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tv   Nightly Business Report  PBS  March 5, 2014 6:30pm-7:01pm PST

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. >> this is "nightly business report" with tyler math son and cisse -- brought to you in part by -- >> the street.com featuring stephanie link who shares her stock picks and market insights with action alerts plus. the multimillion-dollar portfolio she manages with jim cramer. you can lesch more at the street.com/nbr. winter blues. reports on the labor market raising concerns for would be job seekers. will friday's government employment report confirm the hiring slump, and is this just a blip or a long-term trend? >> exxonmobil disappoints investors with its oil and gas production outlook. will new projects re-energize the world's largest publicly traded energy company? and economic priorities. china sets up course for growth and structural reform, but there's one thing some global
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investors fear could disrupt the economic powerhouse. we have all that and more tonight on nightly business report for wednesday, march 5th. old man winter has struck again, and spring is two weeks from tomorrow. it can't come soon enough for the recovering u.s. economy. several reports out today blame last month's cold bitter weather and unrelenting snow for a slowdown in economic growth in february. far fewer than expected private sector jobs were added last month both in the southwests sector in the economy fell to the slowest pace in four years, and it appears that white is the new beige as the federal reserve's latest beige book economic survey reported that white snowy, frigid winter weather had a major impact on hiring, manufacturing, and consumer spending. steve liesman has more on what it all means. >> after ravaging the nation in
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snow and cold, the weather hit the u.s. again today. this time in a series of frigid economic reports that showed a chilling impact in this winter's weather. a key gauge of the job market, the adt national report came at just 139,000, below the 160,000 estimated by wall street, and friday's jobs report from the government could be soft as well. at a measure of the service sector, which makes up the bumg of the u.s. economy, fell to just 51.6. the lowest level in four years, and in large measure due to the weather. >> a lot of law firms couldn't practice because they couldn't get to the office and couldn't work. accountants couldn't work. retailers have been significantly affected, and it affects all the things that they do, so, you know, in general businesses just couldn't get the work done that they normally do. >> inside that service report from the institute for supply management, a gauge of employment dropped nearly nine points, the only bigger drop was during the 2008 recession. if that wasn't enough evidence
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that mother nature is having her way with the u.s. economy, the fed's beige book, a collection of economic anecdote from around the nation, released today, mentioned weather 119 times. that compares with just 18 mentions a year ago. among the mentions volumes in dallas fell due to the weather. nine districts of the 12 reported weaker manufacturing because of weather. crops were damaged in the richmond, atlanta districts. energy declineed in the minneapolis district which includes the oil-rich state of north dakota. hiring slowdowns in boston due to weather. ski resorts in kansas city, the minneapolis districts, they had a good month. hotels in atlanta and boston because of stranded travellers, and there was increased energy demand that showed up in higher utility bills, but also softer retail and auto sales. for nightly business report, i'm steve liesman. despite all the uncertainties about the u.s. economy, josh fineman's view is
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glass half full. he is chief economist. looks like we are now keeping score on how many times the fed mentions weather in its report. the 119 times that steve just reported. we've been hearing that a lot. is that really what's going on, or is it an excuse? is something more fundamental happening with the economy? >> i think it's the main thing that's going on here. we're all talking about the weather, and we certainly again in the beige book. it's send aing chilling through people and economic activity. there's little doubt about that. we can't be 100% certain that's all that's going on. there has been an inventory correction dampening activity here in the first quarter, but the key point is both of those things, the weather and inventories, should be temporary. i'm assuming that before long -- i'm hoping the weather returns to more normal, and the inventory correction will prove to be self-limiting. when that happens i think the economy is improving fundamentals should reappear. >> josh, how dowel explain the
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rather sharp downward revision in gdp for the fourth quarter of last year? that was really well before the worst of the bad weather hit. >> it was. i mean, we had a little bit of a bad weather in december, but some of that was we have too much of an increase in some of the early indicators, and she sort of tailed off a little bit. some of the weather. not all of it. overall the economy did pretty well in the second half of the year. keep in mind the two and a half of the fourth quarter followed 4% in the third quarter. the economy did seem to be gaining momentum. it has lost a little momentum here, the weather, the inventory correction, but i think the improving fund memtss should reappear. >> i know a lot of people are very concerned about the employment report that's coming out on friday, and i know that you have a forecast that's not expecting too many jobs being added to businesses. how important is that? tell us what your prediction is. >> i'm looking for it to be on the softer side, but i have to say i think the bands of
