tv Nightly Business Report PBS April 25, 2012 6:30pm-7:00pm PDT
captioning sponsored by wpbt >> tom: apple shares soar as global demand for iphones jumps. in the u.s., the federal reserve thinks the economy needs a couple more years to get stronger. but will the bank buy more bonds to goose the economy? "n.b.r.'s" darren gersh asked federal reserve chief ben bernanke. >> reporter: is the committee now any closer to qe3 than it was in its last meeting? >> well, first, the committee has certainly been bold and aggressive in terms of easing monetary policy. >> tom: it's "nightly business report" for wednesday, april 25. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
>> tom: good evening. susie is off tonight. from the federal reserve view of an improving economy to trading on apple's record profits, stocks caught fire on wall street. the dow jumped 89 points, the nasdaq skyrockets 68 points, the s&p adds 18. let's begin with the fed and its meeting on the future of interest rates. the central bank held interest rates steady at near zero levels, but policymakers tweaked their outlook for the u.s. economy. the central bankers now see g.d.p. slightly higher than they did in january, around 2.6%. inflation will be slightly higher, coming in at just under 2%. and unemployment is expected to be slightly better, around 8%. washington bureau chief darren
gersh joins us with more. darren? >> reporter: hey, tom, those changes in the fed's forecast were really pretty modest, and that's what most people were expecting. that left the question of the day: what will the fed chairman do next? when i asked about another round of bond buying, what the markets call "quantitative easing," chairman bernanke kept his options open. >> those tools remain very much on the table, and we will not hesitate to use them should the economy require that additional support. >> reporter: now, that's what the markets were expecting. still, unemployment is higher than the fed wants and inflation a bit lower. but even though the fed isn't hitting its two biggest targets, the markets are helping out. interest rates are falling as concerns about europe rise. >> so right now the fed does not have any pressure to act either on quantitative easing or in changing the call on interest rates. i think chairman bernanke feels very comfortable about this position right now.
>> reporter: but what about the future? the federal reserve repeated promises to keep interest rates exceptionally low through late 2014, but bernanke added that is not a hard and fast promise. it really depends on whether regular reports on the economy show weakness or strength. >> forward guidance is conditioned on the data, and if the data were to come in much stronger than expected, we would adjust the guidance appropriately. >> reporter: the federal reserve may think it's in a comfortable spot, but some critics don't. bernanke sounded his most hawkish when he argued back against those who think the fed should tolerate higher inflation if that would bring down unemployment. >> the view of the committee is that that would be very reckless. >> reporter: bernanke says one of the fed's hardest won victories is the trust that it will keep inflation tame. >> to risk that asset for what i think would be quite tentative
and perhaps doubtful gains on the real side would be, i think, an unwise thing to do. >> reporter: after five press conferences, bernanke has now confirmed he's on the dovish side of some of his colleagues. he's with a minority of fed policy makers who see the federal reserve's key short-term interest rate at less than 1% in 2014. darren gersh, "nightly business report," washington. >> tom: james kochan is the chief fixed-income strategist at wells fargo advantage funds. he joins us from that firm tonight. so jim, which camp are you in? should the federal reserve be perhaps more hawkish trying to head off future inflation? over the next year or so? or perhaps let the economy get more of out legs under it. >> well, we think the rate of inflation is going to stay relatively low over the next 12 months. so a policy on the part of the federal reserve to try and stimulate groth, a very aggressive policy as chairman bernanke e just refered to, is probably ropt for another 12 months.
longer run beyond that, as he said, will have to watch the data very carefully, but the federal reserve can't maintain the federal fund rate at zero indefinitely. but i think over the next 12 months it is appropriate to keep the federal fund rate very low. that seems to be what the majority of the committee certainly feels is appropriate, and from our point of view as bond market participants we would put that as an assumption that the federal fund rate stays very close to zero over the next 12 months. >> tom: so expand upon that, because fixed income investors at least in terms of interest rates have gotten punished by this low interest rate approximately over the past three years. where does a bond investor go to look for interest rates? >> well, we've been arguing that the investor should be investing for what i call coupon income, or interest income. and unfortunately too many investors have been far too cautious these last two years, have too much money in cash and cash equivalent that as you said punishes them.
