tv Nightly Business Report PBS April 13, 2016 6:30pm-7:01pm PDT
this is "nightly business report" with tyler mathisen and sue herera. >> gaining steam. stocks hit new highs for the year and for that, you can thank this year's worst performing sector. disrupting cancer. a tech billionaire who changed the music industry and was at the forefront of social media, wants to reinvent the way research is done and he has a plan and the money to do it. what's disgusting? >> 40,000 verizon workers walk off the job and the strike is leading to a war of words between a presidential candidate and the company's ceo. all that and more tonight on "nightly business report for wednesday april 13th. good evening, everyone. i'm sue herera. tyler mathisen is off tonight.
the major benchmarks are at their highs of the year and the two things that helped get them there are the same two things that held the broader market back for so long, china and the financials. data out of china overnight put po expan in a buying mood. for the first time in nine months but it was earnings from jp morgan that sparked rally in the beleaguered banking sector helping stocks across the board. by the closing bell all the indexed gained more than 1%. the dow jones industrial average rose 187 points 17,908. the nasdaq added 75. the s&p 500 was up 20. bob pisani has more on the rally in the year's worst performing sector. >> reporter: jp morgan kicked off earnings season for the big banks and markets and the news was positive because they beat expectations and ceo jamie diamond wa modestly upbeat noting the u.s. economy continues to chug along. now if that doesn't sound like
much, rem, most bank stocks are down more than 10% this year including jp morgan. they've been like zombies wandering around aimlessly because the combination of low interest rates, heavy regulation and slow growth in the u.s. economy has made investors downright hostile to owning them. there's been so much negative sentiment in the group that even a little good news was bound to lift them up. that's exact lly what happened today with most big banks up 4%, 5%. we'll hear from bank of america tomorrow and citigroup and regents financial on friday. there's stimrisk out there. some banks have exposure to loans for oil companies so expect some banks to increase their reserves for possible loan losses but remember, oil has been rallying recently and that decreases the chance that banks will have to take big losses on those loans. for "nightly business report," i'm bob pisani at the new york stock exchange. just as there are risks to the financial sector, there are also risks to the broader market. several measures of investor anxiety are flashing extreme
readings despite the recent rally. mike explains why. >> reporter: stocks have rebounded to within a few percent of their all-time highs so why are investors still so fearful? while the panic of the winter market drop has faded, sever measures of investor move show a bit more anxiety than one would expect. pay up to protect against the steep market decline but not to bet on the rally carrying much higher. the nasty declines of last summer and again early this year remain fresh in many minds. the market is also stalled in a sideways trend for nearly a year and a half show investors are conditioned to think it's now bumping against a ceiling. and of course, stocks have rallied in part for unsatisfying reasons. economic growth has again proved disappointing. plans to lift deral res interest rates. one side of investor caution, many of the stocks leading the
market higher are conservative blue chips with steady dividends such as coca cola and mcdonald's rather than aggressive growth place. this public sobriety could be vindicated if the market undergoes another recession scare or shock from abroad. rising markets always climb a wall of worry, and such a wall surely remains in place for now. for "nightly business report." with stocks sitting near their all-time highs the big questions investors are asking which parts of the market are still cheap and which are too expensi ex dominic chu dig some digging and has the break down. >> reporter: the stock market appears to be showing positive short-term signs of momentum as we head toward the heart of corporate innings season. major stock indices sit a few percentage points away from market highs but the market's march back toward those levels left some investors wondering if things have gone too far too fast. one of the hottest sectors of
2016 in s&p 500 has been utilities. the sector overall gained 12% year to date and a big reason behind it has been the hunt for dividend-paying stocks. as a result, the sector is more expensive than it's been on average over the past 15 years. >> if you look at utilities, for example, on a historical basis, that's very overvalued but the same would apply to the bond market. if you're certain you're going to get these returns based on the dividends and based on the yield and rates go up which they're likely to do, that valuation becomes much more in question. >> reporter: some experts are looking to other parts of the market with more, perhaps, attractive valuations that have been beaten up as of late. . energy stocks seem to fit the bill for some of those brave enough to weather oil price volatility. >> right now, no growth at all essentially is priced in and we are going to see that probably toward the back end of the year, but certainly in the out years. so that's an area on an absolute basis also works with respect to future opportunities.
