tv Nightly Business Report PBS October 16, 2015 6:30pm-7:01pm PDT
♪ >> announcer: this is "nightly business report," with tyler mathisen and sue herera. strong quarter. what shares of general electric did today that they haven't done in years. move or improve. why homeowners are choosing to put a lot more money into their current home. and buy and hold. the stocks our market monitor says should be in your portfolio for a year or more. all that and more tonight on "nightly business report" for friday october 16th. good evening, everyone, and welcome. a seven-year high. that's where general electric shares finished the day after reporting strong third quarter results. the conglomerate said its earnings improved as it continues a massive restructuring and a return to its industrial roots. the stock that's widely held in mutual funds rose more than 3%
today to just about $29 a share, easily making it the best-performing stock on the dow jones industrial average. and shares rose despite reporting revenue that fell short of expectations. mary thompson has more on what's going right for ge. >> reporter: in what ceo jeff immelt called a slow growth and volatile environment, ge held the line on costs and helped by strength in its aviation and transportation businesses beat earnings expectations in the third quarter. >> crisp execution in tough markets, that's the hallmark of a well-managed company. >> reporter: even as revenue missed forecasts, immelt reiterating the firm should meet its profit targets for the year, which is turning out to be its most transformative ever. the firm is ahead of schedule on its plan to sell $200 billion in assets for its finance arm aas it shrinks the once mighty unit. it's about to close on its largest deal ever, the purchase of the french power company
alstom. and if conditions permit it will sell its stake in synchony this month a move that will let it buy back $20 billion in stock. it's a move to return cash to shareholders and generate 90% of the firm's profits from industrial businesses by 2018. the plan and execution getting attention from investors who sent the stock to a seven-year high on the back of the earnings news, building on gains that ge's seen since activist investor nelson peltz took a $2.5 billion stake in the company earlier this month. on the earnings call immelt saying the strategy peltz's firm would like to see ge embrace are mostly in line with his own. >> i think the white paper kind of lays out their thesis. you know, we don't agree with everything, but it's pretty consistent with what we've done and what we're doing. >> reporter: immelt and his management team doing a lot of work in short order to end the long-running underperformance of ge's stock. for "nightly business report" i'm mary thompson. >> that retail finance arm that mary just mentioned saw its
profits rise and top wall street expectations. sinkrony financial, the provider of store credit cards, saw purchase volume grow double digits in the most recent quarter. earlier this week synchrony won approval to split off from general electric. nevertheless, shares fell more than 3 1/2%. on also stocks closed higher for the third straight week. mixed economic data pushed out expectationses for the timing avenue i rate hike and that's being viewed as a good thing for stock investors. by the close the dow jones industrial average gained 74 points to finish at 17,215. the nasdaq rose 16. the s&p 500 added 9. for the week all three major averages rose. the nasdaq seeing the biggest gain of more than 1%. the number of job openings across the country pulled back in august from the record set in july but it still remains at the second highest level ever. the number of positions waiting to be filled dropped slightly to 5.3 million. the labor department report also showed that the quit rate held
steady for the fifth month in a row. consumer sentiment climbed more than forecast in october. this as gasoline prices fell and many believe wage gains will accelerate. according to a survey by the university of michigan, consumers anticipate continued economic expansion but they also expect some headwinds from weak global growth. separately industrial production fell for a second straight month in september on weakness in the energy sector, a strong dollar, and slow growth across the globe. next week will be dominated by earnings reports and investors will be listening to what the companies have to say about the economy and their future prospects. 12 dow components report. want to hear them? i hope so because you're going to hear them. including ibm, travelers, verizon, united tech, american express, coke. here we go. boeing, microsoft, qatar pil lar, 3m, mcdonald's, and procter & gamble. come monday investors will get a fresh look at china's
economy when that country releases its third quarter gdp. the slowdown in china has roiled markets and commodity prices. seema mody tells us exactly what markets will be watching. >> reporter: the big question, will we see china's annual growth forecast fall below 7% for the first time since 2009? many economists say there's a good chance that will happen, in part because china is changing the way it reports gdp. it used to report projections for annual growth four times a year. now it's breaking out gdp for the most recent quarter. the new quarterly gdp numbers are subject to higher volatility, and that's what has investors a bit worried. now the chinese government will give a measure of output by specific industries. services were outperforming manufacturing in china through the first half of the year. but banks and brokerages likely suffered in the third quarter as the chinese stock market tanked. some analysts will be looking at things like health care, tourism, and media to offset a drop in the financial sector. if they don't, china's gdp is
