.30 a share in the fiscal quarter. $2 better than estimates. revenues also came in better than expected: $39.2 billion. >> susie: this is the best quarter ever for tech innovator apple, and the stock surged as much as 5% in hours after trading. suzanne pratt is standing by with more. >> reporter: susie, nervousness about apple's quarter has been huge.
>> people are worried about the stock. the stock is down 13% from the high. and the high came just a few weeks ago. $644 a share. what is it that everybody is worried about? they're worried about whether sales are slipping. >> reporter: the numbers are out, and they're huge. apple sold 35 million iphones in the quarter, millions more than analysts expected. as for ipads, customers snatched up nearly 12 million of those. that was just about what was expected. investors were worried apple's momentum is slowing, particularly because the iphone 4s is six months old. that concern clearly was misplaced as demand for iphones is not cooling off here in the u.s. or in international markets. >> the great thing about the smartphone market is that the pie is just getting bigger. >> reporter: and apple is counting on that pie getting
larger, but its predictions about the future were somewhat cautious today. it expects to earn $8.68 a share in the third quarter, more than a dollar below estimates. and apple is looking for $34 billion in revenue, $3.5 billion less than expected. nevertheless, experts say there's plenty of room for apple to keep growing. >> there still are people who don't own smartphones. there are people who have low- end, entry level smartphones who may be ready to upgrade to a more powerful device. >> you have to wonder if apple can keep up the pace. the next iphone is not expected out until the fall. tom, there is worry that we might see fatigue in iphone sales. >> tom: we certainly didn't see it last quarter. suzanne is reporting from the apple store in manhattan. thank you, suzanne. figure out if there's fatigue
in the quarters ahead. scott sutherland is a technology analyst at wed bush securities and from the firm in san francisco. scott, first of all, anything to worry about for shareholders when it comes to apple's business? >> i think apple's business continues to churn along very well. i think there's very little to worry about right now macis slightly below, but it's all about the iphone, and that continues to hum along really well. >> tom: what about the fatigue concern, if the next iphone isn't until the fall, and the ipad was just released not long ago. is there going to be a new product that's a catalyst in the next three to six months? >> i think the stock is all about the iphone. what we saw last year and the year before, ahead of new iphone launch sales they tend to stip. i lot of us are betting on a launch of the iphone 5 or
whatever they call t. maybe september is soft. we expect that. i wouldn't want to be out of the stock ahead of the iphone 5 for sure. >> tom: take a look at a one year parted of aapl. we've seen a lot of volatility off the all-time high hit a few weeks ago. rebounding nicely in after hours. would you buy it around 600? >> i've been continuing to buy. the numbers look to be going higher. stock still trades at a reasonable pe valuation. you have a big product cycle coming up, and i'm a buyer of the stock at these levels. >> you can't find much wrong with apple. it they can't make the ipad's fast enough to satisfy the demand. >> they can take the inventory down a few00 thousand, and the iphone was selling well and expanded to china which was great, and the price still
focused, and getting the phones out the door, and enough capacity to get the ipad going. i'm sure they're going to catch up as the iphone winds down a little bit before the next launch. >> tom: finally, here before the earnings, we did see a ding in the shell of apple. international trade commission judge ruled that the company infringed on one patent owned by motorola mobility. the patteent it used for communication. we know goog and he will oracle are in the middle of a significant fight that oracle says is worth a billion dollars. what's at stake for apple versus mote role a. >> the patent battles are going back and forth. there's three it was a year ago when they settled with nokeio, and they're making royalty payments to nokia. we barely talk about that. and they continue to crush the earnings estimates. it's an ongoing process, and
the fundamentals remain strong and will trump what's going >> tom: $400 million a day in revenue last quarter. that certainly was a big number. do you own shares yourself, scott, of apple? >> i do not, unfortunately. >> tom: there you go, an honest assessment. scott sutherland is a technology analyst from wed bush securities. >> reporter: i'm erika miller in harlem. i'll tell you about a microfinance loan program that has the support of the new york stock exchange. >> susie: no surprise here-- new data show the housing market remains weak across most of the country. the latest evidence comes from the commerce department. new homes sales, down over 7% in march to an annual rate of just 328,000 homes. that's a four-month low. average prices also down slightly to $234,500. another reading on housing from the standard and poor's case shiller home price index shows the same trend. prices in the top 20 housing
