tv Nightly Business Report PBS September 28, 2015 6:30pm-7:01pm PDT
"nightly business report" with tyler mathisen and sue herera. >> stocks clobbered. the dow gives up more than 300 points triggered by a decline in commodities and a battering in biotech. dancing on the debt ceiling. a government shutdown may likely be averted but a much larger issue is still looming in washington. new way to pay. what consumers need to know about the more secure credit cards that go into effect later this week. all that and more tonight on "nightly business report" for monday september 28th. good evening, everyone. i'm sue herera. tyler mathisen is off tonight. a rough start to this week. the major indices were dragged south by concerns over global growth, especially in china. that pressured commodity prices further, a trend that is
starting to take a toll on a number of recognizable companies. by the close the dow jones industrial average dropped 312 points to 16,001. the s&p declined by 49 points falling below 1,900. and the nasdaq took the biggest hit, down 3%. the main drag on the nasdaq was the biotech sector. the biotech etf fell more than 6%, putting it in bear market territory. as for oil, domestic crude was off nearly 3%. mary thompson has more on the sell-off from the new york stock exchange. >> reporter: another sell-off on wall street blamed on some familiar culprits. concerns about slowing growth in china leading to weakness in commodity stocks, and then there was additional weakness in the once high-flying biotech space. stocks down from the opening bell on the heels of a sell-off in europe and on news of a decline in china's industrial process for the month of august. even as the dollar weakened, oil sank, copper and gold failed to get a bid and the weakness in
commodities spilled over into material and energy stocks, two sectors that helped to pace the market's decline. also hit, biotech stocks. concerns about price gouging dogging this group since last week. the group down over 17% for the month. adding fuel to the fire in monday's session, news house democrats want to subpoena the specialty pharma firm valeant about price hikes on some of its products. pushing the s&p into correction territory, meaning it is now 10% below its recent high. and with the third quarter wrapping up on wednesday the dow is on track for its third straight quarterly decline while the nasdaq is set to snap a ten-quarter winning streak. for "nightly business report" i'm mary thompson from the new york stock exchange. one of those companies feeling the impact of the falling commodity prices is alcoa, the nation's biggest aluminum producer will split into two publicly traded companies as it tries to deal with an oversupply of the metal and falling prices. the market liked the plan, sending shares of the former dow component higher. morgan brennan has the details.
>> reporter: clause kleinfeld saying the decision to split alcoa is the culmination of a multiyear transformation in the company, from simply an aluminum producer to a finished product manufacturer. >> this allows us to put both businesses onto their own path independencely to put through their own strategies, which are very distinct p. >> reporter: the upstream company focused on mining and smelting of aluminum and other metals will keep the alcoa name. it will have the world's largest bauxite mining operations, the largest aluminum refining business, the fourth largest aluminum production output, as well as casting houses and significant energy assets, particularly in hydro power. the second company name still to be decided will be comprised of value add businesses. this will include mid-stream and downstream segments. global rolled products engineered products and solutions and transportation and construction solutions. basically, all of alcoa's manufactured products for the aerospace, automotive, and
construction industries. >> in the key businesses we have in the value add we looked at how many of those products are number one or number two positions and it's 80% of those products are number one or number two positions. so this is fantastic. it gives you a good idea of how massively competitive these businesses are all by itself. >> reporter: the decision to split coming on the heels of ongoing commodity weakness. as aluminum prices have fallen nearly 15% this year. weighing on the company's earnings. analysts say this move will be a positive for alcoa's diverse portfolio of assets. the reason shares soared on the news. >> i can't tell you how many investors i've spoken to who really like the long-term attractive growth prospects of alcoa's downstream segments but just can't get their arms around the uncertainty associated with the upstream segments. and so this split of the company into two separate entities really allows investors who like that downstream exposure to invest directly in it. >> reporter: alcoa expects
