tv Nightly Business Report PBS July 4, 2014 6:30pm-7:01pm PDT
is "nightly business report" with tyler mathisen and susie gehring. >> good evening, everyone, and happy fourth of july. welcome to a special second half outlook of "nightly business report." i'm bill griffeth in for tyler mathisen. >> and i'm susie gharib. well, the first six months of the year are in the books, and the gains by the major indexes are nothing to sneeze at. the s&p and nasdaq gaining around 6%. and while the dow didn't do that well, it still climbed more than 1%. so not quite the fireworks from last year, but still solid gains. >> that's not so ancient history. history, nonetheless. tonight we look ahead to the second half of the year and what to expect in everything from housing to stocks to the economy. >> and that's where we begin tonight, the economy. harsh winter weather severely
hampered growth in the early part of the year that was in the event that eye-popping number showing the economy contracted nearly 3% in the first quarter. but then slowly the economy seems to be finding its footing again. so does that mean we're on track for stronger growth in the second half? steve liesman takes a look. >> here is what to watch for in the economy in the second half. the best guess is that the economy and jobs will both strengthen. is not so much because of any positives, but the lack of negative ones. most economists see 2014 as a year where the headwinds that have held back growth are easing up. the political high jinks that hobbled the economy last year like the fight to the death over the budget resulting in the government shutdown seems to have been resolved at least for now. job growth hurt by a severe winter look to be picking up. europe seems to be clawing its way back, at least no longer negative. the big challenge we've been maintaining 200,000 plus job growth monthly and how the economy will react as the
federal reserve gradually draws down its stimulus. that's the second half economic outlook. for "nightly business report," i'm steve lease man. on to another leg of the economy now, housing. the first half was not exactly stellar, showing some softness. but recent signs have many believing that the downturn will not be prolonged. so what can heat up housing in the second half of the year? diana oleg has the key. >> here is what to watch for in the second half, affordability. it will determine home sales and prices for new and existing homes in the second half after a weaker than expected start. it will also determine all this. who chooses to buy a single-family home and who chooses to rent. after a surge in apartment starts over the past two years, thousands of nature units are set to open in the second half. that could moderate rents a bit. mortgage rates are expected to rise a bit, weakening affordability further. and keep an eye on housing starts. single family was weak in the first half on flat new orders. but the builders could make an
aggressive move. of course, they're going to have to lower prices. that's your second half housing outlook for "nightly business report." i'm diana oleg. the consumer the backbone of the economy is still having a tough time opening the purse strings and wallet. americans are spending, but they're being very cautious about it. the tepid pace mirrors what has been going on in the economy during the first half of the year. so what lies ahead for consumers and retailers over the next six months? courtney reagan takes a look. >> here is what to watch for in retail in the second half. the two biggest retail spending events are still ahead of us. back to school and holiday. the good news is most retailers are expecting a stronger close to the year. the bad news is they're up against tougher comparables. it may be another weak back to school shopping season in the teen sector as more disposable income is diverted to smartphone bills, entertainment, and sports. capital markets analyst susan
anderson thinks the missie shopper is finally ready to start upgrading her wardrobe. that's your second half retail outlook for "nightly business report." i'm courtney reagan. and joining us now with his take on the economy, we're always pleased to welcome back steve forbes, of course chairman and editor-in-chief of forbes media. steve has a new book out now, called "money: how the destruction of the dollar threatening the global economy and what we can do about it." what do you think of the economy right now as we go into the second half? the stock market as a discounting mechanism seems to foretell good things down the road. >> i think the stock market is looking beyond the second half and into next year after the november elections, which looks like the republicans are going to do very well, which means anti-growth initiatives from washington are going to be fewer and fewer, and perhaps some of the current ones will be mitigated a little bit. markets like to anticipate the future. so essential like a baseball player, we hit about 180 in the first half of the year, get it up to .250, .260. not great, but better than the first half.