>> reporter: one of the big bullish arguments for the rest of the year hinges on whether we can see sot more strength in corporate profits. they're not expected to look good for the first quarter of this year. >> the expectations are so negative, positive surprises seem more likely than negative surprises. but i think the real issue is what does the rest of the year map out for and if we get a better than expected season, and they start to raise estimates, that could help the progress of the year a lot. >> reporter: the s&p 500 is a little more expensive now than it has been on average for the past 15 years. so theirs will point to a more stretched valuation. now, it comes down to whether earnings season can provide a positive catalyst for the markets. for "nightly business report," i'm dominic chu. stocks rose today despite downbeat economic data which showed americans didn't spend as much in march as many thought they would. sales at retail stores an restaurants dropped .3% from the prior month. the latest date that is a sign of consumer caution. a big reason for the decline was
a drop in auto sales, a major driver of spending last year. in a separate report on inflation, it shows the prices that u.s. firms receive for their goods and services fell .1%, the second straight month of declines for the producer price index. the economy expanded throughout much of the country. that according to the federal reserve's beige book. an anecdotal look at different sectors of the economy. there was positive news on wage growth. pay increased in all but one of the fed's 12 regional bank districts. consumer spending, however, increased only modestly and expectations for growth and manufacturing were mixed. the federal reserve and other regulators rejected plans from five of the nation's biggest banks on how they would handle a potential bankruptcy and avoid a taxpayer bailout. we explain why these banks were given failing grades and the changes regulators want them to make. >> reporter: every other year
the country's biggest banks have to create living wills. imagine, explaining what would happen if they were to fail so tax payers don't have to bail them out. the federal reserve and fdic this time around rejecting a majority of the plans suggesting they're ramping up their scrutiny of the crop of firms criticized as being too big to fail. bank of america, bank of new york melon, jp morgan street, safe street, and wells fargo all coming up short on items ranging from derivatives exposure to operational issues, to liquidity. jp morgan's ceo addressed the banks on a call scheduled for the banks' earnings. >> liquidity of the company is extraordinary. we have $400 billion in central banks around the world. $300 billion of aa plus short duration securities. $3 billion in very short term -- really top quality repo type of stuff like that. the trading book is $300 billion which is mostly very liquid kind of stuff. so it's -- the liquidity is
extraordinary. >> reporter: the banks hav l october 1st to address the flaws highlighted by regulators. morgan stanley and goldman sachs which did have issues but not enough to get rejected will just have to provide a progress report. as will citigroup which was the only big bank to receive no rejections from the fed and the fdic. analysts at fdr said if citi which has seen its share of regulatory hiccups could meet the standards, other banks should be able to, too. jaffrays highlights the costs on the banks and advantage the regional banks might have and guggenheim suggests the widespread deficiencies shouldn't have an effect on capital payouts determined by the stress test. nearly all banks pass the stress test which happen annually, whether six years after dodd/frank if they're moving the goal post to tighten it even further. it was said the living will process needed to be shortened
and more transparent. for "nightly business report," new york. the nation's biggest coal company has filed for chapter 11 bankruptcy protection. peabody energy warned in march that low coal prices had put it on the edge of insolvency. peabody also suffered from exposure to the bankruptcy of former subsidiary patriot coal. the entire industry, of course, is feeling the pressure of low natural gas prices. a slowing chinese economy and increased regulation. coal production this year is expected to fall 25% from 2014. nearly 40,000 verizon workers walked off the job today as nine months of contract talks between the unions and the telecom company failed to produce a new agreement. some say the strike reflects the anger we're seeing in this primary season as many in the working class believe they're being asked to sacrifice their financial future for the sake of corporate profits. mary thompson has our story from new york. >> reporter: verizon workers
taking to the picket line in the nation's biggest strike since 2011. >> we are officially on strike! >> reporter: over 36,000 union workers from massachusetts to virginia walking off the job at 6:00 a.m. on wednesday. union rep dennis traener saying the intent is to reserve good jobs in the shrinking landline business and make sure workers get their fair share. >> this company made $1.5 billion a month last year in profits. this year, they're making $1.8 billion in profits. it's time to share that with these workers. >> reporter: the key sticking points in the talks, pensions and jobs. verizon wants to freeze pensions after 30 years of service while unions want promises, call center jobs in the northeast and mid-atlantic won't be moved overseas. promises verizon says will make it tougher to do business. >> we have rules from decades ago and we want to amend some of those rules so we can be more competitive. >> reporter: with contract talks
off the table, a war of words broke out between democratic presidential hopeful bernie sanders and verizon ceo. >> this is just another major american corporation triying to destroy the lives of working americans. >> reporter: endorsed by one of the striking unions, sanders was greeted with cheers from picketing workers in brooklyn. verizon greeting his words with derision. in a statement, mcadams calling sanders' view on the telecom giant uninformed and contemptible following the senator's claims verizon doesn't pay its fair share of taxes and doesn't reinvest profits in america. >> when do we want it? >> now! >> sanders' rival hillary clinton getting into the mix as well stating her support for the unions. she also criticized verizon for wanting to outsource call center jobs, something verizon denies it will do. clinton urging verizon to return to the bargaining table and verizon says it's ready and willing when the unions say yes.