yields next to nothing. there are segment of the fixed income markets that still provide reasonably good interest income. high yield corporate bonds, in the six to seven percent range in terms of interest income. some areas of the municipal bond market, single a and triple b credits, for example, yielding in the neighborhood of three, three and a half or 4% range. those areas of the bond markets still throw off or provide reasonably good interest income. treasuries do not. >> tom: let's talk about that, because the yield on the 10-year benchmark today issued by uncle sam, the i. o. u. over the next decade yields less than 2,. it rose slightly today. you got to take more risk to fine that interest rate that's out there, and the fed isn't worried about inflation risk. but we've seen energy prices pop around lately. >> well, that's right. energy prices have gone up. the krf pismt i. has increased
a bit, the core c. p. i. year over year has increased somewhat. so there's been some pickup in inflation, most of it related to energy prices. to some degree food prices. the federal reserve believes that those are temporary. and there is some argue numt that regard. but i think again for the investor, inflation is not going to accelerate in a substantial way, we believe, over the next 12 months. most investors should still be over the next 12 month investing for income, not safety. and you find income away from treasuries, as i said, in the corporate market, particularly high yield, and in some areas of the municipal bond market. >> tom: okay, willing to take on the slightly extra credit risk to get the slightly increased return. >> that's right, some additional credit risk. >> tom: jim kochan, chief fixed income stat gist, wells fargo.
>> reporter: i'm erika miller in the south bronx. i'll tell you about an unconventional fundraising strategy that's helping schools like this one get extra teachers. >> tom: apple was the stock on wall street today, rising almost 9% to back over $600 per share. while u.s. customers may be waiting for a new iphone, the company is dialing up big business in asia. in the u.s., apple sells its iphones through national wireless carriers a.t.&t., verizon and sprint, but all three saw their iphone business drop in the most recent quarter. a.t.&t. activated 43% fewer iphones in the first quarter. verizon's iphone activations fell 26%. sprint just starting selling the iphone in october. this quarter, activations were down 17%. one reason for the drop off was the brisk sales of the new iphone 4s when it debuted in october. but apple's iphone sales fell only 5% last quarter thanks to a big jump in demand from china, demand that signals a huge
opportunity. >> so, today, apple has a low single-digit percent of the market. they are very still much in the early stages in china, but if they could mirror their market share in the u.s. in china, then that would be an enormous opportunity for the company. >> tom: china is now responsible for a fifth of apple's iphone sales and the so-called "halo effect"-- when iphone customers also buy apple computers-- is in full-effect in china. mac sales were up more than 60% in china. like apple, tonight's "street critique" guest sees opportunity in china. asset manager jim oberweis joins us in just a moment with a chinese mobile internet stock pick. we know the investment world is in love with apple. after all, it's hard not to notice a stock that doubles in less than two years. still, small investors do not feel as kindly towards the rest of the market. suzanne pratt tonight on the
concerns of smaller investors. >> reporter: this has been a good year for financial markets. stocks are up, bonds are holding up and volatility has been limited. so how are retail investors navigating 2012? t.d. ameritrade's c.e.o. says they're still very cautious about investing their money. >> they have a memory of last year at this time when the market went up, and then things came unglued in the summertime and we went back down. and that's happened a couple of times now, and there's still lots of uncertainty in the world. >> reporter: the numbers support tomczyk's sense of retail investors. despite the 10% jump in the s&p 500 this year, many are still wary of stocks. the investment company institute, which tracks cash flows into mutual funds, says investors are even still withdrawing money from equity funds. where's it going? you guessed it, bonds and bond
funds. >> a retail investor will chase yield or chase performance, which you should not do. but if you look back at performance here, and you look back and say, "well, back bond funds have outperformed equity funds, and i'm going to go chase that performance," that usually is a mistake. >> reporter: mutual fund giant vanguard has a different take on investor sentiment. it says it's not that stocks are so scary to customers, it's that transaction costs for actively managed stock funds are pricier. as a result, some investors prefer lower cost e.t.f.s and index funds, particularly after the stock market's so-called lost decade of zero returns. >> investors are really thinking about costs, and cost is their number one factor when selecting a fund today, which was very different in the last two decades. >> reporter: some believe it will take years before small investors feel more comfortable with the stock market. not only does the u.s. economy
need to improve greatly, but europe and its financial troubles need to be out of the headlines. suzanne pratt, "nightly business report," new york. >> tom: coca-cola shares hit a 13-year high today, closing at almost $75 a share as the soft drink giant announced plans for a two-for-one stock split. if approved, it would be coke's 11th split since becoming a publicly traded company. so, accounting for stock splits and reinvested dividends, one coca-cola share bought in 1919 for $40 would have earned $9.8 million by now. it looks like the recent discovery of a cow infected with mad cow disease was pure luck. the u.s. department of agriculture tests about 40,000 cattle per year, but that's only a tiny percentage of the 34 million cows slaughtered every year. this was the first case reported in the u.s. since 2006. so far, it looks like the