markets hit fresh lows in february, falling a sharp 0.8% from january. >> the last year has seen a little bit of stability. what we've been doing is bouncing across the bottom. we have hit new lows, and it's basically moving somewhat sideway are for of the last year or so. that's a sign of some bottoming out, but if you look at existing housing starts and home prices, none of these statistics are showing a sign of an absolute turnaround. the most is perhaps a bottoming out. >> susie: meanwhile, big protests today as the nation's largest mortgage lender, wells fargo, held its annual shareholder meeting in san francisco. police shut down streets in the city's financial district as hundreds of people protested everything from wells fargo's record on home loan modifications and foreclosures to its environmental policies. >> tom: wall street managed to shake off that sour housing news and send the blue chips higher, but technology stocks were under
pressure ahead of those apple numbers. the dow added 74 points, the nasdaq fell eight, the s&p up 5. >> susie: those housing numbers, and other recent economic reports, will certainly be discussed by federal reserve policymakers this week. the fed kicked off a two-day meeting today and will announce its interest rate decision at 12:30 p.m. eastern time tomorrow. what to expect: mohamed el- joining us with a preview of what to expect: mohamed el- erian, c.e.o. of pimco. >> nice to have you with us. >> i'm fine, susie, thank you. >> suzanne: all right. most xfts are not expecting any new policy announcements out of the fed tomorrow. so what message should you be expecting from the fed tomorrow? >> susie, we have to digest a lot. we have to digest a statement and new projections and also a
press conference. having said that, we agree with most economists. we don't think they're going to be market movers. we think the fed is going to leave the policy rate where it is. it's going to reinforce the notion that it's not going anywhere soon. we won't have qe now. no immediate qe. and the only question is whether the fed members are converting to more common view. they were all over the place last time they put out the individual projections. > susie: let's pull up a graph of the fed's latest projections. a gdp both of 2.2 to 2.7%, and unemployment between 8 opinion. 8.5. >> innraipgz 1.4 to 1.8%. do you think the fed is going to revise those numbers given the weak economic reports recently? >> we expect them to maintain
those growth numbers. slightly lower the unemployment numbers, because we're already at 8.2% -- but not by much. and keep innraig as it is. the fed is in a wait and see mode. they're going to wait and see how the economy evolves and importantly, how things evolve in europe. they're worried about europe as well as the u.s. it's a wait and see. but we don't expect any major change in projections. >> susie: let me pick up on qe, the quantitative easing everybody is talking about. investors would like to see the fed intervene into the treasury market buying up more treasuries. but begin what you're seeing about the economy, does the economy need qe? >> that's a great question. our sense is that if the economy evolves naturally, it's going to be slow. why? because we have a debt overhang and oil prices are too high, and europe is still too uncertain.
so our sense is towards the end of the year the fed is going to have to actively look to whether it should have another round of qe. but not now. in a few months time. >> susie: you keep talking about europe, and i know you just returned from europe a few days ago. and we saw the market yesterday respond negatively to results in europe. what's your takeaway of what's going on and what it means for us here in the u.s. >> for us it means uncertainty, and investmentors have a tug-of-war between earnings and zoo-look at apple, and their earnings -- and this big cloud. in europe, we see slowing. we are seeing more dithering and debate over what they should be doing. and then the political process complicating the economic process. so i'm afraid, susie that europe is going to be a head wind for us for quite a while
still. >> susie: we have a half minute left. i ask you stock versus bonds. what's your thinking these days? >> our thinking is focus on quality companys and quality sovereigns, which mean cash cushions, low financial margins, and exposure to growing. look at apple. look how much has come from china. the world has heltdy parsonage, and getting exposeed to them as opposed to places overindebted and unfortunately are not able to grow fast. >> susie: are you recommended apple, and do you own the stock? >> i do not own the stock, and i think it's an incredible stock because it tells two things, susie. innovation, and enchantment. that's hard to do. >> susie: we'll leave it there. mohammed, thanks so much. great talking with you.