>> it's your multimillion-dollar contract, though. >> to some specifics, you heard steve liesman's report and talking about business investment is expected to pick up. hiring is expected to pick up. is that how you see it? how encourage ready you? >> i think it will be. bank lending is picking up little bit. for five years the regulators have been pounding on banks about risks which means don't lend to small and new businesses. that's beginning to ease up. the energy boom is still going along. and the tapering is hugely bullish. contrary to what most people think, qe was actually contracting the economy. it was great for washington. deficit without tears. great for big companies. they can borrow at no costs at all. for small and new businesses, very tough environment. what the fed do when they tapers means there is more money for the rest of the economy. which is good. >> janet yellen says she is not worried about inflation. in fact, she wants a higher inflation rate. i can imagine you don't agree with that right now. >> it's an absurd theory, and i think future generations are going to wonder what was going through these people's minds.
i wish somebody in congress would ask her why. 2%, 3% inflation means a thousand dollars extra cost for a typical american family. somebody should ask her why is a family having to pay an extra thousand dollars a year for fuel and food good for the economy? why do they have to spend more? why is that stimulating for economy? spending more for same goods and services? it's a bizarre theory, but it seems to have a vice-like grip. >> where do you see inflation right now, though? >> inflation, inflation, because they don't know what they're doing with the dollar. inflation is a real threat. gold has picked up a little bit. not a good sign. so you have to watch out. the problem is the fed operates by whim. and when you have that, you're like doctors that don't know what they're doing. >> i take it that you're in the camp saying it's time to raise interest rates. you know, i'm sure you've been hearing the sound bites in the headlines from said policymakers every day. another one is saying the economy is back to normal. time to start raising interest rates. what do you think? >> it's like rent control in the housing market and you end up
distorting the market. i think sooner they gradually allow real rates to come again, it will actually mean more credit for the private sector, because then banks will know what credit is costing, what they can lend it at and have a margin, and new players can come into the game if regulars pound the banks too hard. so the better, the quicker they allow the interest rate controls to come off, the better for the economy. >> your book is called "how the destruction of the dollar threatens the global economy and what we can do about it." what can we do about it right now? >> ultimately, go back at least short-term to the kind of stability we had under the reagan administration and clinton administration, and ultimately, we're going to go to something that sounds very, very bizarre today, but it's going to come in the next generation. we're going to go to a gold standard again. >> you think we could go back to the gold standard? >> absolutely. we had it for the first 180 years of this country's existence. if we maintained growth rates that we had under the gold
standard the last 40 years we would have an economy today that would be 50% larger. >> a lot of people would say we won't have a currency that is vast enough dealing that the financial markets and central banks have gotten so big. and it also is not because of gold. it's because of globalization. it's because of more technology. that things have changed. not because of the gold standard. what do you say to that? >> the classical gold standard, we had the biggest push for globalization in human history. as a matter of fact, the 100th year of the beginning of the great war, the first world war wasn't until the 1990s that we got the capital flows and the trade global international trade to proportionate levels that we had in 1914, weren't reached again until the 1990s. so a gold standard by making it easier to have cross border capital flows and investment and the like because you actually know what you're going to get back in return enhances globalization. it's like having 60 minutes in an hour. imagine if they floated the clock. 60 minutes one day, 48 the next.