likely to take a hit. real estate is another area of interest. china's property sales recovered some in the second quarter, but real estate development slowed drastically in the first eight months of 2015. and that slowdown has weighed down commodity prices around the world. >> it's not the exposure directly to china. it's the exposure we have to europe. in europe the intense exposure they have to china it all comes full circle back to our shores. >> reporter: infrastructure investment also slowed this year and those numbers will be watched to see if china's fiscal and monetary efforts are working or if more stimulus is needed. still, mixed data out of china this week didn't pull the stock markets down, and there are some investors who feel even if china's growth rate slows below 7% that stocks might be okay. >> even in that 6, 6 1/2 handle for the second largest economy of the world, to be growing at that rate, not as bad as maybe the market is suggesting here. >> reporter: not bad as long as there are no surprises. just remember what happened to
stocks after china surprised everyone by devaluing its currency not so long ago in august. for "nightly business report" i'm seema mody. and from china we go to europe now, where auto sales rose nearly 10% in september. that made the 25th consecutive month of growth in the european union for that metric. but as phil lebeau reports, volkswagen lost some market share. a first sign that the emissions scandal is starting to pinch. >> reporter: almost a month after the scandal surrounding rigged diesel emissions erupted at volkswagen, the german automaker is starting to feel the impact. european auto sales in september show vw lost market share to competitors. overall the company lost .3% to other automakers in europe where some countries have suspended sales of certain vw diesel models. volkswagen's new ceo, matthias mueller-s trying to quickly move his company past the scandal but
it's still too early to predict how many billions of dollars it will ultimately cost the company. officially, vw has recalled more than 8 million diesel models in europe and will start repairing those vehicles early next year. meanwhile, here in the u.s. vw dealerships have diesel models parked in the back of dealerships because the company has yet to find a solution to bring those cars into compliance with epa pollution standards. while vw sales in september have only shown a slight impact from the diesel scandal, the real test will come over the next couple of months. that's when volkswagen will be working to restore sales of certain diesel models not only in the united states but in many countries around europe. phil lebeau, "nightly business report," chicago. the recently named ceo of united continental airlines has been hospitalized. in a statement the airline offered no details about the condition of oscar munoz but did say the airline was operating normally. munoz replaced former ceo jeff
smisek last month amid a federal probe involving the port authority of new york and new jersey. shares of the airline fell 3% on the trading day. and the last ever u.s. airways flight will take off tonight from san francisco. this as the carrier's merger with american nears completion. once flight number 1939, named for the year the airline was founded, lands in philadelphia, there will be no more us airways. all flights will fly under the american airlines brand. and still ahead, show me the money. after years of cash flowing into start-ups, are things starting it to change in silicon valley? ♪
money has been pouring into silicon valley start-ups. according to a new report, venture capital spending is on track for a record year. pricewaterhousecoopers says $16 billion was invested in more than 1,000 deals in just the third quarter. but that's a 5% decline from the second quarter. and as josh lipton reports, some are now wondering if the venture capital market is starting to cool. >> reporter: it is a great time to be an entrepreneur in america. that's one take from recent data showing the surge of money flowing into start-ups. there has now been seven straight quarters of more than $10 billion deployed to these young companies. in part, venture capitalists say this rush of money can be traced right back to the federal reserve. as central bankers leave interest rates near zero, investors are forced to chase
returns and potentially higher-yielding assets like the equity of start-ups. >> with the fed's decision to keep interest rates low and push out the rise in interest rates, what they're doing is encouraging people to push up the risk and people are searching for growth. the cyclical growth area of technology. there's a lot of capital which is pushing up the risk of looking for growth and they're going into technology. >> reporter: the flow of money has boosted the number of so-called unicorns, or start-ups valued above $1 billion. there were 79 unicorns around the world at the end of last year. according to cb insights, a firm that tracks and analyzes venture capital. today there are 142. the question now is whether the good times continue. mason says venture capitalists if they're going to keep pumping money into start-ups need to start seeing actual cash returns on their investments meaning start-ups need to go public or sell.