aluminum demand to grow 6 1/2% this year and double this decade. it forecasts 9% growth in aerospace through 2017. the announcement comes ahead of next week's quarterly results as well, when the metals giant unofficially kicks off earnings season. for "nightly business report" i'm morgan brennan. it's not just alcoa. a number of other companies are feeling the pressure of declining commodity prices including glencorps. it's one of the world's largest producers and traders of commodities. and as saima modi explains those low commodity prices are crushing companies that borrowed money in order to grow. >> reporter: it's a sign of the times but how bad can it get? swiss mining giant glen core, once a symbol of a decade-long boom in commodities, is used to digging through mountains, but clearing a mountain of debt, roughly $30 billion, won't be easy while commodity prices are buried. four years ago it went public. its top executives became billionaires. last year it collected more than
$220 billion in revenues. this year it's ranked tenth on "fortune's" global 500 list. but now low prices for copper and zinc are hurting profits. copper is at six-year lows, and even though it just raised $2.5 billion to pay off debt with a stock offering, investors have to be cringing after glencore's shares dropped by nearly a third at one point today. and they've been cut almost in half since the equity sale a few weeks ago. china's slowing economy, especially in the power sector, which uses a lot of copper, is just one of the culprits ganging oup on companies like glencore, which is hardly alone. lower prices for aluminum were behind today's announcement by alcoa to split up in order to find growth. also today, in a deal worth more than $32 billion, williams company agreed to be sold to dallas-based energy transfer. that's more than $15 billion less than energy transfer had offered back in june.
but with nat gas prices and oil down, the shares of energy companies have been beaten down as well. even the giants like royal dutch shell are not immune. shell today said it will stop drilling off the shores of alaska. an expensive and controversial project that cost billions and caused a surge of protests. the arctic is one of the few remaining unexplored oil frontiers and shell wanted in. even with oil prices down over the last 20 months. but drilling this summer showed only traces of oil and gas, and for now it can't justify the costs involved. for "nightly business report" i'm see ma modi. >> as we mentioned the once high-flying biotechnology sector fell sharply again today. brian scorny joins us to put the sell-off into context. he's the senior biotechnology analyst at r.w. baird. welcome. it's nice to have you here, brian. >> thank you very much for having me. >> why don't you do that. put it in perspective for us
because we had seen phenomenal gains in this particular sector for some time. >> sure. yeah, i think we really do have to look at this in context. if you look at the various biotech indexes over the last four years, they're up almost 200%. so the fact that we're seeing a very sharp sell-off over the last couple of weeks, i think we have to put it in perspective and say, you know, biotech has been the leader in a multiyear bull market to begin with and just when we start seeing some macro selling, because it is a leader, it has a tendency as a sector to lead the downturn too. so it's not totally surprising that when the overall markets are in decline that we're seeing biotech sort of leading the trend downwards. >> a lost people today were wondering whether or not this sector was starting to bottom. you don't think so. >> well, you know, i don't know so. i think fundamentally i don't see a lot of down side to the
sector. i think the big issue that's been weighing on the group over the last week and a half has really been renewed dialogue around drug pricing. i think we all know drugs in this country are expensive and there were a couple of occurrences that happened recently leading to a number of the presidential candidates speaking out, particularly about drug pricing. and that's a concern that has constantly weighed on the sector. if there is some major overhaul in the drug pricing system in this country, i think investors view that in large part that would be a big negative. whlth it justifies even if we do overhaul the system the level of decline that we've seen over the past couple of weeks remains to be seen. but i think that's certainly what's weighing on the sector. given that we're going to have presidential candidates speaking over the next 12 months, i think there is that headline risk. so i think it's hard to call a bottom to the declines but i certainly don't think that the sell-off is fundamentally rational. and i wouldn't be surprised to see a bounce in the not too distant future.