life would be very confusing. stability is good. money is a measure of value. that's the key thing. a measure of value. when you start to muck with it, you get the sluggish growth we've had in recent years. >> we can always count on you giving us something to think about it. >> the new book called "money." very simply. aumz good to see steve. >> thanks. the s&p had a decent showing in the first half, up 6%. but one important area that lagged the benchmark performance, the financial sector. kayla tausche has more on what is expected to happen with the banks in the second half of 2014. >> here is what to watch for in the financial sector in the second half. bulls will see bank earnings improve alongside the economy. consumer banks will see loan demand keep picking up. the feds beige book having thrown strength across all u.s. districts. an investment banks will reap big paydays. costs, though, will rise at the same time. bond trading remaining weak, and the fed may stop paying banks'
interest. it may start charging them on $2.6 trillion in excess reserve they hold. finally, bank of america, citigroup could pay tens of millions of dollars to settle legal issues. for "nightly business report," i'm kayla tausche in new york. autos ended the first half fairly strong. sales in june did beat expectations, even general motors in the eye of that storm over its ignition switch issues still managed to scratch out a gain. needless to say, gm will continue to be in the spotlight for the rest of the year. and there are some trends to watch in the skies as well. fill lphil lebeau shows us what to keep an eye on. >> here is what to watch for in the airline sector. higher fuel prices put pressure on the bottom line for airlines, and that means airlines stocks could b facing a little more pressure themselves. also, expect more attention to be focused on niche startup
airlines like people express, which will be flying limited schedules. finally, for the legacy airlines, southwest will be flying internationally for the first time in the second half of this year. and other carriers like jetblue will be expanding their offerings when it comes to coast-to-coast flights. meanwhile, the outlook for the auto sector in the second half of this year will be dominated by a few key stories. general motors is expected to see the pace of recalls slow down after recalling more than 20 million vehicles in the first half of the year. investors will be keying in on fiat chrysler, which is expected to have its ipo before the end of this year with a listing likely on the new york stock exchange. as for auto sales themselves, well, the pace is expected to stay strong. many in the industry believe that auto sales will be above 16 million vehicles for the entire year. that's your outlook for the autos and airlines for the second half of this year. phil lebeau, "nightly business report," chicago. now biotech was the sizzling sector in the first half.
between mergers and developing drugs, the group was up about 20%. what can we expect the rest of the way? meg turrell explains. >> here is what to watch for in pharma and biotech in the second half. the habitat will continue to be hot with gilead expected to receive approval on a drug combination in october and more data on drugs from merck and bristol-myers in november. among biotext, expect clinical data readouts on important pipeline products that could have big implications. and never discount m&a. analysts expect it the record year to continue. and the second half's largest deal may in fact be a rerun of the first half. analysts expect pfizer to make a second run at buying astrazeneca. that's the second half. for "nightly business report," i'm meg turrell. >> so what is next for the stock market and which sectors will be the winners and the losers? we turn now to steven whiting,
global chief investment strategist at city private bank. steven, thank you so much for joining us. >> thank you. >> who would have guessed back in january that this is where we would be in july? what is your outlook for the rest of the year? >> we had a good first half of the year if you count in dividends as you should. s&p total return was about 7%. i would doubt that we're going to fully repeat that return. third quarter periods have a history of being a bit more volatile, lower volume periods. and we do think earnings are growing something less than what you would annualize as a 7% first half of the year. but we do expect that this unfinished economic recovery which can continue for at least two more years of above trend growth and rising profits and evaluations that are not terribly stretched, at least not compared to a fixed income valuations, that will continue to see new highs over time. >> as we know, the federal reserve is pulling back
gradually month by month on the buying that is done of treasu treasuries and mortgage-backed securities. is the fed going to help or hurt the economy in the stock market down the road do you think? >> well, for the financial markets, i think it could be a source of volatility as we conclude qe in september or october. it will put greater focus in on what a considerable period of time in which policy rates will be at zero really means. fed chair yellin mentioned at one point six months or something like six months to quote her exactly. but we do think it's a bit longer period than that and more data-dependent. but again, the focus will be very much on what is next out of the fed. when when at the moment, they're continuing to ease. >> let's look at some of the stock sectors in which you're expect fog interest rest of the year. for this first part, utilities, energy, health care. they were the big gainers. what sectors do you think will do well and which won't do well over the next six months? >> well, we saw a backing off of long-term interest rates in the first half of the year that we
would not expect to be repeated in the second half. there have been good reasons why we've not seen unrelenting risers in interest rates, including the fact that u.s. yields are double german yields. so i think interest-sensitive sectors of the market will have a difficult time repeating their first half performance. the energy sector is interesting in the sense that global risks to oil supplies have picked up with the events both in iraq and surrounding ukraine being issues that are unresolved. and that has shifted some of the benefits of an oil production boom in the united states back to producers. it is not something that we want to emphasize. we don't have a very bullish long-term view of oil given how much production and investment has picked up. but it's a firmer sector than it was. in general, though, american industrial firms, you know, are an area where we just think we will see a longer, stronger expansion for newly competitive american industrials. >> what about overseas?