in new york city, mary thompson for "nightly business report." still ahead, real estate risk. as home prices heat up, there's a new way to protect your equity if things start to cool. a twist in boardroom drama, independent board member james grosfeld resigned from the board of the country's third largest home builder. he joined the company's founder in calling for chairman and ceo to step down. in an interview he explained why his departure is effective immediately. >> i'm calling for richard dugas' resignation. i think that i'm the only board
member and that's not an easy situation to be in. and addition reason is that certain board meetings have gone on without my attendance. which i think it's improper. so under the circumstances, it didn't make any sense for me to remain on the board. >> he served as ceo of the company from 1974 to 1990. shares of pulty home rose 2.5%. near record low mortgage rates may be pushing more home buyers into the spring housing market. according to the mortgage bankers association, total mortgage applications volume rose 10% last week from the week prior. new purchase applications along with refinancings were higher and it was the second highest levels for purchase applications in nearly six years. well, you pay to insure your home, right? so why not insure the cash you put into your home? specifically the down payment. diana olick tells us about a new kind of protection plan.
>> reporter: if you're worried about today's overheating home prices turning into another housing bust, you might consider this. starting today, dallas-based value insured is offering insurance on your down payment if your home value fall. >> nobody has a crystal ball and if we look at what's going on in the housing market today, if you're in the community that was affected by the declining oil prices or ge moving out of connecticut or the overbuilding that's going on in miami, we actually do have home prices that are volatile. >> reporter: here's how it works. say you're buying a $200,000 home and you put 10% down. that's $20,000. to protect that down payment, you pay value insured about $1,200 and they insure you for 7 years. three years later, you decide to sell but the value of your home has fallen by $30,00 value insured will pay you the amount of the loss up to that $20,000 down payment. in other words, whatever skin you put in the game is insured.
you only get the payout if you move and you must be an owner occupant, so no investor properties. the product comes seven years after the worst of the housing crisis, nearly a quarter of all homes with a mortgage were under water in negative equity. millions of those homes were then lost to foreclosure. perhaps we needed this then, but do we need it now. ? >> i think a lot of consumers are naturally suffering from a pstd that makes them wary of getting back into the home market. i think consumers should understand that broadly speaking for a long period of time, house prices have been stable. >> reporter: while there's unlikely to be another national real estate crash, there will always be pockets where home prices fall. all real estate is local, and so, too, is the risk. for "nightly business report," i'm diana olick in washington. analysts are bullish on fitbit and that is where we begin tonight's "market focus." strong sales of the fitness company's latest devices prompted citigroup to increase
its earnings and revenue estimates and reiterate its buy rating on the stock with a $30 price target. similarly, pacific quest raised its unit estimates for the current and for the second quarter. shares of fitbit soared over 12% to 1701. shares of gopro surged on a report that the company hired an industrial designer from apple. the longtime apple employee is expected to create a new hardware design group at gopro. that report sent gopro shares up 19% to $13.92. valiant pharmaceutical's outgoing ceo michael pearson agreed to give a deposition to a senate committee investigating the company's controversial drug price increases. previously pearson had declined to cooperate with the subpoena issued by the committee. the deposition is set to take place on monday. valiant shares were up 3% to 3310. clovis oncology saw its shares fall after the pharmaceutical company failed to
secure approval from the fda for the lung cancer drug. they said they will work with the federal agency to evaluate the best path forward for that drug. shares of clovis fell 5% to 1349. s federal regulators have reportedly proposed banning the founder of tharanos for two years. the founder elizabeth holmes failed to fix major problems at its california lab. as first reported by "the wall street journal" the centers for medicare and medicaid services says it plans to revoke the california lab license. its arguments against the proposed sanctions are under review. tharanos became well known for a fast, accurate and affordable blood test but has come under scrutiny recently after some questioned the accuracy of its proprietary testing methods. well, he disrupted the music
industry and shook up social media and now he has his sights set on cancer research. tech billionaire sean parker is giving $250 million to 6 cancer centers nationwide in a first of its kind collaboration. that funding is designed to accelerate the development of cancer immunotherapies which enhances the body's immune system to kill cancer cells. it's considered one of the most promising fronts in the battle against cancer and this is the largest cash infusion ever for this type of research. >> over the last 40 years, even though we made some pretty good progress in treating about half of all cancers using conventional therapies like chemotherapy, radiation, and surgery, you know, we haven't been that successful in bringing new therapies to market to actually treat patients more recently. immunotherapy is the outlier, incredible new technology platform managing to treat otherwise untreatable cancers. >> is this new initiative a game changer when it comes to funding
