tv Nightly Business Report PBS January 25, 2016 6:30pm-7:01pm PST
this is "nightly business report" with tyler mathisen and sue herera. stocks head south to start the week following oil prices lower as wall street keeps an eye on this week's federal reserve meeting and wrap of economic data coming out. all daybreak fast help jump start mcdonald's sales and investors are wonder if it's real. the ones investors need to watch. all that and more for monday, january 25th. good evening, everyone. welcome. tyler is on assignment tonight. it was another very rough session for the faint of heart on wall street today. stocks were holding their own for a while, but a better than 7% sell off in oil was too much
and things fell apart in the afternoon. the drop improved after a few days of stabilization reignited growth concerns. the federal reserve begins a two day meeting tomorrow. while no interest rate move is expected, the feds view and tone on the economy will be key. there is also a lot of data for investors to pour over this week as well as about quarter of the s&p 500 companies reporting their earnings. the dow fell 215 points. the nasdaq dropped 72 and the s&p was off 29. shares of caterpillar was one of the biggest drags after goldman sach's downgraded to sell to neutral. shares of caterpillar were down 5% on the day.
on the flip side, mcdonald's was one of the best performers after they saw global sales surge 5% and domestic sales did even better up nearly 6%. the big catalyst, all daybreak fast. shares gave back a lot of early gains as the overall market sold off but still managed to sell higher. jane has more. >> i saw a new billboard driving in this morning that said actions speak louder than words. watch us. they exceeded expectations with its best growth in u.s. stores. they are up nearly 6%. the main reason, one word, mcmuffin. customers who might have gone elsewhere for lunch are coming to have breakfast for lunch. people coming in for lunch are adding breakfast items. >> we'll take breakfast.
we have given up in recent years. in fact, since the launch of all day breakfast we have experienced greater sales. we entered the quarter with a positive gap of 2.9%. >> it's going to take another six months of steady growth before they move from turn around phase to growth stage. it's not as impressives in the u.s. the terror takes this paris in november have had an impact in europe. china saw 4% growth in stores opened a year. mcdonald's plans to open 250 new stores in china this year. the most of any market. other initiatives include here in the u.s., the mcpick two menu. two items, $2. 25% of customers are all about price. they are experimenting with delivering food to your table here in california and the company will improve its app so it actually adds to sales this
year. finally, management plans to give shareholders back $14 billion in dividends and share repurchases in 2016. jane wells, los angeles. >> our guest tonight owns more than 600,000 shares of mcdonald's. he says this feels like a turn around for the company. joining us is joseph portfolio manager. joe, welcome. nice to have you here. >> good evening. >> you bought this stock when the street did not love it at all. you had a nice gain in this particular position that you own. tell me what you think about the report we had today. you said it feels like a turn around. >> it's a bit surprising the initiative too old hold immediately. mcdonald's has been grappling with changing consumer taste and
a decade of public relations. >> steve easterbrook has been an interesting ceo to watch. it has a decent dividend and does. are you confident the initiatives he's put in place, the expansion in china, will continue to go higher? >> he's done everything a normal manager would do. if you're in the retailing business you want know what your customers think and you have to have the courage to make the changes. the egg mcmuffin is the beginning. >> there's some who feel that the aggressive expansion in china might be a little bit risky because that economy has been slowing down. >> many years ago people bought mcdonald's as defensive
consumption. i think he's taking a cautious approach and starting with a limited menu. i think it's a massive market that should be approached. >> speak to me about what you call the underleveraged balance sheet and also the dividend, which you found very attractive? >> when we first bought the stock, really our clients pushed away from table and said are you crazy. mcdonald's is not something we want to have in our portfolio. we showed them the balance sheet and asked them to imagine if it was an industrial name. that helped them overcome that where energy stocks are overleveraged and underpressure. the dividend is something we could also point to because at the time, treasuries are yielding much lower numbers and while we waited for this turn around to take place, it was a reasonable proposition. >> are you worried about the dividend near term? there are some companies cutting it and mcdonald's has not been on the list because the stock has been doing well.
