tv Nightly Business Report PBS October 7, 2014 6:30pm-7:01pm PDT
. this is "nightly business report" with tyler mathisen and susan guerin brought to you in part by -- >> thestreet.com featuring stephanie link, stock picks with action alerts plus. the multimillion-dollar portfolio she manages with jim cramer. you can learn more at thestreet.com/nbr. stocks slammed. the major indexes tumbled more than 1% as investors grow concerned about a slowing global economy. the international monetary fund also cutting its growth forecasts but says there's one bright spot. the u.s. >> but how bright is it? a new survey suggests the economic recovery here still has a long way to go, and americans may be tired of waiting. and housing triple dip? they say it wouldn't happen
again, but now some experts are warning of yet another pullback in home prices. we have all that and more tonight on "nightly business report" for tuesday, october 7th. >> good evening, everyone, and welcome. stocks took a real tumble today. closing at a two-month low on weak manufacturing data out of germany. the economic engine of europe, and deepening worries about a slowdown in global growth overall. that's after the international monetary fund trimmed its outlook for global growth this year and next, singling out the troubled economies in europe, japan and latin america most especially. with that, stocks here sold off sharply after they did in europe. on wall street they began the day lower and stayed in the red all session long. they sank further into the closing bell. and the final numbers were brutal. the dow, off 272 points. worst day since the end of july. the nasdaq was down nearly 70 points. and the s&p 500 dropped almost 30.
sara eisen with the weaker forecast around the world as well as the one bright spot. >> reporter: mediocre. that's the way the imf is describing the global economy. ahead of its gathering of central bankers, finance ministers and other financial heavyweights in washington this week, the fund took down its forecast for global growth. saying it expects the world to only grow 3.3% this year and 3.8% next year. the reason -- political risk from the middle east and russia, a weaker european economy and risks of a storm brewing and what the imf calls complacent financial markets. >> i don't think that we are at the bubble stage or anything like this, but there are some markets which i think are a bit too optimistic. i think we're going to see some exit from the u.s. i think it has been explained as well as it could by the fed but it's still going to come with some bumps. we're going to get moments where the market is a bit worried.
and once in a while we're going to get numbers like these ones which are going to make people think that the future is not quite as brought as they thought. >> reporter: but there is a bright spot, the united states. imt says the u.s. will grow faster than previously predicted and should hold up well in a world fraught with risk. >> we think it's resilient. we think it's a recovery which is not running but maybe walking on all four legs. we see the housing market steadily improve. we see a fairly balanced growth. so we are very optimistic about the fact that the recovery will continue for some time. >> reporter: financial markets have been dealing with diverging growth paths around the world. for instance, the u.s. dollar has climbed for 12 weeks in a row, the longest rally ever. and increasingly investors are turning to american companies that do most of their business at home instead of multinationals with overseas exposure. for "nightly business report," i'm sara eisen. yum brands is one of those companies that has overseas
exposure and its quarterly earnings got hurt by it. after the market closed today, the owner of pizza hut, taco bell and kfc which gets more than half of its revenue from china posted earnings that came in below expectations. it was a top and bottom-line myth. yum earned 87 cents a share missing estimates by two pennies. revenues topped $3 billion but were just short of forecasts with sales in china plunging 14% after a food safety scare. and weaker margins than wall street was looking for. investors were also disappointed that yum also lowered its earnings growth forecast for the full year. in after-hours trading shares were initially lower. even though the imf's outlook on the u.s. economy is strong, a lot of americans see a different story. the all-america economic survey done by cnbc which produces this broadcast has some surprising results about how ordinary people view the u.s. economy. steve liesman has more.