disease was caused by a genetic mutation and not transferable from cow to cow. >> tom: we saw the apple effect today, maybe even more than the federal reserve effect. while the fed continues to hold interest rates down, it was the technology sector, led by apple, that pushed the broad market higher. the s&p 500 had a nice jump from the opening bell and was able to maintain the buying interest throughout the session, ending with almost a 1.5% rally. and technology topped the sectors, rising more than 3%. materials and consumer discretionary sectors were up about 2% each. so, it should be no surprise that apple was the strongest in the tech sector, jumping almost
9%, as we mentioned earlier. that certainly helped other tech firms doing business with it. corning makes glass for smart- phones, and an analyst at r.b.c. capital markets thinks corning's tv screen business could get a boost if apple ever launches a tv product. shares of corning were up 7%. broadcom supplies apple with wireless semiconductors. shares popped more than 6% on the back of apple's success. airplane maker boeing helped the dow industrial index take flight today. stronger sales of planes fueled by a strong first quarter. earnings were much better than anticipated, and so were revenues. boeing was successful by increasing its production of airlines to help meet higher global demand. so, the stock pped $77 per share, their highest since may. volume more than tripled. boeing is confident enough in its prospects that it increased its financial forcast for the
full year. boeing has been able to increase its production of its new dreamliner 787. meantime, caterpillar was digging a bit of a hole with its stock price today, falling more than 4.5%. volume more than doubled on the sell-off. it was a negative reaction after first quarter earnings were better than forecast thanks to a double-digit increase in construction and mining sales last quarter. but growth has been slowing in latin america and europe. farm fertilizer maker mosaic has good news for shareholders today: sales are growing more than expected. that sent the stock up more than 5%. the company says demand has increased sharply in the past month as warm weather has allowed u.s. and canadian farmers to get into their fields earlier that usual. now, that warm weather may also have had more people buying cars, with stronger than expected earnings at auto dealers across the u.s., but that didn't help all their stocks. auto-nation fell 1% despite stronger than expected earnings. penske auto, though, is close to a new 52-week high after today's 1% rally.
lithia motors jumped more than 7.5%. all three reported higher first quarter sales and higher vehicle prices. now, two-wheelers were also selling well at the beginning of the year. motorcycle maker harley davidson's earnings were more than expected. shares hit a new high, up 6%. harley said younger customers are coming to the brand, and it now expects to ship more cycles this year than it anticipated in january. and that's tonight's "market focus." >> tom: do you remember bake sales?
jim, you run a mutual fund focus on china where expectations have been driven lower. as that economy slows. why does that make it a good time to put money now in china? >> i guess it's been said that if your expectations are low enough you'll never be disappointed. for many investors in china that is the case. i've been doing this 7 years, we've seen expectations from china change, right gnaw they remain just above horrid. much of that stems from slowing growth in china. growth is actually slowing in china, but at a measured pace. the chinese government has the will and the balance sheet to accelerate growth if they want to, i think you'll see that later this year. i think you'll see growth faster than most of the world, just not quite as fast as it has been. >> tom: there are pockets of strength from apple as we reported earlier, a fifth of
its iphone sales came from china. your play with the security firm, nq the ticker symbol, what do you anticipate out of this? >> so netqin makes security smart wear for cell phones. i think it's the industry leader for that type of product. we like it's not only because of the high growth, but also because of valuation. evaluation is one of the most attractive ratios in our universe right now. we also see some opportunities to grow abroad. they recently launched a partnership with verizon, that paired with china's growth rate and continued expansion of cell phones is a good combination. >> tom: price earnings growth ratio, looking at all those things to come up with a valuation. you also like a company, mlnx, data storage technology here. had a big pop within the past week or so after a sessions
earnings increase. is it too late to buy? >> no, i don't think. so i think they're just getting started. so they make a new technology which connects servers for very high speed connections. what you're going to see in the next year or so is intel roll off a whole new line of servers that are much faster, where as that connection is more likely to become a bottleneck. folks will be more willing to pay for a very high speed internet connection, and it's the logical choice for them to pick. aif that technology becomes adopted, think i you'll see significant growth in revenues, and a lot of that will drop down to the bottom line. >> tom: foreign technology is the play there with jim oberweis. do you or the fund have positions in those two stocks? >> they're two of the top positions in our funds and i'm a shareholder. i don't own anything directly. >> tom: all right, jim oberweis, in chicago tonight, thanks, jim.