cancer research? dr. stan gurson, director of the seidman cancer center joins us to talk about that. you here. >> thank you for having me. >> mr. parker saysf hopeful he' going to bridge the two worlds, the entrepreneurial world and the academic world so funding doesn't take as long and collaboration becomes more available. do you agree with that? do you think that would be a game changer as some are calling it? >> i think it absolutely is a game changer. it's transformative and the combination of bringing multiple cancer centers and bringing fresh money into the mix is incredibly important. >> it seems as though it would also speed things up a little bit because you don't have scientists and researchers and doctors competing for grant money that sometimes takes an awfully long time to be distributors. if they can bypass road block isn't quite the right word, but in some cases it does act as a
road block, correct? >> i think by bringing the best scientists in the country together through the six institutions, i hope they would broaden out because there are certainl oth folks of equivalent stature around the country that can bring it to the table. just by bringing folks together to talk about this, we'll advance the science effort much more than an individual grant application. >> how do you feel about the immunotherapeutic approach to cancer at this point, is it as promising as we're led to believe? >> we have seen very difficult to treat cancers melt away with immunotherapy. the biggest issues are only a portion of patients respond. patients are rarely cured. so we have a huge amount to learn, but it tells us we can start to harness the immune system against cancer. >> do you think that this type of donation, and there have been other very large donations directed at other parts of cancer research, but this seems unusual in that it seems to be trying to change the business model, if you will, of medicine and of research. do you think that it might
trigger more philanthropic donations along these lines? >> i would certainly hope so. we all want to make the right investment. this is a good investment. this will be transformational. i would hope it brings out of the woodwork many, many more. it will take multiples of this to really change cancer. >> one of the interesting things to me is the collaboration that will have to occur between medical institutions and medicine is incredibly competitive. everybody is fighting for funding. is it going to be easy for some of these researchers to collaborate with, in essence, people who are their competitors at other institutions? >> they're only competitors because they're bright and smart, have creative ideas but you put them in a room together and you have them work out a problem together and common solutions that are better than they can individually find are bound to occur. >> let's hope that is, indeed, the case. thanks so much for spending time with us, doctor. appreciate it. dr. stan gurson with uh seidman
cancer center. coming up tonight -- >> i want to go into space. but i want to do it in vehicles. >> the other billionaire and visionary who wants to lead the next wave of space exploration. applications for skilled worker visas hit a record. the government received 263,000 applications easily surpassing the 85,000 limit for the entire year set by congress. the visas will be distributed by a lottery. historically, a majority of the demand for those visas comes
from the i.t. services industry. jeff basos, founder of amazon, of course, billionaire and now a space cowboy. he's one of a handful of wealthy businessmen investing a lot of money to explore the final frontier. jane wells has more on the man shaking up the space race. >> reporter: the space symposium in colorado springs is usually a state affair but the business of space is changing and the new players are not stayed. >> i've been obsessed over rocket engines and space flights since i was 5 years old. >> reporter: amazon's jeff basos the star of the show so far, billionaire funding a space venture. blue origin, a rocket company he founded recently launched a rocket sent to the edge of space and safely landed it three times. basos thinks rocket reusability is crucial to bringing down the
costs of space and lower costs are necessary to unleash the entrepreneurial explosion the internet has seen. >> i want to go into space but i want to do if in vehicles and even though i do want to go into space, a personal thing i'd like to do that, it's not what's important to me. what's important to me is lowering the cost of access to space. >> reporter: how low can costs go? >> just a few thousand dollars of refurbishment. we never took the engine out of the vehicle. >> reporter: he say s the other hurdle to grn spa is the lack of practice. he thinks space tourism ventures like the one he hopes to have up and running in 2018 will provide lots of track thpractice. >> need to have surgery, find somebody who does the operation 20 times a week. >> reporter: other competitors like elon musk or richard branson. like those men, he wants space launches to become common not just to help humans leave earth but in his opinion to help us save it.
for "nightly business report," jane wells, colorado springs. >> to read more about the private sector space race, head to our website, nbr.com. before we go, here's another look at the day on wall street. stocks at highs for the year. the dow rose 187 points. the nasdaq added 75. the s&p 500 was up 20. and that is "nightly business report" for tonight. i'm sue herera. thanks for joining us. have a great evening. we'll see you here tomorrow.
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