do you see better opportunities, maybe europe as they continue to try and deal with their economic woes? >> yes. >> china, which is starting to create demand, the economy over there? >> yes. i think you have to keep in mind in a place like china, there is a terrible lack of confidence compared to what there was some years ago. it's a market trading with roughly the same growth rate of earnings as the united states market, half the valuation. in the case of europe, people look at particularly away from the north of europe and say, well, these are weak and fragile economies. but that's when we start an upturn. and that's exactly where we were in the u.s. market about four years ago. as banks deleveraged, we have seen, you know, a sort of -- the u.s. being a leading indicator what is going on in europe. this has been the longest period of underperformance of european shares relative to the united states that we can record on record. so the european market is catching up and we think we can continue to, particularly in the
privilege rear of europe. >> thank you so much, steven. appreciate your thoughts. steven whiting of siti private bank. coming up, which hot spots might throw a wrench into the machinery? we'll look at that when we come back. there are a lot of factors in play when it comes to energy in the second half, as you heard from steven just a moment ago from geopolitical tensions in iraq and ukraine to political policies here in the u.s. but one thing is certain. oil and gas prices will clearly be in focus. jackie deangelis has more. >> here is what to watch for in the energy sector for the second half of the year. crude oil prices could continue
to see volatility. hot spots like russia, ukraine and iraq already boosting prices in the first half. those areas not appearing to cool off. traders think prices could stay high in the second half. also, the u.s. is boosting its own crude oil production, and washington appears to be considering lifting the ban on exports. so that of course could bring prices down in the global marketplace. we're also watching the keystone pipeline. while there is no date on a decision just yet, trader thinks we could hear from washington after the midterm elections. that's your second half energy outlook. for "nightly business report," i'm jackie deangelis in new york. >> so as we've said, the events in iraq will play a role for u.s. markets whether it be stocks or energy. but there are also critical events in asia, europe, and south america. michelle caruso-cabrera spans the globe for hot 1309s that could have an impact in the second half of the year. >> here is what to watch for internationally in the second half of the year. first, how the situation unfolds in iraq, which of course drives the oil markets.
second, china and the state of the chinese economy. can the country maintain a growth rate of at least 7% of gdp? third, in europe, the outcome of the banking stress tests. these are important because it's a crucial step for a banking union. and also in europe, whether or not the central bank there finally undertakes some kind of quantitative easing to combat its fear of deflation. finally, there are crucial elections to watch for as well. turkey in early august, brazil in october. that's your second half international outlook for "nightly business report." i'm michelle caruso-cabrera. our next guest says that american investors need to get used to political and security risks. he is paul christopher, chief international strategist at wells fargo. paul, welcome back to "nightly business report." you heard michelle's report. what hot spot worryious the most? >> well, ukraine worries me the most right now, mainly because i think it's underappreciated. it's sort of drifted into the back pages of the paper as people focus on iraq.
