tv Nightly Business Report PBS August 28, 2013 4:30pm-5:01pm PDT
this is "nightly business report" with tyler mathisen and susie gharib brought to you by. >> sailing through the heart of historic cities and landscapes on a river, you get close to iconic landmarks, to lal life, to cultural treasures, viking river cruises, exploring the world in comfort. crude concerns, oil prices rise to the highest level in years but if tensions with syria continue to escalate, could a spike in gasoline prices be next? new mortgage rules, they are designed to take risk out of the market, but what could they mean for investors and home buyers
and the pace of housing recovery? and slashing college costs, even as tuition skyrockets, there is a way for students to get credits at cut rate prices. tonight we kick off the first of a three-part series on ways to pay for college. that and more tonight on "nightly business report" for wednesday, august 28th. good evening everybody i'm bill griffeth in for tyler tonight here with susie gharib. waiting for confirmation the u.s. and its allies are nearing a decision on staging a military strike against syria. that fear sent the markets into a tail spin on tuesday. today a different story, though, stocks ended higher, that after traders heard no further rattling about syria and after a surge in oil prices that actually helped lift energy stocks today. the dow ended higher of three straight losing sessions finished up 48 points, the nasdaq up 14, the s&p added 4.
crude oil up another dollar a barrel. it's first settle above $110 a barrel since may of 2011 and that helped the entire energy sector and sent shares of dow components exxonmobil up more than 2%. even though oil prices spiked higher, prices here at home at the pump are holding. that could change. hampton pearson explains. >> reporter: as millions of americans get ready to hit the road for the long holiday day weekend gasoline prices at $. $3.55 a gallon are up. possible military strikes against syria could be a game changer with some predicting a 10 cents a gallon spike in prices at the pump in early september. >> it's very, very likely if there is a military attack in
syria, we'll see the highest prices since 2008. >> reporter: in 2008 it was $147 a barrel and gasoline was over $4 a gallon. by october, both figures have been cut in half. what is different this time is that oil prices began rice rosi before the standoff when tensions in egypt began raising concerns about supply disruptions. >> what i think we'll have is the fear of supply interruption, which will get the rally and what it might also do is prevent ships from being insured. can't have ships insured, can't have ships in crude oil. >> reporter: unless and until there are attacks and reactions, figuring out the price of crude oil or gas will keep market watchers on edge. >> the economy and u.s. seems to be slowing. some production issues would resolve themselves and there is
a great argument for the price coming back down as rapidly as it may go up here. now aside from the tension in the middle east, u.s. markets are fixated on when the federal reserve will pull back on bond buying program. wall street is fond of calling it taper, but other markets and economies around the world are also keeping a close eye on the fed. let's take a quick trip around the globe. china, india and brazil to see how they might be effected. >> reporter: here in china, people feel this country would be immune with the u.s. federal reserve scale back. china has capital control so the money flowing out of the emerging market to the united states would mainly becoming from other asian nations. that doesn't mean china is totally out of the woods. analyst say the out flow of capital from this part of the year could hurt the economy.