>> the stock is doing well. they can cover the dividend payment. it's somet steve has announced he will not cut back. when they say they want to give shares or money back to shareholders, we view that as a positive thing. >> all right. thanks for spending time with us. >> thank you. >> as the market slides, and we're currently in correct territory, there's a strategy called buy the dibs. it's looking for bargains in the stock bins. it's not a strategy that just the pros can take advantage of. >> picking tops and bottoms in the stock market is no easy task and you'd be hard pressed to find anyone who can do it with consistency. the recent market downdraft has left some wondering whether this is the time to invest. >> we just had stocks go on sale 10% or even more for individual security. i think a long term investor should take advantage.
>> where are some investors looking for bargains? some are looking for winners over the past year. only around ten stocks have posted gains over the past week of 5% or more and still have positive returns over the past 12 months as well. among them names like verizon, also nike, mcdonald's and amazon.com. each have seen buying on a shorter term basis and managed also to hold onto gains longer term. others are looking for potential winners in places that have been relative laggers up until now, a potential reversal of current trends. >> i think there's going to be a lot of change. i think international markets o. i think industrial will do be better than consumer and large caps will do better. it's not about finding the market bottom. i think the entire leadership is
cha changing as we go forward. >> markets have managed to rebound sharply since the financial crisis. caution remains a big theme among experts with slowing economic growth around the world and the potential for large market shock that haven't been seen in 2016, understanding once risk tolerance will be a big part of any buy or sale decision in the market. the downturn in oil prices continues to takes toll. haliburton posted a loss. it was hurt by a steep decline in its north american business. revenue was cut by 50%. shares were off 3%. the drop in oil is having ripple effects throughout the economy. business activity tied to oil and commodities is one of biggest pressure points. the manufacturer sector is feeling the pain. we look at the damage and
whether it might get worse. >> more signs depressed oil prices are taking a toll on manufacturing. the dow federal reserve saying business activity in texas has tumbled to the lowest level since the recession of 2009. the data speaks for itself and reflects the major recession the energy match is in and the ripple effect on other industries. it's the latest sign they aren't the only ones feeling the adverse effect of the crude collapse. it has joseph concerned. >> investors need to be worried about the manufacturing sector because even though it's a small piece of the overall economy, it tends to be a very leading indicator of what happens. >> with the economy growing at 2%, the risk of broader recession is much higher than in economic growth were more robust and it isn't just oil prices pressuring sector either. >> a portion of the
manufacturing sector is oil, but i think equal parts also include the fact the u.s. dollar has had one of its strongest rises on record. thirdly, we have a pretty sizable inventory correction working through. >> as energy companies slash that's trading into less for industry. for miners that provide sand needed to frack oil wells like u.s. steel. the transportation equipment makers like green breyer that saw rail car orders punch 80%. wells fargo says the billing index is flashing a warning sign. the sector leads broader building activity in its dust likely the first to signal a downturn. analysts will be focused on all this as earning season plays out with companies including u.s. steel, caterpillar reporting
this week alone. the energy downturn will once again drag down results, and that businesses are hunkerring down for another rough year. coming up, it's a big week for earnings, as we said, but in particular for technology. the key reports to watch when we come back. the east coast continues to dig out after this week's blizzard that buried the region under several feet of snow. slowly, things are getting back normal as streets continue to get plowed.