>> i think they're getting close to the show me the money stage. for this kind of investment to continue you need to see distributions coming from ipos in m&a markets and as you know the ipo market has been choppy. but if you don't see those distributions start coming soon, we will start seeing this investment come down. >> reporter: there also could be signs of cracks already developing in the startup community. note-taking app evernote recently announced layoffs, and mutual fund investors in dropbox reportedly marked down the value of their holdings in the company by 20%. venture capitalists have already invested more than $47 billion in the first three quarters of this year. the next few quarters will be critical in determining whether the party continues or whether startup founders will have a tougher time raising those big rounds of funding. for "nightly business report" i'm josh lipton in san francisco. daily fantasy sports sites
have been dealt another setback. nevada regulators are bang them from operating in the state until they get a gambling license. the decision was made by the nevada gaming control board. thursday evening both draft kings and fan duel pulled out of that state. comcast ventures and nbc sports ventures have stakes in fan duel. comcast is the parent company of cnbc, which produces this program. now to the race for the white house. john harwood recently interviewed a number of presidential candidates from jeb bush to donald trump about their plans for the economy. tonight he talks with mike huckabee about his proposals for wall street and your money. >> if you were a populist, a republican populist before it was cool. >> whatever that is supposed to mean. >> well, that's what i'm getting at. now you have jeb bush, marco rubio, ted cruz, even donald trump saying we need to help the people in the middle and working classes. >> eight years ago, nine years ago in the cnbc debate in fact, in dearborn, michigan, i
remember it well -- >> i was there. >> -- we were all asked how the economy was doing and most everyone was giving the standard republican boilerplate language. >> sky's the limit. >> wealth creates wealth. >> stock market seems to be doing pretty well. >> that it's doing great. i said, well, if you're work in the corner office things are going swimmingly well. >> but for a lot of americans it's not doing so well. the people who handle the bags and make the beds at our hotels and serve the food, many of them are having to work two jobs. >> i was, i mean, just pilloried for that by the "wall street journal" and by others who thought that i was a total ignoramus when it came to how the economy was functioning. well, it turns out i was pretty darn ahead of my time because within a year the economy had fallen apart and the people at the top were feeling what i was watching happen to the people at the bottom already. >> let me ask you about wall street and its relationship to the rest of the economy. >> i'm not sure that the repeal of glass-steagall was a brilliant idea because what you did, you erased the line between traditional banks -- >> would you bring it back?