>> quite a bit of panic since the fed came and look at the tapering of the stimulus program, depresuated more than 7%. stock markets jumped more than 10%. a lot of questions from the sii. stock tapering is not ready. the deficit is widening, gold is down and inflation specials remain high. money managers reading the measures taken causing panic mood and adding to the pressure. >> reporter: here in brazil, it led to capital flight, currency we can buy 20 against the dollar this year. aggressive rate rises have done
little to sustain the weaknesses and high inflation. the government is trying to apiece investors saying it has weapons. but you have to remember presidential elections are just around the corner, over 13 months away and as the recent civil unrest proved, people here take the royal in their pockets seriously. so let's hope this year socket world cup and 2016 olympics can brighten the mood in latin america's largest economy. now, some of those same countries are straddled with debt and political uncertainty and for american companies that have exposure to the markets, the risk is big. we have more on what it could mean for your money. >> reporter: emerging markets, once considered the saviors of the world economy thriving even in the face of the u.s. and europe's receptions, but now the
brick nations are threatened by debts, inflation and political uncertainty and those risks could hit the bottom line on some of the biggest companies in the u.s. it's a double whammy for the multi national, the emerging market currencies mixed their products and services less competitive and profits made in local currencies are worth less in dollar terms. agricultural names have exposure to brazil, a country dealing with political uncertainty. texaco and alcoa generate sales in russia. in india, a country dealing with rising inflation, american tower and pea body energy do a great deal of business. lastly, china, companies like advanced micro device vices gerate more than 50% of the revenues there. according to thompson reuters,
they are under performing the s&p 500 on a three-month basis. however, jp morgan's richard says that multi nationals with exposure to bricks could be a huge buying opportunity. >> if you watch currencies fall 10, 15, 20%, if you were looking at strategic investment you were planning to build up manufacturing domestically over the next two to three years, you'll uncrease the investment today because you got a haircut of 20% on the investment. >> reporter: while they battle over the fate of emerging market stocks, there is one thing they do agree on, further volatility and markets will continue as these countries assess what type of structural reform is needed to solve the problems. for "nightly business report," i'm seema mody in new york. joining us to talk about how investors can navigate through uncertainties from syria to oil to emerging markets, jeff with
us tonight, chief market strategist. good to see you again. >> thanks for having me on. >> we built a worry for investors. should they be concerned? we're going into the fall. we didn't get the tapering. the possibility of a debt crisis. should investors be concerned? >> it's understandable why they might feel uncommitted with the fed committed to the tapering and the u.s. committed to military action in syria and fighting over the debt ceiling. those issues left investors on the sidelines. it took along time for inveps tors to get back to even after the losses five years ago and understandable it may be cautious here. we don't see a major pull back of 10 or 20%, maybe another 5 or 10% move, which maybe we're half way through already. investors that want a hedge in the portfolio, may look to gold, may look to oil as effective edges in their portfolio. they tend to go up when
political risk rises but you got to be quick in getting back out again because once this military action takes place, they quickly reverse course. >> jeff, getting back to, you next some of the political risks here, talk us through what the market reaction would be if there is military action, if it's prolonged or if there is some kind of diplomatic resolution. what can investors expect in those scenarios? >> it's interesting. it seems to be now that we're committed to military action, the faster it's over with the decisive strike seems to be the best reaction. sometimes markets don't react in '99 and in 95 in bosnia it didn't affect the markets. precommitted to action in august of 1990 to where we took action in january of 1991 stocks fell. once action was taken, stocks rose, so i think we if take action and it's decisive, stocks will turn around on that. it's that lag between when we
precommitted and do it that's the drag. tied to chuck hagel's comments it might be days away rather than weeks but if there is a diplomatic solution, that could be positive but it needs to be decisive or clear cut or lier over the markets or along with those other issues, the debt ceiling or tapering. >> the stock market. what about interest rates and treasury markets, as we know the markets anticipate tapering, yields have been going up but when they fear the military action against syria yields go down. which way do you think they are going in the near term? >> they didn't come back much. that's what is interesting. they came back a bit but headed higher. i think in the face of the military intervention, which may not be that decisive. it may take place over the course of several weeks. i think yields are probably headed higher. not dramatically but simply because the economy, domestic
concerns, not foreign ones and i think are affecting the bond market. >> jeff, quick question because we have to go now, what about cash? is it wise to put money into cash now and sell out stocks? >> i don't think so. cash is earning a negative real return. they need to stay committed. >> jeff of lpl financial. thanks for coming on. still ahead, what do "the new york times," twitter, and huffing ton post have in common? they are victims of hack attacks. how well-prepared are businesses to prevent future ones? that's coming up but first how the international markets closed today.