>> all right, brian, we'll leave it there. thank you so much. >> thank you. >> brian scorny with r.w. baird. world leaders are in new york for the first day of the united nations general assembly. and it was the war in syria that played out on the world stage, with president obama and russia's president putin sharing their divergent views on how to resolve the conflict, which has led to a humanitarian crisis as thousands become refugees fleeing to europe. stressing those already very fragile economies. michelle caruso-cabrera reports. >> reporter: how to resolve the crisis in syria at the top of the agenda here at the u.n., especially in the speeches by both president obama and president putin. president obama told the u.n. general assembly that while the u.s. is willing to work with iran and russia to fight the terrorist group isis, which would help stabilize syria, he also said the dictator of the country, bashar al assad, should step down. >> yes, realism dictates that compromise will be required
toned the fighting sxumtly stamp out isis. but realism also required a managed transition away from assad and to a new leader. and an inclusive government that recognizes there must be an end to this chaos so that the syrian people can begin to rebuild. >> reporter: but russian leader vladimir putin is a strong supporter of assad, having spent extensive amounts of military equipment to the syrian leader to help him fight the terrorist insurgency in his country. fighter jets, attack helicopters, tanks, and surface-to-air missiles. he's also providing military intelligence. and putin made clear his support for assad again today. >> translator: we think it is an enormous mistake to refuse to cooperate with the syrian government and its armed forces valiantly fighting terrorism face to face. we should finally acknowledge that no one but president assad's forces and militia are truly fighting the islamic state
and other terrorist organizations in syria. >> reporter: with president obama unwilling to take a more interventionist role in syria, putin has a wide opening to get involved and put his stamp on the region. the u.s. and europe have been trying to isolate him economically with sanctions in retaliation for his involvement in ukraine. however, with the massive refugee crisis engulfing countries like germany, they may be softening their stance toward putin, especially if they think he can help. for "nightly business report," michelle caruso-cabrera, the u.n. today becky quick spoke with former president bill clinton at the clinton global initiative's annual meeting, which brings together heads of state, government and business leaders, as well as scholars. she spoke with him about a number of issues including what he thinks of the federal reserve's latest decision not to increase interest rates. >> the federal reserve, they just decided not to raise interest rates and in doing so they cited a couple of factors that aren't in their dual mandate. they talked about china. they talked about the stronger
dollar. were they right to be looking at all these additional conditions and were they right in the choice ton raise interest rates? >> i think so. i think that in a world where america looks like a good news story compared to the current problems in china and the slow growth in russia and the uncertainty caused by the massive move of the refugees and to the european union, i think they didn't want to take a chance on not only slowing growth on the united states but having that impact on the rest of the world. >> and just today some key fed officials commented on the possible timing of an interest rate increase. during a "wall street journal"-sponsored event, new york fed president bill dudley said the central bank remains on track for a likely rate hike this year and could reach its inflation target next year. san francisco fed president john williams reiterated similar timing. but in a separate speech chicago
fed president charles evans said the best time to hike rates may not come until the middle of next year. still ahead, the tax plan that would free nearly half of all americans from paying income tax. the odds of a government shutdown have fallen since the surprise resignation of house speaker john boehner on friday, but his departure has increased uncertainty over a far bigger issue -- the country's ability to pay its debt. eamon javers is in washington for us tonight. so eamon, how contentious is this debate going to be about the debt ceiling in this
post-boehner congress? >> reporter: sue, this is what we call a fluid situation here in washington, d.c. not a lot of people expected to see john boehner resign. in the short term it means we're unlikely to see a government shutdown this week. boehner will have the political freedom now to cut a deal with democrats to avert that this week. but later on in the year we've got two big things. we've got the extension of that spending bill, which is only going to go until december 11th. and then we've also got the debt ceiling. both of those things are absolute core principles for these conservatives who threw john boehner out of the speakership this week. how they're going to handle those is anybody's guess at this point. it's a very volatile situation. >> kevin mccarthy, speaking of the speakership, of california officially announcing that he's running for speaker of the house. what are the chances he's going to get the job? >> he looks like the favorite at this point. he is the number two. the majority leader now. he's boehner's deputy. so the irony of all this is that the conservatives may have forced out john boehner and then gotten his deputy, who if anything is viewed as a little bit more liberal than john
boehner just by a little bit, not a lot. that might elevate mccarthy to the speakership unless the conservatives can rally around another candidate. it's not clear yet that we know who all the candidates are going to be p it's a real free-for-all. >> you work in the most interesting city. never a dull moment. general electric said it's going to open a plant in canada and move 350 jobs north of the border, citing the failure of congress to reauthorize the expo export-import bank. does that pressure congress at all or someone. >> i think it does. members of congress, our politicians, politicians pay attention to announcements about jobs, particularly in their communities. but in this case the export-import bank is caught up in this conservative firestorm up on capitol hill. conservatives don't like the export-import bank. they think it's crony capitalism, it exists just to benefit a couple of big companies and it's about picking winners and losers in the economy and not about real free market economics. so they want to shut it down and keep it shut down.
