tv Nightly Business Report PBS December 19, 2016 6:30pm-7:01pm PST
♪ this is "nightly business report" with tyler mathisen and sue herera. funded in part by: hss. our value principles are patient first, and we want to deliver the highest-quality care. >> the goal of creating and sustaining value is all about putting the patient at the center of the equation. >> the purpose of this organization is to help people get back to what they need and love to do. rally pauses. the reason stocks seems to have seen to have taken a breather. will the bulls remain in control and send the dow to 20,000? >> golden age. why a well-known investor says bank stocks are entering a
gilded era. billion-dollar fraud. hedge fund executives are accused of bill being investors in what's being called a bernie mado madoff-like ponzi scheme. for this monday, december the 19th. good evening, everybody. welcome i'm bill griffith in tonight for tyler mathisen. >> great to have you here. i'm sue herera. dow 20,000 remains within reach. but after a few attempts, the plu blue chip index has fallen short. today gains were trimmed when russia's ambassador to turkey was shot and killed in anchora. investors also rattled this afternoon when several people were killed by a truck which drove into a christmas market in berlin, germany. so with one eye on overseas events, the dow jones average rose 39 points to 19,883. the nasdaq was up 20, the s&p 500 gained 4. today's modest moves mirror
those of the past few days. as bob pisani explains, some may not be questioning the strength of the recent rally. >> reporter: with the dow up only fractctionally today and i the last five days, the russian ambassador to turkey may have taken some winds of the nottest morning rally. a remarkable five weeks since the election with the markets up about 6%. largely on a belief a proposed combination of tax cuts, fewer regulations and a massive stimulus program will somehow translate into a surge in corporate profits in 2017. but that hope can only push stocks so far. there is a battle going on. instead of bulls versus bears, let's call it the pragmatists versus the opt might activities. the stock market going too fast, we don't know how stimulus programs will impact earnings because we don't know what the numbers are going to be or what the programs will be. the optimists saying use your imagination. we don't have to have all of the numbers, but we know all of this will be good for stocks. this may be a very flimsy
foundation for a stock rally. that's essentially where we are now. and that flimsiness may be why the market is starting to look trendless. former market leaders like banks and industrials and materials up big in november sort of stopped rallying, and while november laggards like consumer staples are trying to make up for the difference, investors haven't been buying with quite the same enthusiasm as the prior month. now a pause after such a big rally is certainly in order and perhaps forgive investors. should they sit tight so they can buy lower? there is no agreement on the direction right now. for "nightly business report," i'm bob pisani at the new york stock exchange. >> since the election, the financial sector has been the best performing sector overall. banks are benefitting, of course, from higher interest rates, and they're rallying on the assumption that a republican administration will reduce those regulations that were put in place after the financial crisis.
financials are up 17% since november 8th and they have advanced more than 20% just this year. and in an interview today on cnbc, a well-known investor who correctly bet against subprime mortgage securities during the financial crisis, today said he's now very bullish on the banks. >> what i think is going to happen is i think the right risks -- financial system is going to be -- partially deregulated i think over the next couple years, more leverage. and this will be a golden age of investing in financial be stocks. >> so you would be very long right now. financial stocks. >> as long as i could be. >> and is that what you are? >> and that is what i am. >> so is it time to invest in the banking sector for the long-term. and if so, what should you know before you do? >> joining us tonight to talk about that, eric wasnerstrom, managing director at guggenheim securities. good to see you. thank you for joining us tonight. >> thanks for having me. >> are you as bullish on the banks as steve eisman is right now? >> i'm afraid i'm not.