>> very likely. and i'm not saying there shouldn't be some regulatory controls. and i hate to use the word "controls." some regulation. but what you don't want is a referee that doesn't simply enforce the rules but tries to totally control the flow of the game. >> ben bernanke said in an interview the other day that he regretted the fact that no individual wall street wall street executives were prosecuted for their role in leading up to the financial crisis. do you agree with him that somebody should have been prosecuted? >> absolutely they should have. these were the smartest people in the room. john, these were the people that were supposed to be the geniuses. these were all ivy leaguers. and they knew darn well what they were doing is shuffling paper around and getting paid ridiculous sums of money. >> why do you think none of those prosecutions ever happened? >> money. politics. that's why i say, look, the
contributors keep flowing to washington, washington keeps doing the dance. i've said that washington is like a strip club. you've got people tossing dollars and people doing the dance. it was a casino. and i got in trouble for saying that very thing eight years ago. i'd like to say i was right. >> governor, thanks so much for joining us. >> thank you, john. enjoyed it. >> john harwood. a sour earnings report puts shares of kansas city southern on the wrong track. that's where we begin tonight's "market focus." the railroad company said earnings and revenue were hurt partially by a depreciation of the mexican peso. the company operates rails in mexico. shares were off more than 10% to 87.37. honeywell international's earnings beat wall street expectations but sales were a different story. the conglomerate said revenue fell 5%, hit by a stronger dollar and weaker demand for oil and gas equipment. the company also cut its
full-year revenue forecast. honeywell shares fell 1 1/2% to 97.03. suntrust banks beat earnings targets on an adjusted basis. the company was helped by an edge up in its loan business while keeping costs in check. the street liked the news, sending shares up 1% to $40.01. >> the industrial supply company ww granger cut its full-year forecast as its earnings fell nearly 20% in its third quarter. granger said its results reflect a challenging industrial economy in north america and if you're an industrial supply company that is not good news for you. shares fell 6%, 207.65. the regional bank comerica saw its earnings fall 12% in part because of lower oil prices. the texas-based bank lends to a lot of companies in the energy sector. and that exposes it to those sharply lower oil prices. comerica shares were off about 1%. 42.26. and the worst performer in the s&p 500 -- i jumped the gun
there. it was quanta services. it warned this quarter's profit will be below its prior forecast and the company continues to see pressure on its margins. shares walloped today, losing more than a quarter of their value. they finished the day at 18.74. and shares of the fresh markets soared on a report that the specialty grocer's founder was considering a buyout bid as reuters first reported, the founder ray barry, not the football player, ray barry is teaming up with a private equity firm to take the company private. the company says it doesn't comment on market speculation. shares finished more than 7% higher to 26.19. now to our market monitor who likes big and mid cap stocks. he says they're poised to do well in a volatile market. he is gene peroni, portfolio manager at advisers asset management. last time he was on 18 months ago he recommended celgene, which is up 36%, polaris, which is down 17%, and western
digital, which is off 20%. good to see you again, gene. welcome back. >> great to be with you, sue. >> let's start first of all with whether or not you still hold those stocks that we outlined. >> celgene i still like here very much. polaris i continue to like. it is down, as you mentioned. but i think the stock looks attractive at these levels. western digital a bit of a different story there. i'd say it's a hold, but i wouldn't be looking at it as an aggressive buyer. i think there are others that are more attractive in the technology category. >> let's take a look first at your overall market outlook. the market barometer's been doing very well this month. one of the best months of the year. by some measures in several years. do you expect this rally to hold into the end of the year, and if so why? >> i do. august 24th was a hideous day for the stock market. the volatility index, which is often dubbed the fear index, went up to 53, towering above the peaks that we saw last
october amid the ebola scare, where it was about 31. so you had real panic there and tremendous selling at the opening. days later we saw a key technical reversal in west texas intermediate crude. and that's held that reversal since. it went from 38 to near 50. back to 50% which you would expect after reversal, and it's stabilized since. that factor, that uncertainty is off the table now too. i think energy looks attractive here that had been an uncertainty for some time for the market. earnings seem like they're coming in pretty well here for the third quarter. and i think the fed is going to remain dovish for an extended period of time. many of the underpinnings for this market look good. most importantly, the technicals are responding very favorably. certainly corrected has come back nicely, technology is coming back nicely. consumer discretionary. and now we have the financials and energy stocks joining the groups. the leadership groups. >> so gene, i asked you earlier about celgene.