some news tonight about housing. pending contracts fell by 1. 3% in july coming off more than a six-year high in june. a realtor's group says the recent rise in rates averaging around 4.6% for a 30-year loan may be keeping some would be home buyers on the sidelines. a banker's group reports applications for new mortgages fell this week with a sizable drop in refinance. speaking of mortgages, new n les aimed at cutting risks i the mortgage market. the fdic, the federal agency approved a new rule that require mortgage lenders to keep a stake in the loans that are bundled up and sold as securities. diana olick joins us from washington. dianna, rules, more rules, we keep getting them from washington. tell us about the details. >> reporter: i just want to clarify these are proposed new rules, and they haven't passed
anything. n they are still putting them out for comment. this is the second go round they have done with the rules. they are about a qualified residential mortgage, that is which mortgages from the banks would be exempt from risk retention under dodd frank and what they have done is loosened up. the first proposal two years ago said the mortgages had to have 20% down. now they are saying they will take that out. they heard from the banking industry, the banking industry does not like that. they are lining the rules with the cfpb that have been put into place this year. so when we say new rules, they are copies of rules in place. >> what do they mean for investors and by the way, home buyers as well? >> the new rules going into place, which a lot of banks are using, will make it more safe for investors and owners. they will take a lot of risk out. you can't have the negative loans, the interest only loans that were really a big part of
the housing crash that these were loans that were very poorly under writ and went back quickly and caused the housing crash. it will be tighter. things are already tighter, as we know. they will clarify the risk retention for banks, which will make things easier for them to understand in this realm of rules. it will also safeguard borrowers, even if it makes it harder to get the loan. >> will this be good or bad for the housing recovery? >> it depends on who you ask. there are people who say there are too many rules, rules upon rules and what we need is to loosen up credit to get more home buyers back into the market. then you said wait a minute, there are others who want the safeguards in place, want to know the mortgage market is going to be a place that will not crash the way it did five years ago and that we won't see the kind of mortgage abuses that we saw back then. so again, it's kind of a double-edged southwarword.
it will make it stricter to get a mortgage. >> thank you. see you later. elsewhere, zale posted first profit since 2008. strong sales driven by the edition of exclusive jewelry lines that offer high margins zales beat earnings and the stocks soared almost 30% on that news and closed at $11.63. shoppers were spending at express. the apparel retailer topped analysts estimates for the third quart near a row and boosted the profit forecast. the ceo says customers are responding enthusiastically to the selection of merchandise now and the stock climbed as a result more than 6% to $21.10. but at chiccos the women's apparel retailer says sales and profits are down.
the company blamed it on lower traffic, fewer transactions and less money spent. investors brushed that off after the ceo said much of the inventory is cleared out. that was enough to send the stock up 4% to $15.95. william sanoma posted earnings higher than analysts estimates but the profit outlook fell short and gross margins stopped so pressured the stock and it lost 4% to $56.97. a good day for shareholders of the wireless chip maker, avago. it's getting a boost at some of the world's biggest smart phone makers launch new products. the chips are used in apple iphones and devices made by samsung. the stock rose 5% to $38 and
change. a new warning out today just how vulnerable your cell phone might be to computer virus. smart phones using google's android operating system are the target for malware attacks. the devices received a staggering 79% of all malware threats to mobile devices last year with text messages hiding about half of all the malicious software out there. hacking this week at the new york times, twitter and huffing ton post a lot of e companies are evaluating how safe their websites are and how prepared they are against an attack. we have more on what companies and security experts are doing to protect against future intrusio intrusions. what are they doing? >> not enough if you talk to cybersecurity experts. cybersecurity experts telecom pan knees to buy more software
but what we saw with the new york times is an attack the times said in particular was done by the syrian electronic army or somebody trying to appear like the syrian electr electronic army. that's a group loosely affiliate idea the with bashar al-assad which raises questions for companies and institutions trying to defend against cyber attacks. will they reap blow back for foreign u.s. policy decisions as hackers respond by targeting american companies? that's something new that we haven't seen before. >> this has to hit them in the pocketbook. what kind of lopses are we talking about? >> "the new york times" website was down for certain people trying to access it, not necessarily for everybody. they were trying to get it up quickly. the revenues lost probably not
significant. what the problem will be is if the hackers are able to get beyond just the public facing website and get into the guts of some companies and get credit card information and material operations of the company, that's where you see significant losses. >> the other issue on the side of the businesses, these are high-profile companies that put out news they are hacked but other companies think it's taboo to say they are vulnerable and have been hacked. how much is that of them holding back? >> that's a problem because the companies who are their clients, they are work pg with these companies to prevent the atta attacks, they don't want any details getting out because there is money at stake on some disputes over who is responsible, partly for brand protections reasons. they don't want to be embarrassed. they would like them to be more forth coming and tell americans, tell customers when they have been hacked because that will show the scale of the problem and types of people doing it and things they can do to solve it.