amtrak is back up and running and planes are taking off at the airports after the storm forced the cancellation of thousands of flights. another multi-billion dollar inversion deal, this time with two industrial names. that's where we begin tonight's market focus. johnson controls and tyco have agreed to merge in a deal valued at more than $30 billion. johnston will own 56% of the company and will keep its name while moving headquarters to ireland where tyco is. they make protection and video surveillance systems. shares dropped 24%. tyco soared nearly 12% to 34.15. sprint is cutting about 2500 jobs as part of its efforts to slash about $2.5 billion in costs. most of the layoffs are coming by closing call centers. it's the third round of cut backs in the last year and a half. shares of sprint fell 12% to
2.52. consumer products maker kimberly clark missed targets for earnings and revenue numbers as a strong dollar and global currency hurt the results. the makers of huggies and kleenex said net sales will come in flat to down again. kimber horton posted a slightly better profit. it saw home revenue grow at its slowest rate. they did see a rise in orders in the quarter which is an indicator of future revenue. dr horton fell nearly 5% to 26.50. the supreme court threw out a ruling in favor of amgen employees who said they lost money in the company stock ownership program. the original lawsuit from 2007 said the value of the plaintiffs retirement plans fell when the
stock dropped. it was revealed the company concealed negative clinic study results and marketed it for off label uses that were unsafe. the court said the original rules was incorrect and sent the case back to lower courts. shares fell more than 1.5%. as we mentioned just a bit earlier about a quarter of the s&p 500 scheduled to report earnings. it's a big week. we look at why wall street will be focused on a trio of the big names. >> reporter: it has been a tough start to the year for tech. sector is down some 7%. 33 tech stocks were nearly 50% in the s&p 500 are in bare market territory. meaning a drop of 20% from a recent high. investors are concerned about global economic growth and that's a problem for tech given that 60% of the sectors revenue comes from overseas. despite the sector's drop,
investment strategist remain on the sidelines for now. >> the sector doesn't look at these levels. earnings are expected to grow pretty much in line with the overall market. also, the worries persist as to what will be happening overseas and how that will reflect on this highly international sector. >> investors await three critical reports from big technology companies that will give a better indication of how tech performs from here. the first is apple, which will report earnings tomorrow after the close. already that stock is down around 20% in the past six months as investors worry about iphone growth in the quarters ahead. some analysts argue that the stock could move higher this year on new products and strong buy backs. also ceo tim cook continues to sound as bullish about the company's business in china given the economy's slow down.
main land china accounts for 30% of apple's revenue. on thursday amazon reports the stock is down about 10% this year. it's up more than 90% over the past 12 months. rbc and amazon bull said he will focus on unit growth, the key retail metric which he thinks will jump more than 20% as well as whether the company's cloud business maintains momentum. amazon has a lot of supporters on wall street. finally, investors are fans of ceo microsoft and the business he's built up. the stock is up 10%. intel latest reportings will show a challenging quarter for microsoft. we'll know when the company reports results on thursday. i'm josh lipton in san francisco. let's turn to our next guest to talk more about tech earnings
and the one he says investors should be watching closely. he's principal of his own tech firm. good to see you. welcome back. >> thank you, sue. >> let's start with apple. are you one of those out there that thinks this is make or break quarter for apple? >> i would say looking at apple, the stock clearly is trading a very, very low valuation relative to earnings whether you adjust to cash or not. when you have a low multiple on a company, such as apple, i think the market's already factored in its own concern around the products. going forward, if we look in september of 2016, we will have the introduction, the new iphone 7. from that standpoint that should help to jump start growth going in towards the end of the year. if there is a pull back on apple, coming off the december quarter results, we think it's attractive time to consider establishing a position or adding to an existing position. >> let's move onto facebook.
everybody will be watching the instagram part of facebook. >> the stock has not been immuned to the downturn. instagram has been something to help drive traffic to the facebook site. i think investors are going to be looking at how well facebook is doing in terms of their audience engagement and how that is driving their own advertising revenues on a global basis. one thing we also say to facebook, unlike apple or other companies on technology sector, facebook has no operations in china. from that standpoint should be immune in that regard. >> what about microsoft? everybody is watching management and how they are positioning this company in an ever changing world, you know the cloud and things like that. what you going to be watching for? >> certainly in terms of microsoft, people might have raised concerns with how regard to the windows 10 software upgrade. the company is deciding not to charge to bring the users base up to fally current level to the extent they can.