>> the good news when it comes to the american economy, the cnbc all-america survey finds 18% of the public believes the economy is in good or excellen shape. up three points from last year. the bad news, 79% in the nationwide poll of 805 americans judge it as just fair or poor. and both numbers remain depressed relative to where they were before the financial crisis. more good news. just 28% of the public sees the economy getting worse in the next year. but in an economy marked by tepid growth, that's really bad news because 42% think it will remain the same. and just about half see it getting better. it's that kind of economy. vastly improved from where it was in the depths of the great recession but still below the level americans have been accustomed to pre-crisis. >> i do think that the data employment rate being as low as it is, that's not what people think about. what people think is about their own jobs, their own difficulty paying their student loans, their own difficulty of paying for their kids' college education. when things are improving albeit
very slowly, people get tired of waiting. >> reporter: what's behind these attitudes? the outlook for housing helps explain. americans look for their home values to grow by almost 2% in the next year. half of what they normally expected before the krecrisis b better than from 2008 to 2012 when the average american thought their home would decline in value. americans also don't seem too in love with the stock market these days. just about one-third say now is a good time to invest in equities. down slightly from a year ago. a very large 29% are unsure. and given the uncertainty in the economy today, unsure seems about the smartest call of all. for "nightly business report," i'm steve liesman. but some encouraging news about the u.s. labor market out today. the number of advertised job openings in august rose to a 13 1/2-year high with employers looking to fill more than 4.8 million positions. there may be a setback in the housing recovery. they said it couldn't happen
again. another dip in home prices nationwide across the nation. the third one since the financial crisis hit. but some are now warning that a triple dip could be a real possibility. diana olick reports. >> reporter: real estate agent mia simon doesn't need any national reports to tell her what's going on in the neighborhood she works. >> i would say demand is definitely down from the feverish high that we had in the beginning of the year. >> reporter: but what's going on in her northern california market has national analysts concerned. >> the west, it's really that leading indicator of the canary in the coal mine because as the west goes, both on the downturn and in the recovery, we've seen the rest of the country go as well. >> reporter: that's why villa corda is making a controversial call, predicting home prices could go negative nationally by the end of this year, a triple dip. >> essentially what you'll see is it's the first quarterly decline since 2011. and so what that means is that will be the first time collectively as a nation we've seen prices drop since the low
point or the trough of the housing crisis. >> reporter: prices are still rising nationally, up 6.4% in august from a year ago according to the latest readings from core logic. but that's about half the price appreciation we were seeing a year ago, and mortgage rates today are higher than they were last year. on the other hand, we're still seeing a tight supply of homes for sale, and that alone could keep prices in the positive. despite the drop in demand this fall and winter, traditionally the weakest seasons for housing. >> there's some seasonality to it every year, but this time it feels a little bit more than just seasonality. it feels like a little cooling of the market. >> reporter: a cooling that seems eerily similar to the ghosts of housings past. for "nightly business report," i'm diana olick in washington. housing is one important pillar of the economy. the consumer, another. consumer spending accounts for about two-thirds of all economic activity. this quarter which includes the holiday season is a critical one for retailers and a test of how
much consumers are willing to spend. as courtney reagan tells us, a report out today is predicting a much better shopping season this year than last. >> reporter: temperatures may still be in the 90s in some parts of the u.s., but it's time to start thinking about christmas. holiday shopping forecasts are looking hotter than the last several years. the job market has improved. the stock market is strong. gas prices continue to fall. and many consumers are feeling better about their personal finances. the combination, pushing consumer confidence higher. the national retail federation predicts the strongest holiday sales in three years. forecasting consumers will spend a whopping $617 billion. 4.1% more than last year. >> as goes the holiday season and as goes retail, so goes the economy in many ways. so i think there is a lot of optimism about the fact that we're going to do much better