you know, i think if i were to categorize myself relative to what bob just discussed in your previous segment, i'm more in the pragmatist camp. with continue to respect of the yield curve, many things i would argue as being discounted in bank stocks are still i think very early, and i'm in a little more of a skbat see mode to see if they, in fact, benefit future earnings. >> one of the things that has been pointed out by a number of analysts as a bullish scenario is regulatory reform. but you seem to think that perhaps not as much reform is going to happen as a lot of people think. >> yes. that's correct. so the big debate is really around the repeal of dodd/frank. and i would say quite flatley, the likelihood of repeal or significant reform to dodd/frank is zero. the one thing you could see is some new legislation targeted at regulatory relief for smaller community and regional banks. but broadly speaking, i don't
see a big -- a high likelihood of deregulation, as long as that requires 60 votes in the u.s. senate, which it will. >> having said all of this, eric, you still have buyer recommendations on big banks. you've got on citi, on morgan stanley and some of the regionals. so, put this in perspective. are you buying them now or what are you doing with them? >> generally speaking, i would argue that the space broadly is now certainly at the top end of our range of fair value. within that, we continue to fight for the names where there is an i hdiosyncratic reason wh we think the rallies go higher rather than just a macro environment. which we find at this point an uncompelling case, given the run in the stock. >> what about earnings? you mention that had. and, you knows, one of the issues for the market has been the expectations that earnings are going to continue to deliver on perhaps the top end of estimates. would you fall into that camp, or are you equally as cautious on the earnings front? >> well, i think you have to
sort of parse a bit what the drivers of earnings may be. so probably the most significant one, of course, is the net interest margin, which responds to the shape of the yield curve. the yield curve has steepened, so that's positive for banks and the short end may come up through rate hikes, also positive. net net, they contribute 4 to 5% of earnings. obviously, that alone wouldn't explain a roughly 25% move in the stocks. so we think what's also being discounted is things like more robust capital markets, and a lower corporate tax rate, and, again, would he see it's just very early to conclude that those things are happening. >> eric wasserstrom, good to see you again. thank you for joining us. >> thank you interest for having me. almost the end of the year. in the past few januarys, anything but kind to investors. the market seemed to suffer from a new year's hangover. will 2017 be different? mike santoli takes a look. >> as investors prepare for
2017, the ghost of january's past might soon disturb their sleep. the stock market has finished strong in december the past three years. but in each case, stocks stumbled into the new year. losing an average of nearly 4% in the month of january since 2014. this year's january drop led ultimately to a harsh 15% down turn into february. wall street is now trying to figure out if the market is again set up for a similar hangover following the current rally. the bad news, the dow does seem right for at least a pullback after an 8% surge since election day and the rush of investor optimism that's accompanied it. a variety of economic and financial factors are in better shape now than they were heading into the market skid a year ago. for example, the current rally is quite broad with a majority of stocks taking part in the gains, while last year's market was driven only by a small handful of big stocks. analysts are also impressed the sector is geared to economic acceleration in the lead. semiconductors, banks and
transportation stocks. the bond market is better based, too. the recent lift in ten-year treasury yields to 2.5% builds in inflation outlook and the bond market is quite strong in con trafrt to last year when risky corporate bonds were tumbling as oil collapsed and industry slowed. on the corporate front, earnings projected to grow again over the next few quarters unlike a year ago when companies are in the middle of a long stretch of declining profits. all factors suggest any different stocks is less likely to be as dangerous as last winter's selloff. that doesn't mean all risks have been banished. stocks are about as expensive relative to corporate earnings as they have been the entire market cycle dating to 2009. the u.s. dollar for its part at a 14-year high against world currencies. this will refrastrain profit grh and could destabilize the emerging market economies and exacerbate trade tensions with china. and it's far from clear exactly
where tax spending policies in the trump administration will propose or get through congress. the first year of a presidency has been bumpy for markets. for "nightly business report," i'm mike santoli at the new york stock exchange. elsewhere, deutsche bank could settle with department of justice this week. and at least according to reuters, the amount they settle for could be less than the $14 billion originally reported. this settlement, of course, relates to the sale of toxic mortgage debt that con contributed to the 2008 financial crisis. back in september, there were reports that surfaced that deutsche bank could face that $14 billion penalty and it prompted the bank to deny speculation that it needed any bailout from the german government. the head of the international monetary fund has been found guilty on criminal charges linked to the misuse of public funds. the case is linked to christine la lagarde.