we think if investors have been very much encouraged about the move to the cloud, it's worked well for amazon. people have know that microsoft is number two behind amazon in terms of their cloud base operation. it's the growth in that area that clearly will be driving stock price returns over the balance of 2016. >> i have 30 seconds left. let's try to squeeze in ebay. what are you looking for? >> the company's fallen off the paypal operations. the concerns we have, if you look at the scale of competitor, are we going to find that volumes are down substantially. are there other ecommerce out there doing a better job. >> great to see you again. >> thank you. >> david garrity. competition from the likes of uber and lyft are becoming too much. can these two worlds coexist?
that's next. exchange rated funds better known as etf have grown in popularity that some consider them their own asset class. the biggest and brightest are gathering to explore in topics. bob has more from hollywood, florida. >> market volatility was the hot topic at the eft.com conference. >> we're telling investors that this volatility may be with us for a while, but it's very important to stay diversified, keep a long term perspective and
behavior is reenforcing that. >> three other hot topics here, smart data. gold man sach's made a big splash last year with three etfs.man sach's made a big splah last year with three etfs. the big question is do they really out perform market cap weighted indices? the jury is still out on that. so much money is coming in it's attracted the money crowd. the industry is split on this. half say who needs them. we don't need them. the other half says there's plenty of room for other investment style. is the sec going to tighten regulation. they announced they will would be looking into the suitable of investors like leverage. they're also looking at limiting the amount of leverage that could be used in an etf
portfolio. >> san francisco's largest taxi company has filed for bankruptcy. the company faced a steep drop in passengers as it faced tough competition from uber and lyft. last year chicago's yellow cab service filed for bankruptcy. so will other cab companies file for bankruptcy in other cities around the country? let's find out from mitchell moss. he joins us now. welcome. it's nice to have you here. >> thank you. glad to be with you. >> i guess that is the question. how prevalent is this going to become, do you think? >> we should not generalize from san francisco. everyone loves the city of san francisco. it's beautiful. it's spectacular. the cab service has been terrible there. it's hard to hail a cab on the street. very expensive when you get in. it's no surprise that uber and
lyft has taken over because the taxi industry has not been very responsive. >> what about chicago? >> it's a different case. there's been many different cabs. the first part to understand is that in chicago, there are so few people who want to drive a cab now that the mayor is having american idol kind of competition to get a cab driver and givie ining away a free medallion. the taxis have had a monopoly position and when people are getting better service and cost, they're preferring it. san francisco, i should point out, has had a bankruptcy filing because they have had millions of dollars in judgments against them that have been filed and the courts have awarded the plaintiffs damages. it's not just due to uber. it's due to this is a co-op. i think you're finding out across the country there are many individuals that would rather pay less for better service. you don't take a taxi to go to
los angeles international airport. it's better to take uber because it's quicker and cheaper. the market has entered the area of mobility for hire service. up until now we had a monopoly in many cases. the city police department regulated them. unfortunately, taxi companies may be going out of business but taxi drivers are switching to drive uber and lyft. this new york the taxi limo is very smart. they have uber, lyft and yellow cab coexisting. >> is that the message? you have to give good service, keep your prices low? how is this going to impact mobility in those urban areas? it doesn't sound like you think it will in new york. >> many people i know are much more comfortable having an uber where you press a button on your phone and comes to your
immediate location than to get out on a street and fight for a tax key or call someone and never know when they will pick up the phone, answer it or send a cab. i think we have to realize that in new york, we have licensed car companies, licensed taxi drivers that inspect the cars. other cities will have to do the same thing. it's clear that people are voting to choose mobility, which is coming out of their cell phone. >> mitchell moss with new york university's center for transportation. thank you. that will do it for "nightly business report." i'm sue herera. thanks for joining us. have a great evening. we'll see you tomorrow.