and so this announcement may not have the effect that ge thinks it's going to have. >> interesting to say the least. eamon, thanks as always. eamon javers in washington. meantime, in new york donald trump outlined his tax plan, and it would lower taxes for millions of americans. john harwood has the details. >> create high growth in this country -- >> reporter: first it was jeb bush proposing a big tax cut and drawing a tax for ballooning the deficit and wrargd the rich. now donald trump has entered the debate with a bigger one on all counts. trump proposed a top personal rate of 25%, a top corporate rate of 15%, ending the estate tax, and taking 31 million working-class households off the tax altogether. he insisted growth and spending cuts to offset the loss of revenue will both be huge. >> we're looking at 3% but we think it could be 5%, it could even be 6%. we're going to have growth that will be tremendous. and by the way, if we have more than 3, these numbers are really
spectacular. and one of the things that they don't take into account in any big league fashion is the cutting. there is so much waste in government that i believe when i get in there i'll be able to cut without losing anything to cut tremendous amounts. >> reporter: bush didn't go that far. the former florida governor also proposed middle-class tax cuts and ending the estate tax, but his top personal rate was 28%. his top corporate rate, 20%. mr. bush said higher growth would be worth bigger budget deficits. >> everybody freaks out about the deficit. i mean, i worry about the deficit, the structural deficit for sure, but if we grow our economy at a faster rate the dynamic nature of tax policy will kick in. >> reporter: both men would need help to make their budget numbers add up. mr. bush's economic advisers say his plan could add as much as $3.5 trillion to the deficit. the cost of mr. trump's plan, one liberal tax group says 10 trillion. for "nightly business report" i'm john harwood in washington.
cal mane's results disappoint weighing on its shares. that is where we begin tonight's market focus. the company actually reported a big increase in earnings. this as the bird flu has impacted its rival egg producers. still the company's bottom line results fell short of estimates. shares slid 12% to $50.63. vale resorts also reporting disappointing quarterlies. the ski resort company's loss was wider than expected. it did report an increase in revenue and season pass sales. still, shares fell 4% to 103.05. whole foods is cutting 1,500 jobs over the next two months. the upscale grocery chain says the move is part of its plan to lower prices for its customers. the stock slipped 1% to 30.75. and apple reporting record sales of its iphone 6s and 6s plus. in the devices' first weekend of availability. the dow component sold more than 13 million phones, setting a company record. despite that, the shares fell
almost 2% on this down day to close at 112.44. nextstar broadcasting has offered nearly $2 billion to buy the local teeb station owner media general. the move is an attempt to break up the company's recent agreement to buy meredith corporation. according to nextstar, that deal would allow the combined companies to reach about 40% of u.s. households. media general surged 22% to 13.64. nextstar fell more than 2% to 43.51. so it's no surprise then that the media landscape is changing, and it's changing very quickly. that was the big topic of discussion at ad week, a gathering of thousands of executives from agencies, brands, and traditional and digital media companies in new york. julia boorstin was there as a number of companies shared their strategies to stay ahead of the competition. >> reporter: facebook, google, yahoo! aol. they're all announcing new tools to make their ads more targeted and effective as they fight to
steal ad dollars from the television giants. facebook now allowing marketers to buy ads using the language and metrics of tv advertising, nielsen ratings points. and aol is announcing a big push into live mobile video. not only distributing its own content and of that huffco and tech crunch to its nearly 2,000 partners but creating a platform for any content provider to create and distribute mobile video to about half a billion mobile users around the world. >> really an opportunity to take the scale of what people are used to in traditional or online and accelerate it to mobile. and we think live in mobile is probably going to be the most important aspect of mobile in the future. >> reporter: ad execs see digital video advertising poised to overtake tv but tv is fight back. all the networks are streaming more video with ads embedded. viacom's experimenting with cutting ad time at its networks including mtv. and everyone's looking for better measurements of who's actually watching. rent track measures viewing on