>> i suspect we'll talk more about this in the future. >> thank you. >> amen jaif vers joining us tonight. some schools letting students get deep credits but first, the three-part series on new ways to pay for college but first, how commodities, currencies and treasuries performed today. jp morgan chase is facing for federal fines. the largest bank may have to pay as much as $600 million in penalties as a part of a global settlement over huge trading
losses last year in the so-called london whales scandal. today, word the government's consumer financial protection burro is expected to fine the bank $80 million for selling a credit card identity theft protection service that didn't deliver on promises to customers. another big fine, this one against a huge casino operator, las vegas sands agreeing to pay more than $47 million to settle a federal investigation after it failed to stop money laundering when a gambler with known links to drug trafficking made millions in money transfers through gameling operations. colleges everywhere are back in session this week and tonight, nig"nightly business report" looks at new and creative ways people are paying for school and making that college education really pay off. in the first of three reports this week, marry thompson tells us how some schools are letting students get credits at cut-rate prices. >> reporter: there is no mook
you but mooks are massively open online courses are a small but growing presence like san jose state university. here is professor ron rogers. >> being able to teac teach effectively online is holding the cost down. >> reporter: partnering with odassity opens up to hundreds if not thousands of more students at more flexible times and at a lower cost. the cost that is still needed to cover fees for transferring moot credits and pay professors to grade papers and test students to make sure course work is completed. the savings can be substantial. herriot took a move to fulfill a math requirement. the $150 she spent, $1,550less than the cost of a campus class.
>> the cost of having to travel to san jose like every day, that saved me a lot, and also, i was able to study on my own. >> reporter: the cost saving is important, give an year at a private four-year is $49 and a public college over $17,000. other schools folding and the state university of new york estimates they could cut the cost of a college degree by a third. and while educators down play muks work better in engineering, science and hath as college costs continue to rise, mixing a muk in could cut the cost of college by degree. for "nightly business report," i'm mary thompson. tomorrow we continue the series of ways to pay for college with a look at how some students are turning to crowd
funding to finance the high cost of tuition. tonight, we commemorate the 50s anniversary of dr. martin luther king junior's i have a dream speech. tens of thousands of people including marchers there for the original speech, civil rights leaders, politics, ordinary americans took to the national mall today to remember the words of dr. king noting how far the nation has come for equality to all and how far we have to go. president obama spoke from the very same spot where dr. king spoke those unforgettable words on the struggle for civil rights half a century ago. >> but we would dishonor those heroes, as well, to suggest that the work of this nation is somehow complete. the universal may bend towards justice, but it doesn't bend on it's own. to secure the gains this country has made requires constant
vigilance. >> i can't believe it's been 50 years. >> i was reading the speech today. gives you chills. >> it does. >> that's "nightly business report" for tonight. i'm susie gharib, thanks for watching. >> i'm bill griffeth. thanks for watching. see you tomorrow. "nightly business report" has been brought to you by. >> sailing through the heart of historic cities and landscapes on a river, you get close to iconic landmarks, to local life, to cultural treasures, viking river cruises, exploring the world in comfort.