i think iraq is more of a long-term story. >> what happen there's? obviously the new president of ukraine has sided now with the european union, much to the chagrin of vladimir putin and the russians. do they come to loggerheads over that, or what happens do, you think? >> that's right. and not only in ukraine, but moldova also. you have interest in the eu-27 group. i think putin continues to apply pressure in the best way he knows how, which is sort of subterfuges that involve having irregulars make trouble in the eastern regions of ukraine until he can get poroshenko, the president of the ukraine to declare the eastern regions not just -- not really independent, but autonomous. that's his main goal. >> and how do you think -- going to iraq, how do you think the whole iraq situation is going to play out over the rest of this year, and what does it mean for next year? >> over the rest of this year, i really think iraq is going to turn into a slow grind. the insurgents really don't have
the ability to take baghdad or really disrupt the oil production of iraq. what they can do, though, is to slip into baghdad and have terrorist acts, bombings, suicide missions, those kinds of things. they can also keep pressure on the military in order to have the military spread out over the whole country, trying to play a whac-a-mole game as the insurgents move from one town to next. what investors really need to keep in mind i think is iraq is part of a broader problem in the middle east where borders are just disintegrating. and the risk there is at some point we have a full-blown religious civil war. and that would affect oil production and oil exports. i don't think that's eminent, so i don't think investors should be focusing on risk havens such as gold at this point or even buying excessive amounts of oil. i think we need to be broadly diversified instead. >> how do we view china right now? there are questions about the growth of their economy, the
strategy there to create this demand, growth economy, inflation problems, pollution problems. how do you view them right now, and how should investors play china right now, do you think? >> china's obviously in the process of a transition to a more sustainable growth rate. but in the process, they have to make sure they don't slow too much. so this is the third year in a row when china has implemented the second half of the year stimulus programs that actually go in the opposite direction of the reforms by stimulating building activity. so china i think will remain stable, at least for the time being. and investors should continue to look to asia. i just came back from southeast asia. we continue to like that part of the world as well. but would hold it in a broadly diversified way in order not the take too much risk on any one country. we think china will stay stable and will hold emerging markets together. >> okay. given us a lot to think about. thank you so much, paul. paul christopher, international
strategist at wells fargo. meanwhile, the nasdaq was up about 40% last year, and so far this year it is still on the move higher. what might drive tech higher the rest of the way, you ask? we'll let you know, coming up. the nasdaq was up about 6% in the first half of the year, adding to stellar gains we saw in 2013. but many think the trends in the next six months could propel the nasdaq higher. josh lipton now with the tech outlook for the second half. >> here is what to watch for in the tech sector in this second
half. there are nearly two billion smartphone users in the world, and you might have a few more options when deciding what your next device should be. amazon will ship its new phone on july 25th, and apple is expected to launch its new smartphone some time in the fall. another trend to watch, tech companies could deliver more devices and services to track your health. apple just launched a new app called health. the tech titan's move into this area could motive other companies to jump into the space as well. switching to enterprise, analysts think you'll see a pickup in deal making in the second half. large vendors looking to acquire more companies to build out their solutions that they can offer clients from storage to cloud services. that's your second half tech outlook for "nightly business report." i'm josh lipton. will there be more deals in the media space? will the government weigh in on how you can get your entertainment? and what are the big boys in social media up to? those are just a few questions
that julia boorstein. >> in the second half, the music and video streaming wars will intensify as amazon and yahoo and google and others ramp up their music and content option. we expect the fcc to settle the debate about net neutrality. plus, as megadeals await approval, expect more m & a as media giants look for digital growth in social players and snap up startups. and here comes the next generation of social advertising as instagram ramps up ads, linkedin offer morse content and twitter will expand exchange. for "nightly business report," i'm julia boorstein in los angeles. finally tonight, it is the fourth of july. so you may have been one of the 100 million or so americans who were spending the day on cookouts and barbecues and picnics. and if you were, man, did you spend. a national retail federation
says consumers were spending an estimated $6.2 billion this year on burgers and other food items to celebrate the 4th. that comes out to a little more than $68 per household. that's amazing. i make a mean potato salad, by the way. what about you? >> i'm coming over. >> okay. you bring fireworks then. that's it for the fourth of july edition of "nightly business report." thanks for joining us. i'm bill griffeth. >> and i'm susie gharib. have a great weekend, everybody. we'll see you back here on monday.
deputy assistant commissioner robert strickland gave this reaction. it is hard to comprehend how a detective of mcadam's rank and experience could've deceived his fellow officers for so long... 'cause you were in charge of him, you pillock! ...we will undertake a full and thorough review of all the major investigations led by dci mcadam during the last 15 years. ouch. fifteen years. pity the poor bastards that've got to sort that lot out! yes, pity. but it's nothing to do with us. those are all closed cases. all except this one. no way! you don't wanna do it? no! pullman: 1998, a 26-year-old named graham thompson drowned in a vat of beer. felspar's brewery, hoxton, as in the still-functioning, still-making beer felspar's. okay, fair enough. ( sighs ) oh, felspar's.