it's one of your recommendations tonight as well. with a price target of 145. you mentioned the correction in the health care industry. i would assume that that pertains to celgene as well and that's one reason why maybe you would add to a position here? >> yes. celgene i'm offering because it is a real bellwether in the group. it's a large cap name. but there are mid-cap stocks in the biotech group that also look attractive. health care generally, there are so many different subcategories but most of the subcategories of health care continue to look very attractive. so i think what we went through here in the last several weeks, kind of politically triggered at one point there was a correction that arguably was overdue. now i think the group is poised to move higher. >> you mentioned earlier that there are several technology companies that you like better than western digital and nxp semiconductor is one of them. why? >> well, specifically i do like nxp. i like that they're involved in a number of different areas
including automotive entertainment, and security systems and so on. they're involved in a lot of very favorable, in favor groups, i'd say, right now. somewhat to the consumer focus. but i also like the semiconductors generally. for us to recommend a stock or put a stock in a portfolio, it's not just a one off. we have to not only like the individual stock we're recommending but the group as well. with nxp we have both of those in our favor. >> i've got about 30 seconds left, gene. signature bank is the last on the list. >> the financials are coming around here very nicely. i think that we had mixed earnings for the third quarter and this group is doing so well following the earnings is a very good sign for their outlooks. signature bank is a mid-cap player. i like the mid-cap financials here right now very much. so spny's one of my favorite choices in that category. >> gene, good to see you. have a great weekend. we'll see you again soon. >> thanks, sue, you too. >> gene peroni.
>> renovation nation. why the timing may be perfect to take on that home improvement project. but good luck finding a contractor. ♪ here's a look at what to watch for next week. it is the busiest week for earnings seasons a ty mentioned earlier. 104 s&p 500 companies are set to report along with 12 dow components. three key pieces of housing data. home builder sentiment, housing starts, and existing home sales are out. and a number of fed officials are scheduled to speak. so hang on to your hats. that's what to watch for next week. planning to remodel your kitchen, update the bathroom? yeah, go for it. find a contractor?
not so fast. a new wave of remodeling has builders booked and shares of building suppliers like home depot, masco and whirlpool surging. diana olick explains what's behind the renovation boom. >> reporter: homeowners are feeling better about the value of their property, and that's why they're suddenly more willing to add to that value. >> homeowners are once again turning to these discretionary projects, you know, that they just didn't feel confident in doing for so many years with the economy in the housing downturn. >> reporter: growth in home remodeling is expected to nearly tripling from now until the middle of next year according to harvard's joint center for housing studies. why? growth in both home sxailz home values. when you buy a home, you generally want to fix it up a bit and put your stamp on it. but also, when you feel like your home value is growing, you don't mind spending more on it to get what you want. d.c. area builder peter lustig
says it's a combination of confidence, cash, and fear of rising rates. >> because one can borrow so inexpensively i think now, they would rather pull out the cash on a home equity line or something of that nature and improve their home. it's a very safe investment. >> reporter: in fact, cash-out refinances jumped 68% this summer compared to a year ago according to black knight financial services. and a lot of that cash has gone right back into that house in the form of renovations. but finding someone to do the work is increasingly difficult. >> we lost so many construction workers during the downturn. those workers are not necessarily coming back. >> reporter: winter is usually the slow season for all construction, but some contractors say they're already booked through the spring. the rush is on before higher rates threaten to take that new kitchen off the table. for "nightly business report" i'm diana olick in washington. >> for more on the remodeling
wave you can read diana's story on our website, nbr.com. and here's another look at the day on wall street for you. the dow jones industrial average gained 74 points to close at 17,215. the nasdaq rose 16. the s&p 500 added 9. for the week all three major averages rose. the nasdaq seeing the biggest gain, of more than 1%. and that does it for "nightly business report" for tonight and for the week. >> and have a great weekend, everybody. i'm tyler mathisen. thanks from me as well. we'll see you monday.
arrived at the major crime unit this morning, ready for action. this is my world. feels like the calm before the storm. but i know that i'll be kicking down doors before long. ( beeps ) oh, no! come on, brian! come on, think, think, think! on my way in this morning, i played a game that keeps me sharp-- spot the criminal. it's a game i always win. cop is in my dna. ( beeps ) morning. crying out bloody loud!