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uncertainty around that are greater than usual because of the weather impact. you know, we just don't know how many people were held out and couldn't get to work because of the weather. we don't have any of them off the pay roles or how many will just see a reduction in hours. i think, unfortunately, the report is going to be obscuring the underlying trends, and we're going to have to wait probably until the following couple of months to get a clearer picture. >> josh, how long will these weather effects continue to show up legitimately in the data? >> well, depends on how quickly the weather comes back more normal. if we're assuming that, you know, we kind of get back to more normal temperatures and precipitations in march and april, then the data that starts to print in april and may should look more normal. they could get a bounceback. to average through things for a few months before we get a read on the underlying trends. >> all right. so how do you think this is going to play out with the federal reserve? they're having their first policy meeting with janet yellin
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in less than two weeks. if the numbers are weak in march, april, and may, what do they do? >> oh, well, right now i think, you know, they're just not going to have a clear hand at the meeting. i don't think they're going to dooefrate from the crypt script that they've been under, which is this gradual tapering pace. i think they're comfortable with that and comfortable with the forecast about the economy. it's going to take a much bigger shift to get them to veer off that task. if we get into the spring and it turns out this is not just the weather phenomenon, that the economy is downshifting more fundamentally, then, you know, by may, june, that type of time frame, then it would have to rethink. i don't think that's going to happen, but i think that's what it would take to get the fed to veer off this course. >> thanks so much, josh. josh fineman, chief global economist at deutsche asset and wealth management. quiet day on wall street. stocks following up their best one-day gains of the year on tuesday with low volatility today. the major averages ending mixed. little changed basically. despite that disappointing data
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on jobs and economic growth, the dow ended 3r5 points lower, fairly modest decline there. the nasdaq, however, was up six, and the s&p ended just fractionally lower. exxonmobil was by far the biggest decliner in the dow today. shares fell nearly 3% after the oil giant announced plans to sharply cut funding for oil and natural gas drilling this year. morgan brennan has more on the cuts and where the company sees growth. >> exxonmobil ceo rex telling analysts and investors that it's oil and natural gas production will be flat in 2014. a big reason for that is lower cap x spending. with the oil giant announce aing 6% cut to its drilling budget. exxon also plans to invest less in its north american natural gas business. >> we have deliberately elected to let continue to just decline rather than invest a lot in sustaining or growing north american gas capacity, which we
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have the opportunity to do. that's a dlig deliberate choice we're making. just because it doesn't appear the market needs it yet. >> tillerson also touching on the crisis in ukraine, saying his company's exploration plans in that country are on hold thanks to the current circumstances. so sinclair finds that exxonmobil's operations in russia where a partnership was brought and is seen as having massive growth potential have so far not been impacted by the unrest in the region. though he did hint that the company would be impacted by any economic sanctions, the west puts on moscow. >> you know, governments can take abbings that are beyond our control, such as sanctions, which would prohibit any businesses from conducting activities and we've been through that. whether it's with iranian sanctions or or whether it's other countries, libya. so that's just part of the risk we know is there. always present. >> it wasn't all bad news from
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exxonmobil. the company says that it will see a record ten new projects come on-line this year, and that it expects annual growth of 2% to 3% beginning in 2015. wun look at how the stock is trading today. down nearly 3%. it's easy to see that today's message didn't sit well with investors. for nightly business report, i'm morgan brennan. moving to the economy in china. as the national people's congress met today, laying up growth targets and spending plans for the world's second largest economy. we have more now from beijing. >> as we open up this year's chinese congress, investors set up better sense of the new leadership's economic priorities for 2014 and china's version of the state of the union address the premier reaffirmed the country's annual target. economic growth is forecast at 7.5%. consumer inflation at 3.5%. now, the figures have just set policymakers what really takes to slower growth than previous years.
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the target in the past years have been seen as a floor, but with the economy slowing down, the target is increasingly being viewed as an actual target. now, much of the premier's speech focused on the costs of china's rapid economic growth. he declared a war on pollution. the administration also said it would find ways to help local governments reign in debt. perhaps by allowing them to sell bonds. now, another highlight from the day china is increasing its military spend big 12.2%. that increase was accompanied by a warning by the premier that china wouldn't allow any country to reverse the course of history, a comment that is seen as an oblique reference that japan, possibility the united states and china rises on the global stage. for nightly business report, beijing. well, despite china's strong growth projections, the country could see its first ever corporate bond default. a solar firm says it won't be able to make an interest payment this friday. it's something investors are keeping a close eye on and michelle caruso cabrera joins us with more on all of this.