>> tom: do you remember bake sales? now they've gone online and lost the baking altogether. many non-profit organizations are turning to social media to raise money, sometimes from donors thousands of miles away. we continue our look this week at crowd-funding with erika miller on how one social media site is changing the school fundraiser. >> reporter: like many private middle schools, saint ignatius has a rigorous curriculum, and the kids score well on standardized tests. >> on the asset value, which is good. >> reporter: but unlike others, this school is tuition-free, and there's a teacher for every six students. and there's something even more remarkable. >> this area is the poorest area of all 435 congressional districts in the country. so, we believe in giving our students the best of what they deserve.
>> reporter: three of the ten teachers here are paid for by americorps, the government service organization. to raise money for teachers, americorps has expanded beyond traditional fundraising. it recently started using social media to increase visibility and broaden its donor pool. fundly is the web site americorps turned to for help. dave boyce, the c.e.o. of fundly, says social fundraising starts with the idea that all of us are passionate about certain causes. >> if we can tap into that emotion and get people not only to contribute their money, but also some of their social influence, and get other people to join them in supporting a cause, then many hands make light work, and we can fund great things. >> reporter: he says the idea for the site came from trying to manage the relentless fundraising requests of his six kids. since fundly began in 2009, it has raised nearly $2.5 million. it's now the largest social fundraising platform in the u.s. >> our success has been that we've been able to get p.t.a.s
and local clubs and local churches, and even the libraries and local non-profits, all the way up to the world's largest non-profits. >> reporter: fundly is a for- profit company. it makes its money through transaction fees of up to 4.9%. but the organizations say that's only slightly more than they pay to process a credit card donation, and it's easy. teach for america, a division of americorps, has raised $100,000 on fundly in just a few months. >> fundly provides a way to engage our existing supporters in a new and exciting way. it's different, it's fun, it's easy. >> reporter: saint ignatius has also started using fundly to raise money for an eighth grade trip to washington, d.c. >> we raised over $13,000. we originally set our goal at $5,000, and we've increased our goal twice due to the overwhelming response. >> reporter: so in addition to
their usual curriculum, saint ignatius students are getting a lesson in successful fundraising. erika miller, "nightly business report," south bronx. >> tom: we continue our week- long look at the power of the internet tomorrow. we'll find out how an idea for unused public space under the streets of manhattan is bringing a community together. also, the iconic american brand lands end has been around since the 1960s. it's now owned by sears. we'll talk to the c.e.o. about what customers are buying. and earnings from online gaming phenomenon zynga, the company behind "farmville." finally, one of this spring's multibillion-dollar deals was in baseball, with the los angeles dodgers selling for more than $2 billion. that made it the most expensive sports deal since the n.f.l.'s miami dolphins sold for $1 billion. rick horrow spoke with dolphins owner stephen ross about spending that kind of money.
>> i bought it because i wanted to create a winner. i love football. i bought it, you know, one, because i could afford it, and the idea of building a winner. the challenge of doing that. certainly i haven't been successful doing that yet, so, you know, i don't feel i've been a success until i can create, and being an owner i'm more like a fan. and i didn't do it as a business. it has a lot of advantages owning a team, but that wasn't the reason why i bought the team. >> tom: big question. did you overpay? >> a lot of teams in the nfl have been traded and i think when you sigh the values of those teams that traded and the fact that we own the real estate, we own the stadium, our team traded a little higher value than the most recent acquisitions. you can't really compare them. but based on football, i think it's pretty much at the level that i paid for it. >> you feel like you've gotten the value out of what you
initially paid for that franchise? too early to tell or did you do it for other reasons? >> i did it because i wanted to bring back the winning tradition to miami. it wasn't much money i made on it. so i didn't look at it as a value pop six, and i haven't created the winner yet, so it's a lot hard e than i thought it would be. but that's my goal and i'm intent on seeing that through. >> tom: dolphins owner steven ross with rick who are ro. that's "nightly business report" for wednesday, april 25. i'm tom hudson. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org