and we've been speaking with mohamed el-erian, c.e.o. of pimco. >> tom: two years after the b.p. gulf of mexico oil spill, and the first criminal charges in the case were filed today. federal prosecutors in louisiana charged an engineer for the oil giant with two counts of obstruction of justice. they believe the engineer, after being told his electronic files would be collected as evidence, deleted over 200 text messages from his supervisor. the engineer faces up to 20 years in prison if convicted. >> susie: walmart today, responding to a new york "times" article alleging widespread bribery of foreign officials in mexico. the company says the allegations stem from six years ago, and that it has taken steps to investigate potential wrongdoing, saying it has a "rigorous process in place to quickly and aggressively manage
issues like this when they arise." walmart also says it has created a new watchdog position to assure its global compliance with the federal corrupt practices act. tom: federal regulators today, going after the egan jones credit rating firm. the securities and exchange commission charged the firm and its president, sean egan, with making false statements on a regulatory filing four years ago. just last week, when we spoke with sean egan, he denied the claims and said he made all statements to the best of his ability. egan also asked why the firm is being singled out now and wondered whether it had anything to do with his downgrade of u.s. debt. tonight, egan says both he and the firm will fight the charges.
>> susie: july 1 is an important day if you have a student loan. that's the day that interest rates on some federal student loans will double. politicians are latching onto the issue in the fight to win over young voters. but as sylvia hall reports, it could have a very real impact on students and their families. >> reporter: flanked by a crowd of north carolina college students, president obama today asked congress to keep student loan rates low for one more year. >> we can't price the middle class out of a college education, not at a time when most new jobs in america will require more than a high school diploma. whether it's a four-year degree or a two-year degree, we can't make higher education a luxury. it's an economic imperative. >> reporter: in 2007, congress cut interest rates on stafford loans, a popular federal student loan, in half in a push to make college more affordable. that law expires this summer.
so unless congress passes an extension, interest rates on the loans will increase from 3.4% to almost 7% next year. over time, the increase could raise college costs for borrowers by thousands of dollars. >> that's going to have a pretty significant impact for families down the road. i mean, you can imagine $1,000 could go towards a down payment on a house, a down payment on a car, or even starting a business. >> reporter: yesterday, republican presidential candidate mitt romney said he supported the extension, but not everyone agrees. some even argue keeping student loans cheap raises college prices. >> if you give somebody 100 more dollars to consume education, if you give everybody 100 more dollars, colleges say, "hey, i can raise tuition 100 dollars. they are no worse off, and i get more money to do things that i think are more important." and that's almost exactly what we see happening. >> reporter: a one-year extension would add an estimated $6 billion to the national debt, leaving some to wonder if it's a good use of taxpayer dollars. on average, stafford loans make
up half of a student's debt at graduation. that means even if congress does act, it won't solve most student's debt problems. sylvia hall, "nightly business report," washington. >> susie: u.s. cattle futures tumbled on word of a new case of mad cow disease here in the u.s. the infected animal was a dairy cow from a farm in central california. the u.s. department of agriculture is investigating. it says the food chain is not at risk. >> this particular animal did not enter the food supply at any time, so there is no concern about that. time since hearing bell mad cow, and the government started testing for mad cow in the u.s. a decade ago. this is only the fourth discovered since then. >> a lot of immediate concern with cattle futures. they tumbled. the biggest drop in sen months. >> tom: before the apple results in the market focus, the focus of the stock market was on earnings, and that
still allowed lots of trading certainly, no dount. we have the s&p 500. spent the session in the green, although it wasn't a lot of lift. the index finished up less than 0.5%. earnings from a key apple partner, a.t.&t., helped set the tone early today. it's first quarter was stronger than expected. a.t.&t. was the first wireless carrier to sell the iphone, and its earnings were helped by fewer iphones. the reason why fewer iphone sales helps a.t.&t.'s bottom line is because it doesn't have to send as much cash to apple. carriers like a.t.&t. buy the phones from apple and then offers discounts to customers. the carriers have to make up the difference, and that hurts their profit margins. a.t.&t. shareholders were not worried about a drop in iphone sales. the stock jumped more than 3.5%, bringing it close to a new 52- week high. a.t.&t.'s rally helped make the telecommunication stock sector the best performing area of the broader market today. the industrials and financial sectors were also up more than