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how serious is this, and why is this the first ever corporate bond default? >> well, it's not that all chinese corporatings have been perfect and very profitable and been able to pay their debts. except when they run into trouble, the refers and the bonds have been bailed out either by the underwriters or government. this will be the first time where government says we're not going to do that this time. >> capitalism is supposed to work like that. not that they're capitalists, but -- >> right, right. some people say this is a good thing. this needs to finally happen. >> so tell me about why some analysts are calling this potentially a bear-stearns moment? had. >> if you have been investing in a type of product that has always paid you back, regardless of the risk involved, then suddenly you discover one day, wait a minute, this isn't necessarily that good. remember, that's what happens with bear-stearns when they first had their hedge funds go under, and then people thought, wait a minute, subprime isn't as safe as everybody thought. that's what they're equate it with. suddenly there was this beginning of the ebbing with confidence, and they're worried
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that's going to happen throughout the corporate bond market because maybe some corporate bonds shouldn't be as rated as high or have as many investors they're getting. >> should american investors be worried about this? if you have an etf and china securities or you said just a moment ago this could be a good thing. >> well, it's a good thing that people should learn that just because you invest in something doesn't mean you're always going to get paid back. it's a painful lesson to learn and can be painful for the economy. whether american investors should be concerned, it's something we can't quite answer. there's a couple of things we know. that the chinese financial system, if it does suffer a big freeze, it's still actually pretty insulated from the rest of the world. it's not as advanced financial system as we have, so it's not as integrated with the rest of the world. at the same time if china has to spend a lot of money fixing this, that's money they can't use to buy iron-ore, et cetera. >> who would own the bonds? it's going to be mostly chinese holders. >> that's what i was guessing.
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>> all right. michelle, thanks for coming by. this was great. really appreciate it. have a good weekend. >> still ahead, yet another delay to a key part of the new health care law. we'll have the details right after this. >> it is latest on the dmrisz ukraine. in moscow a proposed law would allow the kremlin to seize property and bank accounts of western companies and individuals if economic sanctions are imposed against russia wra. with russian troops still on the ground in ukraine's crimea region, secretary of state john kerry was in paris trying to drum up support for the interim leaders in kiev. >> russia can now choose -- and
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we are committed to working with russia and together with our friends and allies in an effort to provide a way for this entire situation to find the road to deescalation. >> meanwhile, european union officials are offering $15 billion in loans and grants over the next few years matching the bail-out that russia offered ukraine's ousted president several weeks ago. that is on top of the $1 billion in loan guarantees from washington in exchange for energy subsidies. well, europe gets about one-third of its energy needs from russia. much of it moved through natural gas pipelines in ukraine. so the stand-off between russia and ukraine is being closely watched by nat-gas traders in the u.s. kate kelly talked with some of the traders in texas about price volatility in the u.s. market and how tough it is to make the right call on natural gas. >> this means a lot more of
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this. as people crank up the heat to keep warm, the price of natural gas has shot up making this the most volatile winter for the commodity in decades. unlike other commodity that are also subject to the tug of supply and demand, natural gas can shift suddenly spiking during a winter like this one and quickly plummeting once the forecast changes and the thaw sets in. in the past few weeks alone they've hit multi-year highs only to follow with the worst four-day losing streak since 1996. >> demand for natural gas and many other commodities is much more elastic today than what we've seen in the past, so as a result you think about the consumer being much more price-sensitive. >> consumers have taken notice every time they open their heating bills, and so have investors since it's that elasticity or sensitivity to price change that has made trading natural gas much more risky. >> traders here in houston are open about the amount of risk they take buying and selling contracts tied to future prices of natural gas. as hedge fund manager bill
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perkins told me, we thrive on kay, on but at the same time perkins says, we can lose all our money on any given day. >> perkins is one of the lucky few whose funds made money in january. largely by following the weather patterns in deciding how to trade. he is not alone. david dunn, who manages about $100 million at lockridge investment add veezors, is up 8% to 9% this year on a unique approach to impasse that involves betting on price changes between one region and another. >> what we're doing is we're trading two ends of a pipe, and obviously there are two prices at each end of the pipe, and the differential between the prices theoretically on paper should be the cost of transportation. we've got any number of factors that influence the price that each end of the pipe, and it's that basis relationship that we're trading. >> the only sure way to make money is to be right, and hedge fund managers say the only thing they know for sure is that the bumpy ride will continue. for "nightly business report" i'm kate kelly in houston. another delay in a key