the judge did not impose a fine or sentence. experts say that may allow her to keep her position. but the organization's board will have the final say. a hedge fund founder and other executives were charged today with defrauding investors, making it one of the largest alleged scams since bernie madoff's ponzi scheme. andrea day has our story tonight. >> today we're announcing the arrest of seven individuals associated with new york-based hedge fund called platinum partners. >> an alleged billion dollar fraud with many high-level executives taken into custody early this morning. >> mark nordlich, chief investment officer, and david levi, both charged together with three other co defendants. >> investigators say the billion-dollar scheme worked like a classic ponzi. and when the money started to dry up, some executives at platinum partners panicked and booked flights out of the
country. >> these defendants defrauded by falsely portraying their flagship hedge under, ppba, was thriving when, in fact, it was not. >> reporter: investors were left desperate for their money. according to the indictment, one writing in an e-mail to executives at the firm, i don't know who is in charge now, but i know it is unacceptable. >> platinum created a ppba fund in 2003, and every year since then, through 2015, reported on average positive annual returns of 16.8%. and not a single down year. >> reporter: in its prime, the fund had nearly $2 billion in assets under management. but prosecutors say in the past years, executives lied to investors and plotted ways to cover it up. >> between 2012 and 2016, platinum collected $1 hundred million. they had no value more than a
piece of cheap metal. >> reporter: executives at the firm paid back favorite investors first, allegedly describing what was happening internally as hail mary time. in brooklyn, i'm andrea day for "nightly business report." >> still ahead, perfect timing? the encouraging message of the share of the federal reserve for recent college graduates. ♪ of . major cities across northern china were under a blanket of smog on monday. in fact, it was so bad businesses were shut down and air and ground traffic disrupted more than 20 cities, issued red alerts, expected to remain in effect through wednesday. and this all comes as political and economic tensions continue
to linger between the world's two largest economies following the seizure of that u.s. naval drone last week. we have more from beijing. ♪ china's foreign ministry attempted to ease tensions over the drones, saying the chinese and u.s. militaries were in talks to negotiate the handover of the drones. they also cautiously defended beijing's actions, saying china's navy had a responsible and professional attitude to identify and ascertain this object, if you discover or pick something up from the street, you have to examine it. that was a very different tone from what was coming out of the state media, which both defended beijing's actions strongly and mocked donald trump. the people's daily called the u.s. survey ship a serial offender, spying against china. the official pressed more broadly, attacked the president-elect, calling him emotional for tweeting that
beijing should keep the drone. the nationalist global times said trump's tweets add fuel to the fire and said trump is not behaving as a president and has no sense of how to lead a super power. trump has indicated he wants to become much more aggressive on the south china sea. his choice for secretary of state, rex tillerson, also suggests a tougher line. under tillerson, exxon team with vietnam for oil exploration, drawing protests from beijing. analysts say that beijing is officially showing some restraint. however, they believe that if trump were to carry out his aggressive stance and turning that into official policy, beijing would also react with stronger action. some of the ideas are that beijing could recall its ambassador or perhaps even cut diplomatic ties. the state media appear its to be attempting to steer trump away from confrontation. the china daily said that trump should take president obama's
advice and think through what the consequences are before up-ending long-standing policy. for "nightly business report," i'm eunice yoon, in beijing. president-elect donald trump has picked a conservative congressman to be his budget chief. and run one of the most powerful and influential economic agencies. mik mill veiny. eamon javers is covering the story tonight from washington. good to see you, eamon. >> hi, sue. >> so if medical any is a fiscal conservative, how is that going to gel, or will it gel, with mr. trump's calls for massive infrastructure spending? >> yeah, that's going to be the fascinating point of tension. he's one of the members of the freedom caucus up on capitol hill. he's a republican from south carolina. very conservative. he's even billed himself as a member of the shutdown caucus. doesn't want to see any spending not paid for by any other spending cuts, traditionally. the question is, how is he going to view donald trump's infrastructure spending plans.
will they be able to come up with a way to cut as much as they spend, and where will they find those other cuts. that's going to be on his plate in january. it's going to be a very, very tough task. >> then, on the other hand, eamon, you have the president-elect's criticism of some of the aerospace contracts we have. most importantly, the air force one deal that he claimed was $4 billion. how does that jive with mr. mulvaney's strategies? >> that's an interesting one. mulvaney is one of the few republicans willing to call for cuts in defense spending, as well as in other domestic discretionary spending. so traditionally, you see a lot of republicans call for spending cuts. mulvaney has said he would like to see defense cuts, as well. that seems to align pretty well with what donald trump has been saying about some of these defense contracts. they're too expensive, and the contractors are sort of having one on with the u.s. taxpayers here. so that could be an area of convergence. but the whole question of
transportation and infrastructure is really a prickly one and we have to wait and see how they resolve it. >> eamon, thank you, as always. eamon javers in washington. meantime, apple appeals that european unions nearly $14 billion tax order, and that's where we begin tonight's market focus. back in august, the eu slapped the tech giant with the multibillion dollar tax bill, alleging the company accepted illegal state aid from ireland in return for creating jobs in that country. today apple said it has now formally appealed the eu's decision, adding the agency retroactively changed the rules and disregarded decades of irish tax law. apple rose fractionally today to $116.64. meanwhile, home builder lennar said an increase in orders and higher average selling prices helped that company post better than expected earnings. the company also said that it expects to perform well under a trump administration, even if
the fed does continue to hike interest rates. shares of lennar down to $43.40. and shares of clovis oncology got a lift today following the fda's early approval of the drug maker's treatment for ovarian cancer. the medication intended to treat woman who have an advanced form of the disease and who have specific between mutations. shares surged more than 8.5% today to $40.48. lands end has named a new ceo. jerome griffith. not bill griffith, former chief executive of tumi. he will succeed the company's two interim ceos. lands end shares rose nearly 4% to $17.75. and boeing warned it may cut additional positions next year in an effort to cut costs. the aircraft maker said some of its cuts will be a part of a voluntary layoff program in one of its units but the company did not disclose how many jobs will
be lost. shares rose to $156.18. the share of the federal reserve has some encouraging words for new college graduates. the class of 2016 is entering the strongest job market in nearly a decade. steve liesman has more. >> reporter: janet yellen had a mid year machine for college students. stay in school and get that degree. in a commencement speech at the university of baltimore, yellen told graduates that the pay gap between those with college grease and those are high school diplomas has widened to a 720%. but graduates only get those benefits if they, well, actually get the glodiploma. >> research shows higher education comes only to those who graduate. even those completing three or more years of college bench less when they don't get a degree.