120 million tv sets with video on demand. for 28 days after a show first airs. layering on top of that viewing data, information about buying and voting habits. >> what we're doing for television is precise lly measuring it and giving advertisers the ability to precisely target using the demographic of the cars they y buy, how they vote, and the products they buy to put in their cupboard. >> reporter: and it's not just tv that faces challenges of ad skipping and viewers switching to streaming. mobile also faces a new threat. the advent of ad blockers. >> i call it's vigilante consumers. if you keep giving them stuff that's not relevant, the consumers are just going to turn off. >> reporter: while brands and agencies carefully navigate new waters, internet giants are pushing their tools to rival traditional media's dominance. for "nightly business report" i'm julia boorstin in new york. still ahead, a new way to pay. why you'll no longer be swiping your credit or debit cards at
most retailers nationwide. here's what to watch for tomorrow. a read on the state of housing with the s&p case shiller home price index. also on the data front a report on consumer confidence. and the senate is scheduled to vote on a spending bill which, if passed, will give fresh funds to federal agencies avoiding a government shutdown. and that is what to watch for on tuesday. an update now on the volkswagen investigation. audi, mostly owned by volkswagen, has confirmed that more than 2 million of its cars have the software that is able to skirt emissions testing. the majority of those cars were sold in europe.
about 13,000 were sold in the u.s. and in canada. well, you may have received a new credit card or debit card in the mail with a microchip. as we've been reporting, it's part of a nationwide shift by major credit card issuers to offer added security and try and combat credit card fraud, which has skyrocketed to more than $5 billion a year. and it all goes into effect later this week on october 1st. but what is this new technology, and how does it all work? sharon epperson explains. >> reporter: the computer chip on your credit or debit card is designed to give you an added layer of protection against fraud. >> it's harder to make an actual replica of that credit card and creates a unique transaction code that's passed to the merchant every time you make a purchase with the card. so that means that the merchant will have a lot less of your usable data. >> that small metallic square on the front makes it more secure. when read at a point of sale terminal the chip creates a new
transaction code for every purchase you make. >> if somebody steals that unique transaction code from target or home depot or wherever and tries to use it someplace else to make a purchase, it won't do them any good. it's essentially like having an expired password. >> reporter: upgrading terminals to read the chip cards can cost $200 to $1,000 per device. according to the federal reserve bank of chicago. a hefty expense for some small business owners, now slowly starting to transition. >> this machine doesn't accept the chip card, but i will contact the merchant service to upgrade it to a new machine to accept the chip. >> reporter: because as of october 1st if there is card fraud and a store has not changed its system to accept chip technology, the merchant, not the card issuer or payment processor, could be held liable. >> if a merchant doesn't have a terminal that accepted mv cards
and there's an instance of fraud there, then that merchant is likely to bear the liability, and that's a big change from the past. >> reporter: another big change, no more swiping the card along the the magnetic strip. instead you'll dip so the terminal can read the new chip. for "nightly business report" i'm sharon epperson. >> and that is "nightly business report" for tonight. i'm sue herera. thanks for watching. have a great evening, everybody. we'll see you here tomorrow.