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provision of the affordable care act. the white house now wants to let you hahning on to your health insurance policy untilen the he wanted of 2016 even if it doesn't comply approximate with the health law's stricter coverage standards for newly issued plans. republicans claim the change was politically motivated. late last year the president urged states and insurers to commit noncompliant policies through 2014, but that would have meant cancellation notices would start to hit right around the midterm elections. some constitutional scholars warn that the move is a too broad extension of executive poushz to reshape law, but the white house says it's just trying to smooth the transition to a new health insurance system. shares tumbled as it afforded a loss that was bigger than expected, and that's where we begin tonight. the home builders saw a drop in contracts on higher cancellation rates and fewer home deliveries. it blamed the poor quarterly performance on harsh winter weather, slowing sales and extending construction times. the stock plunged more than 10%
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to $5.44. ron foreman posting better than expected earnings thanks to strong sales of jack daniels. the liquor maker behind brands like southern comfort, also upped its outlook. that sent shares up more than 3% to $87 .11. serberus is trying to buy safeway, but kroger may be getting in the way. there are reports that kroger is considering a bid for safeway, the nation's second largest grocery chain, but serberus is still seen as the top contender. saufway up today, and kroger also higher. 3% so at $43.68. the fda won't apply eli lily's p controversial drug. in may the fda warned the drugmaker that the german plant violated standards, and those issues have not been resolved. the fda is not requesting any
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more tests of the drug. shares fell a fraction there to $59.43. going once. going twice. sold. coming up, we'll tell you why google, the king of search, is investing in a website that auctions real estate. u.s. safety regulators are coming down hard on general motors about what the automaker knew and when it knew about a faulty ignition switch that's been linked to 13 car crash deaths. the national highway traffic safety administration wants answers to 107 questions about that ignition problem and sent gm a 27-page order today
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demanding pictures, memos, emails, engineering reports, and lots of other data. google thinks it's found answers about real estate. the on-line search giant's investment arm just put an internet real estate company on the map big-time giving it a $50 million cash infusion. that's after auction.com, which sells both residential and commercial real estate, came knocking on google's door. google answered. diana spoke with the ceo today about the cash infusion and the company's new relationship with google. >> do you have a list of properties for today? sflo when the housing market crashed, auction.com was born, holding its first live auction in 2007 and launching on-line the next year. >> $150,000. >> $26 billion in residential and commercial sales later, the california-based company is getting a $50 million vote of confidence from google capital, an investment arm of the internet giant. >> management made a list of who
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would be the most strategic partner for aukdz.com, and google is on the top of the list. they hope to take advantage of google's cash and of the digital marketing and product development. while the vast majority of its residential properties are foreclosures, as that pile shrinks, its commercial side is growing. sources at google capital say commercial real estate is their primary focus in the deal. especially auction's ability to level the playing field for smaller investors. >> we have a marketplace. people bidding on $50 million apartment buildings, $25 million malls, and these sellers become your buyers. we have a marketplace. in fact, we have billions of dollars of liquidity coming to auction.com with millions of users. >> given the amount of real-time buying and selling, auction's website sees the information the company has could be very valuable, but sources at google say this is not product integration. just a pure money play and freedan agreed. >> they are arguably one of the best data companies in the
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world. that is not something we would share with anybody except auction.com. >> auction.com is not -- an ipo is not out of the question. as for now, it will welcome a member of google to its board and take the relationship from there. for nightly business report, i'm diana olich in new york. to read more about google and its investment in auction.com, go to our website nbr.com. finally tonight after eight years of working on a government salary, it looks like ben bernanke is cashing in. ? just one paid speaking engagement in the united arab emirates on tuesday the former chairman of the federal reserve bank pocketed a reported $250,000. that's for one speech, now. here's the kicker. that's more than he earned in an entire year running the nation's central bank and steering the nation through the worst financial crisis since the great depression. you know, tyler, if he does three more of these speeches that's $1 million. >> that's $1 million, and he will be able to pay for his daughter's education, which he
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lamented he was having to worry about. >> no worries now. that's "nightly business report" for tonight. we want to remind you, this is the time of year your public television station seeks your report to make programs like this one possible. >> i'm tyler matheson. thank you for your support. have a great evening, everybody and hope to see you back here tomorrow night. >> nightly business report has been brought to you in part by the street.com. unded by jim cramer. the street.com is an independent source for stock market analysis. cramer's action alerts plus is home to his multimillion-dollar portfolio. can you learn more at the street.com/nbr.
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