>> for example, yellen said that college graduates usually find jobs that allow them to pay off their student loans, and there's more. >> beyond these advantages, research also shows that a college or graduate degree typically leads to a happier, healthier and longer life. >> those college agrees needed more and more because of globalization and advances in technology. the fed chair offered a fairly upbeat assessment about the u.s. job market overall. she said the u.s. has the strongest job market in nearly a decade, job creation is solid and the layoff rate is steady and there are more job openings. she cautioned the economy still faces challenges, including low economic growth and weak productivity gains. while yellen made no comments on monetary policy, a fed chair who sees a healthier job market tends to be more inclined to hike interest rates. but you don't need a college degree to figure that out.
you just need one for everything else. for "nightly business report," i'm steve liesman. coming up, point, click, shop. what the nation's biggest shippers are doing during their busiest days to make sure you get your holiday packages on time. ♪ blackberry is switching gears. the company, of course, known for its mobile phones with the keyboard is opening a research center for self-driving cars located in ottawa, ontario. blackberry will invest $75 million. the company which has been building software to run in-car entertainment systems will now
also build software to run self-driving features. crunch time for the shippers and companies like fedex and u.p.s. are pulling out all of the stops like mobilizing field staff and adding sunday deliveries. it's all to keep up with a record-breaking number of items ordered online. and as morgan brennen reports, the pressure is on to get packages where they need to go. >> reporter: the countdown is on. as u.p.s., fedex and the u.s. postal service scrambles to deliver an avalanche of packages over the coming days. today will likely be the busiest day for u.p.s. and one of the business just at fedex with both companies handling double the average daily package volume. it will also be the busiest mailing day for the u.s. postal service which expects thursday to be its peak delivery day. >> i'm a traditionalist and also i like the post office. >> i shipped about six packages out -- fedex things here and
there, but mostly christmas cards at this point because so much goes on. >> i think we rely pretty heavily on amazon prime. as a company to get everything here in time. >> combined, the postal service, u.p.s. and fedex plan to ship an estimated 1.8 billion packages this holiday season. to handle it, they began prepping back in january. adding new facilities, new tracking technology, mobile sorting stations, new planes and trucks and extended operating hours. including some sunday deliveries and in the case of the postal service, even service on christmas day. shipping software developers ship matrix says u.p.s. and fedex are posting solid on-performances. on par with the same period in 2015. >> as long as we don't have severe bad weather, a snowstorm, they should be able to hold on to the service levels they have. and the other is, consumers waiting until the day before, until the 22nd or 23rd for the
last minute, that is very difficult to overcome. >> reporter: that as all three parcel carriers anticipate a double digit growth of holiday volumes versus last year. so far, both u.p.s. and the postal service say they are on track to hit their growth targets, which include forecasts for $700 million and 750 million packages respectively this holiday season. fedex hack less forthcoming, so analysts expect an update tomorrow. but with just days to go until christmas and hanukkah, a lot could still go wrong, especially if, once again, consumers turn to the internet for last-minute shopping. for "nightly business report," i'm morgan brennan in new york city. >> look at that. i have a package waiting for me at home. >> excellent. >> okay. >> i'm going to go home and wrap. i'm behind. >> hurry up. >> that does it for "nightly business report." i'm sue herera. thanks for joining us. >> i'm bill griffith. have a great evening. we'll see you tomorrow name
"nightly business report" has been funded in part by: hss. our value principles are patient first, and we want do deliver the highest quality care. >> the goal of creating and sustaining value is all about putting the patient at the center of the equation. >> the purpose of this organization is to help people get back to what they need and love to do.