this year than we did a year ago. and if you think about where we were on this day a year ago, we were exactly one week into the government shutdown. and that took billions of dollars out of the economy. >> reporter: but not everyone's holiday outlook is so rosy. >> the season's going to be quite interesting because it will be very conservative. there will be careful spending. shoppers will be looking for lots of deals. lots of stores but more importantly they'll be going online. >> reporter: there are two very distinct groups of american consumers. the survivalist, households bringing in less than $50,000 per year, living paycheck to paycheck, and selectionists, households bringing in more than $50,000 and making careful decisions when it comes to spending. but survivalists outnumber selectionists 2-1. with so many americans hyper sensitive to deals during the holiday season, retailers will be very calculating about when, how and where shoppers can get the best bargains. >> to keep traffic coming to the
stores, it's both about the quality of the deal as well the timing of the deal. we're going to see a significant amount of in-store traffic. however, we're also going to see a significant amount of traffic online. so the smart retailers, no matter what their channel is, will have a balanced approach to both online and offline retailing. >> reporter: and so will shoppers as they continue to search online and in store for the best doorbuster deals. for "nightly business report," i'm courtney reagan. ethan harris joins us now to talk more about both the u.s. and the global economies. he is co-head of willva economics research at bank of america/merrill lynch. welcome. good to see you. we've led the broadcast with a tremendous amount of observations, statistics, international, domestic, how the consumer feels, retail spending. pull it all together for us. how are we doing in the united states? how's the world doing? and how might a slowdown globally affect us? >> the u.s. is doing pretty well. i mean, probably the best
indicator is to look at the labor market. we've had average job growth over the last eight months of about 230,000 a month. that's about double the normal growth rate. so this has really been the first sign in this recovery of real healing in the labor market. so we're quite optimistic about the u.s. we think that we're entering a new, stronger growth phase. now, obviously, overseas, things are very different. and we've had had a slowdown in many major economies. i don't think that means they're going into recession, and i don't think it torpedos the u.s. recovery. but it is creating a bit of clash out there. it certainly has been a factor in what we're seeing in the u.s. stock market. >> you know, ethan, the new buzzword on wall street, i'm sure you heard it a lot today, bifurcation, the u.s. is strong, the rest of the world is weak. what are the implications of that for u.s. companies and also what does it mean for the federal reserve? is it going to have to take into account what's going on in the
rest of the world before it makes any move on interest rates? >> well, i think what's happened so far isn't big enough to really change the fed call. i still think the fed, sometime in the middle of next year, will start moving here. but, you know, clearly, there's got to be a little more caution out there. the u.s. has had tremendous healing of its economy. the zero interest rate policy, the fed has allowed many people to fix their balance sheets, term out their debt at lower interest rates, and so there's been a lot of healing in the u.s. economy, but there are other parts of the world like europe where they've never really come out of their crisis, and at best for europe you expect slow growth. it's definitely a mixed bag out there. fortunately, the strength is right here at home. >> for equity investors, mr. harris, there's nothing more important i suppose than corporate profits. how do you see them this quarter and into early 2015? >> well, it's going to be a little bit of a weak quarter
because you had a number of things hit in this quarter. you had the strength of the dollar that hurts. you've had the drop in oil prices that hurts earnings. so probably it will be low single digit gains and profits in this quarter. but going forward, we do think we're still on track for okay profit growth. u.s. economy will look better. we're still in an environment where most of the income gains are going to profits rather than wages. and so as income -- overall income picks up, profits should pick up again. so i think we're still in that phase where profits can drive the stock market. >> and you know, ethan, a lot of it depends on the consumer and consumer spending. and you heard in steve liesman's report where there are some americans who are feeling things are just great and others are saying the economy is fair or poor, what is your take on the american consumer right now? >> well, i mean, you look at that survey, and i bet that you 18% or so who think things are
going really well are probably upper income people who have a lot of holdings in the stock market and have seen big income gains because the average american has basically had flat income in real terms and in terms of spending power over the last five years. those surveys reflect that flat environment. it doesn't feel like we're recovering for the average person. the truth is that overall we're doing okay, but it's a very kind of narrow recovery focused on profits and upper north carolinas. >> ethan, thank you very much. ethan harris is with bank of america/merrill lynch. still ahead on the program, former treasury secretary tim geithner took the stand at the aig bailout trial and got defensive. that's coming up.
walmart is cutting health insurance coverage for about 30,000 part-time workers. starting january 1, the world's biggest retailer will eliminate coverage for employees who work less than an average of 30 hours a week which walmart says is about 2% of its total work force. this comes just three years after walmart already scaled back the number of part-time workers eligible to receive health benefits. former new york fed president and treasury secretary timothy geithner took the stand today in the aig bailout trial. geithner defended the tough terms of the insurance giant's rescue, saying it was necessary to get congress and the public to back the deal. mary thompson joins us from outside the federal claims court in washington, d.c., with more. mary, tell us what happened today. >> reporter: well, geithner was on the stand for six hours
during which he acknowledged he was the one who decided on those high interest growths that were charged to aig as part of the $182 billion bailout of the insurance giant. geithner did prove to be a tough witness, though. his answers to most of the questions that were posed by the lead-'s attorney, david boies, i don't know, i don't recall, i don't recall precisely. it was a long day of questioning. now, boies is trying to prove that aig shareholders were treated unfairly because of very high rates they had to pay on loans. rates were far higher than other troubled financial firms during the crisis. the suit also acknowledging that the government -- or charging that the government unfairly compensated aig shareholders for the 92% stake the government eventually took in the insurance company. >> mary, did geithner say anything about whether he made any attempt to find a private solution instead of the public one for rescuing aig? >> reporter: well, you know, he
was asked about some e-mails he received by david boies during the testimony, and geithner kind of shook his head and he said, you know, if there had been any kind of credible offer out there that would have taken this enormous risk that was aig off of the government's hands, he would have pursued it. but evidently there were none that he considered credible out there at the time. >> you know, mary, there have been so many high-profile witnesses in this case. yesterday former treasury secretary hank paulson, today tim geithner. tell us what's on tap for tomorrow. >> reporter: you know, this really is kind of the star-studded week, i guess, for lack of a better term because geithner's testimony went all day today, the cross is going to take place tomorrow. so he'll be here tomorrow morning, and that means they're pushing off testimony from former federal reserve chairman ben bernanke. he was supposed to be here tomorrow morning to testify. they are pushing his testimony off until thursday morning. and he might possibly return friday morning if they don't finish up with him that day.
so a lot to look forward to for the rest of the week and we'll be here. back to you. >> we're looking forward to your reports. thanks, mary thompson in washington. more trouble for some of the world's biggest banks. "the new york times" says the justice department is gearing up to file charges against a number of foreign and american banks, alleging that they colluded to manipulate the price of foreign currencies. the report also says prosecutors may indict individual bank employees using their instant messages to prove they fixed foreign exchange rates. shares of sodastream fell to an all-time low, and that's where we begin tonight's "market focus." the at-home soda machine maker warned that revenue will be weaker than expected in the third quarter. the problem, finding new customers. the ceo said he was disappointed by sodastream's performance and that the company will reveal a new growth plan at the end of the month. shares fizzled, down 22% to $21.52. adco also splasing its outlook
for the second time in two months. the farm machinery company said demand was weaker than expected in the third quarter, and it will be respond by making production cuts. one reason that farmers aren't buying more equipment, falling corn prices, lower prices mean lower income, leaving farmers with less to spend. the stock lost 10% today to $42.13. bristol-myers squibb pulled its hepatitis c drug application from the fda. the pharma company sought approval earlier this year for an oral drug combination to treat the liver disease. now it's halting its efforts, citing a, quote, rapidly evolving treatment landscape. gilead and advi are now working on similar drugs which promise to cure more patients in less time. the stock fell almost 3% to $49.77. mcdonald's japanese unit is forecasting a loss for the year. that region's first loss in 11 years. the world's largest fast food chain citing tougher competition and weakening demand that
started even before a food safety scare. shares today fell more than 1%. they finished at $92.81. twitter is suing the justice department and the fbi. the social media company wants the right to reveal the extent of government surveillance of its users. twitter says this is an important issue for anyone who believes in a strong first amendment. the stock rose fractionally today to $53.53. shares of chimerix rising on news ebola patient ashoka mukpo is being treated with its experimental drug. he's the second patient to receive the drug. the first as we reported yesterday is the dallas patient, thomas duncan. the stock rose about 5.5% to $33.23. and over the past two days, it has gained 10%. its best two-day run on record. samsung shares don't trade here in the u.s., but if they did, they probably would have had had a pretty lousy day. the korean electronics giant warned that profits could tumble
60% this quarter because it's selling far fewer galaxy smartphones than expected. the blame goes to the popularity of the new apple iphone 6. when samsung reports earnings in a few weeks, it's suspected to post the first drop in quarterly profits in three years. coming up, a part of the energy market that's expected to really heat up. that's next. this should make you feel warm all over, at least give your household budget a lift. the energy department predicts that home heating costs will be lower this winter, partly on forecasts for less frigid temps across the country and partly on lower prices for heating oil and propane this year.
despite potentially lower home heating costs, solar roof panels are popping up in neighborhoods from coast to coast. as homeowners look to cut their utility bills further and help the environment. jackie deangelis takes a look at how fast the industry is growing and the challenges it fill stass. >> reporter: the residential solar market is on fair. with panel prices plummeting and companies incentivizing homeowners to switch over. this market could grow to $6 billion in just a couple of years. and for homeowners looking to cut their utility bills or just help the environment, installations are easy. solar companies can outfit homes in a day for no money down. they provide and maintain the equipment under long-term leases. customers can generate nearly all their power needs for the year from these panels. yet they stay connected to the traditional energy grid for times when solar isn't enough. their energy usage costs can be cut in half depending on where they live. >> i needed to save money. i'm a retired police officer.
my wife's 70. we needed to save some cash. and solar is good for the environment. i expect to save probably 25% off my energy bill. >> reporter: and the solar market is just taking off. it has less than 1% penetration nationwide but could see 20% to 30% by 2020. >> solar industry last year installed about 140,000 systems on rooftops. it's about a 60% growth rate. and my company, sunrun, and many of our peers have sustained growth rates as high as 100% each year in our eight-year history and expect to sustain those going forward. >> reporter: but solar's rise could be the utility companies' demise. the utilities have to go along with these projects because state laws mandate that they must. but are they, in fact, supporting the competition? >> basically, we provide power to the customer just like utility does. it's just at a reduced rate.
we like to consider ourselves the producer of power in the end. we don't consider ourselves a utility, but we provide power in the same manner. >> reporter: the question now, how will the solar coaster progress? will the industry meet its growth targets? will the demand be there, and can stole ar stocks which have been on a tear continue to run? for "nightly business report," i'm jackie deangelis. finally tonight, janet yellen is apparently not making a very big impression as the world's most powerful banker. at least not on ordinary americans. a new survey by the pew research center found that three-quarters of americans can't identify ms. yellen as chair of the federal reserve. in fact, about one in six people think alan greenspan is still in charge at the fed. he resigned back in 2006. now, to be fair, ms. yellen has only had the job since january, maybe it will take her a few years to catch on with the public. i think she's quite unmistakable. >> how do you think ben bernanke feels? >> and still greenspan is the
guy people know. >> that's it for tonight. thanks for watching. >> and i'm tyler mathisen. thanks from me as well. have a great evening, everybody. we hope you'll join us here tomorrow night. "nightly business report" has been brought to you in part by -- >> thestreet.com featuring stephanie link from shares or investment strategies, stock picks and market insights with action alerts plus, the multimillion-dollar portfolio she manages with jim cramer. you can learn more at thestreet.com/nbr.
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