1% each. among the industrial stocks moving was 3m. earnings were much stronger than expected in its first quarter, coming in 14 cents ahead of estimates. fellow conglomerate united technologies also had a stronger forecast to start to the year, earning 11 cents per share more than expected. while united tech stock didn't move much, up just a fraction, 3m rallied more than 1,5%. and fellow manufacturer parker hannifan jumped almost 9% after a strong earnings report and increasing its financial guidance for the rest of the year. the tech sector was the biggest drag on the market before apple's earnings tonight. one reason was netflix. the company's latest forecast for subscriber growth was disappointing, and that led to stiff selling. shares fell hard, down 14%. volume quadrupled, with shares down to their lowest level since early january. we do have detailed analysis of the trading in netflix shares on our web site under the "blogs" tab at www.nbr.com. two very different retailers saw
their shares prices moving in the same direction. first, discount store big lots and a big drop, losing almost a quarter of its value. the company surprised investors by announcing its sales in late march slowed and continued weak through april. it now predicts same-store sales to fall. meantime, radio shack lost 10% after losing money in the first quarter. it was expected to turn a profit. well, if railroad kansas city southern is any indication, the economy is chugging along. earnings were up thanks to its freight and auto shipping business. shares popped 6% as volume more than doubled. the rally lifts shares to a new all-time high. and that's tonight's "market focus."
>> susie: while "crowd funding" isn't an everyday term, it's transforming the way non-profits raise money. many organizations now use social media to raise funds, including accion, the nation's largest microfinance lender. as erika miller reports, accion's success has earned the support of a leader in big business. >> reporter: when willie whitfield decided to open his harlem salon a year ago, he discovered he was $5,000 short. that's the difference between hardwood floors and linoleum. so he turned to an unconventional lender, microfinance organization accion. >> it allowed me to, like, really visualize my dream. most of my savings had already went into the business, and when i got the additional funds from accion, it allowed me to continue on with my plans. like, i didn't have to alter my plans. >> reporter: to raise funds, accion relies on kiva.org. at its web site, you can read the stories of carefully screened small business owners
and lend directly to them, even as little as $25. but those small loans add up. maribel lieberman got $20,000 from accion ten years ago to expand her soho chocolate boutique into a wholesale business. >> i needed to make a portfolio. when you start a business of wholesale, you have to be aware that you need to finance that inventory because you are going to get paid later. >> reporter: the business took off. last year, she made $5 million in revenues. but she still works long days at her factory, developing designs and recipes. >> you see, now i'm creating. >> reporter: microfinance loans are, by definition, made to the riskiest of borrowers, people who typically can't get loans anywhere else. but here's something that might surprise you: accion's loans in the u.s. have a higher repayment rate than most banks.
>> last year, we wrote off fewer than 2% of our loans. >> reporter: c.e.o. gina harman says that's a big reason the n.y.s.e. wanted to partner with accion on a nationwide jobs program. >> it's going to extend our ability to reach more borrowers and potentially to lend to borrowers that we might not have been able to lend to yesterday. >> reporter: the big board will provide $1.5 million in seed money, but n.y.s.e. c.e.o. duncan niederauer hopes corporate america will lend more than just financial support. >> someone might help with web site construction or logistics help or banking services, or accounting and tax services. bring to the table what you can bring to the table. help that small company thrive. that's what big companies should be doing. every big company was a small company one day, right? >> reporter: few can appreciate that help more than maribel, who is about to open her first boutique in japan. as for willy? >> i'm looking to expand. there's a space next door that's vacant. because i want to offer nails
and maybe some skin care. so i might be going back to accion! >> reporter: erika miller, "nightly business report," harlem. >> susie: and tomorrow, our crowd-funding series continues. we look at how many non-profits like this school are getting extra teachers, thanks to online fundraising. and we get a peak into what federal reserve policymakers are thinking as the federal reserve issues its latest read on the economy. plus, are small investors putting money to work in the market now? we ask the c.e.o. of t.d. ameritrade. >> susie: that's "nightly business report" for tuesday, april 24. 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: