tv Nightly Business Report PBS July 20, 2009 6:30pm-7:00pm EDT
captioningponsored by wpbt >>aul: c.i.t. reportedly aches a deal with creditors for $3 billion in w loans. thlifeline for the small business lender hes give wall street a boost. >> suzanne: when it mes to health care refo, president obama ys it's time to stop talking and start working towards legislatio but figuring how to pay for it continues to be an uphilbattle for lawmaks. paul: weaker demand for cel phones led to a op in quarterly ofits at texas inruments. we'll take a broader look athe tech sector and at those companies say about the ouook for the econy. >> there are just too ny carriers chasi too few passenge and the industry has to shrink. >> suzanne: bugetting smaller y not be the only option. the future of domest airlines
this program was made possib by contributns to your pbs station from viewers like yo thank you. >> suzannegood evening everne. it's rare when a financial services stock surs nearly 80% in o day. but that was the case for c.t. group today on repor it has fod a way back from the brink of bankruptcy. w jones says c.i.t. bondholders ve agreed to rescue the century old commercial finance firwith a $3-billionoan. much of the money wille available immeately. and c.i.t. reportedly uld be able to reructure outside of a bankruptcy. c.i.t.ends to mostly small and mid-sized businesses. and funds self by selling nds. so when the credit marke froze, it was inrouble. the treasury department habeen in talks witc.i.t. for a fedel bailout. but that plan didn't materialize. so far, no comment from i.t. on the repor of a funding de.
>> suzanne: joining me now wh hithoughts on that c.i.t. deal as well as his outlook for t stock market is stuart schweitzer, global rket strategist at jp morgaprivate bank. stu, welcome back to the program. >> thanks so muc sues n. >> suzan: tell me about this c.i. deal. how importt was it tod, do you think, in continuing is overall potive tone that 've been seeing in stocks? >> oh, i think it was really important. c.i.t. hasbout a milon customers in ameri. and so fincing from c.i.t. is really important partularly as you said a moment ago to smaller businessesll across america. >> suzanne: not only the c.i.t. deal but beer than excted earnings were ao out ere again. they have been for the last week or so. helping to sort of set this ce tone for the maet. when you talk about earnings, yore not really talking aboutrofits beingetter th expected. you say we should focus on revenue. tell me why revenue is so important to this story right
now. >> sure thing. i want to s both earngs and revens but paicularly revenu, saeltz revenues, very important he, because take the first quaer. ke last quarter. companies beaton earngs timates but their revenues fell short of wall street expectatio. how d do tt? how did they beat on earnings? unfortunately it was cutng by cuttingo much stf, cuttg jobs. i want to see revenues get better s companies can sp cuing people. >> suzanne: and do you eect this te for better revenues to continue? what are we seeing from companys in terms of guidae about th third quartero far? >> it's begin to go get a little bit bter. so far throu the early stes of this reporting season, the companies that have reported have come in with average revee gains of somewhere around 5%. not too bad considering that the economy has been shrinkg. but i wouldt expt an immediate turnround in the lar market. in the last couple of cessions it took basically 15 to 18 months until the recession end until the unployment rate peaked.
i hopet will come sooner thisime but i do think i will take a bit oftime yet. >> suzanne: everyby has been mentioning the jobless recovery. the thg that you told m earlier when we spoke that worries yothe most the the human toll of this recession. all thes jobs lost. i mean, ho is it possible that we're going to continu toee a market, y know, rally, when we're seeing all the job cuts connue? >> well, i think it's very challenging. the market rally couldn't contue, in my opinion for the long term unle consumers are able to start spending again. but in the near rm if companies produce better earnings difutput begins to irease because companies have slashed their invtory so now they see... nowhey need toamp production back up, i thinkhat can create a little bi of positive spiri around the enomy and can he the market to continue to do better for a while. >> suzanne: at is your best guess? do you believehat this rally is for realr do you think that this is potentily a bear market trap? >> ihink thisally is for
al but it wasn't en tested yet. it hasn'teen tested by continued high unemployment which we're ing to have. it hasn't been tesd by a nancial problem that maybe don't have a as successful a solution maybe sothing that comes out of the european bankingystem where there are many pblems. >>uzanne: i kw you're a glob strategist. which economi are lily to come out ofecession first and what are thenvestment implications of that story. . >> i think it's verylear that number one out is noasia asia. japan is kind of sluggish he. the rest of asia l by china is alreadyoming out. china had 8% o 7.9% g.d. growth reported just a few days ago. thehinese government says they're ing to keep up the veryeavy stimulus spending that they've been ing. then i thinke'rectually seco behind non-japan asia because we areoing ever so much to promote growth here. europe, i thk, and japan i
think, lag behin they're doing less. and they're much slower to correc t problem of rising labor costs. that is painful herehen we make the cuts, but it positions u to be mh me competitivglobally. >>uzanne: stu, i think we have to leave it there. ank you for jning us. >> always a pleare. >> suzanne: my guesttu schweitzer of morgan private nk. >> paul: ting its cue from vancing world markets, wall street opened high getting more traion from brokerage grades on caterpillar and harley-davidson. at miday, the dow was sporting a 71 point gain with t nasdaq up 16 pots. progress in rescng c.i.t. from bankruptcy was a positi as was growing optimism abou corporate earnin. it all added up to sid gains at the fal bell.
>> sanne: a government watchdogeport says the total cost of e government's oubled asset program or tarp could reach $24 trlion. that's abo $80,000 per taxper. banks re supposed to use that moneto increase lending. but neil barofsky, tarp spial inspector general ys they also used the funds for oth things. his repo surveyed 360 banks. among the findings:
nearly 40% or 144 us some of their ta money to build up capital cushions. 52 ban repaid debts and 15 used the funds to buy othe banks. about 80% of the bks also said some of the money had pported new lendg. toeep better tabs on those loans, barofsky wants the treasury to requirtarp recipients tsubmit periodic ports. we'll find out more morrow about baroky's recommendaons, when he testies before congress. >> paul: with congre getting readfor its summer recess, this is shaping up to a critical week for heth care reform. it's theresident's top domest agenda item and he is making a major push touild support. but as darren gersreports, the chalnge is not just litical. >> reporter: witthe apollo 11 astronauts todaythe president must have ndered why it took less than a decade to get to the moon, but has tan more than five decades to get this clo to a health careverhaul. unlike the dramatic spe race, alyst paul ginsburg says health care refo is not about winning, it's about cuttin
costs and keeping people fm losing coverag >> so a sense it's preventing bad things fm happening, and that'sore, a lot harder to do than pnting out a positive ing that a lot of people wou be eager to get to, which very clearly defed. >> reporter: this week, congress isocusing on things it has not been eager to do. key committees ctinue to search for the money nded to insure allmericans. with no obous solution in sight, policy analyst alec phillips says the white hous has toned down i call for immedie action. the white house is starting to realize that this is gointo be very difficult push, that there are a t of challenges not only political, but scal, and that some of the difficulties that they fe can't really be solved throu pushing congress tact quickly. >> repter: with polls showing public support softeni, the president trying to keep the pressure on. after visiting aospital, he said it was time to st talking the problem to death, rning there is aost to inaction.
>> jobs will be st. take home pay wille lower. businesses will shutter d we will continuto waste hundreds of billions of dollars. >> rorter: one option is to scale back the size ofhe reform package phillips says lawmaks could focus on wherehey do agree: creating aealth care exchange foinsurance and finding savings in medicare spenng. so on both of those issues there is some kern of agreement, the questn is how far do y go on both fronts. >> reporter: white hou health care sposwoman linda douglass says the plan is tachieve the president's original hlth care goals. >> wt the president wants is legislation that igoing to lower costs, is going to protect yourhoice of doctors d plans. it's gng to assure affdable and quality alth care for all americans. >> reporter: ithe early '60s, present kennedy said we choose to go to the moon nobecause it is eas but because it is hard. fitting wordfor health care form as well. darren gersh"nightly business report", washington.
>> suzanne: so of the biggest names in technoly report earnings this week. yahoo, applend microsoft are ong them. but don't exct those numbers tell the same story. as scott gvey reports each company will paint a dferent picture out how it and the economy are doing. >> rorter: so far so good for instors in tech stocks. early seco quarter earnings mbers are good, but there remain many questionfor the weeks ahd. last week, iel had an encouraginglbullish forecast looking ahead to theecond half. but the semicouctor sector needto see confirmation from texas instruments,md, sandisk and oadcom.
when it comes to hardware, dl is falling wayehind its rivals one of the ibm, raised its tlook for the year, but it said the economic enronment remains tough. analyst thomas smith of stdard and poor's ss i.b.m. and hewlt ckard are the stocks to watch here. >> both those coanies have diversied into services and through this dowurn their puniment on the revenue line, if you will, has beeless sere than i think it might have been had they noteen diversifyingver the last five years and th's helped steady their ships and th now look ke strong strategic model th working prettyell. >> repter: two other tech giants report this week. ple tomorrow and microsoft o thursday. analysts say iestors need to focus more on what these companies say about thfuture than what they say abo the past. ple is as much a phone and nsumer electronics company a it is a couter firm these ys. microsoft'report will be noted for s projections about upcoming ses of its new operating syst, windows 7, and for progress by its ng search engi tom lydon, editor of etftrends.com ys
eleconically traded funds like ishares, dow jones, us tec select, antechnology select spdr, let inveors spread risk and avoid having to pick o technology playeover another. >> the great thing aboutt besides the diversifation is its effient. its liquid. it tdes interday and the expense ratio isust a fraction ofhat you would pay in a mutual fund. >> reporter: speaking ofaying, experts say as soon as businesses startaying for compers and other gadgets again, you would be se to invest in the companies th make the par that go into th. scott gurvey, "nigly business repo", new york. >> paul: and n, let's take a lo at some stocks in the news tonight.
d those are the stocks in th news tonight, sunne. >> suzanne: the skies ha been anything b friendly for the nation's airlines during t recession. e air transport association says airline reven plunged 26% lastonth. that's the eighth straig month of losses. as dia eastabrook reports, carrie are battling the global economic slump, and thloss of their mo lucrative passengers. >>eporter: this isn't the best time to be an airline. fuelrices have been bouncing up and down. >> united, you bke my taylor guitar. >> reporter: there's thapesky youtube vio skewering baggage handlers at united airline and worst of a cash-strapped buness travelers have eier cut way back on flyi or like alex paris are only flyi coach. >> we'd rather travel twice as much than to traveless at higher lury. reporter: analysts say a precipitous drop in ll fares
is the pmary reason profits are plunging at many airlis. trouble stted last fall when the global economy nose did, taking businestravel with it. so, lucrive business travelers who pay more to ok late or sit at the front of the ple have practically disappeared. add to that, leisure tralers are only buyg heavily discoued fares. fih ratings airline analyst william warlick says those expensive fareare how airlines ke money. >> most the global legacy carries would rely on 40% or more of their passenrs being businessriented. anobviously they pay a higher fare, they are higher yieldi customers and th tends to drive halff the airlines total passenger revenue. >> reporter: the revue hole could spl trouble for the airlines if busine travel doesn't ke off again. ne year, the major carriers along with sthwest and jetblue haveore than $8 billion in de maturing warlick says refinancinthat debt could be difficult if credit marks remain tight. >> i think it's veryikely that at leastwo or three of the big
rriers will have a significa cash problem on their nds by early 2010 the question is w much cooperation they get let's y from the banks and credit card processorto continue operatg with very compromised liquidity positions. >> reporter: the airlineare working aggrsively to save moy. they're cuttincapacity, elimining routes, and rloughing workers. but experts sait may not be engh to avoid bankruptcies. u. airways, united airlines, lta, and northwest all reorganized under chapteeleven within theast few years. moingstar airline analyst basili alukos ubts another round of reorganations would help he wants to see eith mergers or a liqdation. >> at thend of the day there are st too many carriers chasing too few passenge and the industryas to shrink. >> reporte there's some spulation that uncle sam could throw the airlines lifeline. bumost analysts doubt the u.s government or taxpays would stomach anher bailout, especially to an industry st experts say mu get smaller.
diane eastrook "nightly buness report" chicago. >> paul: tomorrow, aloser look at how those airlines are ring when contineal, jet blue and ited airlines report quarter results. >> suzanne: online bker td ameritrade will buy backlmost half a billion dollars i auction rate secities owned by cuomers. it's part of aeal with new york's attorney general to ttle charges ameritrade misl those customers. the auction rate secities mark froze last year but some okers still sold them as liquid investments. new york's attorney neral is nothreatening similar charges for charles schwab company. schwab denies any wronoing. >> paul:eanwhile, morgan anley has agreed to pay half milln dollars to the s.e.c. to settle crges one of its adsers misled clients. the agency said rgan said one thin but did another, when recommending money magers who had nobeen okayed by the firm.
>> suzanne: re now on health re reform. toght's commentator says if we want to fithe system, we need to recognize a few key pois. he glenn hubbard, an of columbia'sraduatschool of business and former head of the council of ecomic advisers. >> reding health care costs would be big plus for our economy and the budget. heth care occupies a large share of the u.s. economy,nd escalatingealth care costs stall wage groh and job creati. unfortunaty, congress and the obama administrati are on the wrong pa: new mandates and the creationf new unaffordable health care entitlements. the mandes will reduce both wages and employment. the new entitlements wl add to already soaring national debt. to the extent the prosals adess this concern, they do so througlarge increases in marginal tax rates, liming growth and empyment. and the bills will raiseealth care cts by accentuating
current problems with alth insurance. e house and senate bills wou shrine the flaws in current emoyer-based plans that are responsible for high and risg health care costs, flaws tha stem directlfrom the misguided tax exclusiofor employer- provided insurancend the hundreds ostate mandates for covege of health care providers and procedures. to move foard, the country must begin twoeparate debates. the rst: how to improve health insurance toeign in the epidemic ohealth spending that fails to providealue for money. the second: how to impro access thealth care for those who cannot afford it. washington's reform escription is deadly, lets not fillt and get a seco opinion. i'm glenn huard. >> suzanne: and finay, today marks th40th anniversary of apollo 11's landing on theoon. it was one sll step for man e giant leap for technology. thpractical applications of the space program ha touched
every ar of our lives. they range from thgs as complicateas efficient structuresor semi-conductors the simpler aerodynamics of golf balls to beer brakes on carsnd trucks. spacexperts say for every dollar we spd on r&d for space, we get back seven dolrs in eventual economic gwth, paul. i wod say that is a stellar ra of return. >> paul: i wish they'd do little more research on t go balls i use. th're all over thelace. >> suzne: i had a feeling you were goingo say something just like th. that's "nitly business report" for monday, july 20. i'm suzanne pratt. goodnight, everyone. and good night to you,aul. goodnight, sanne. i'm paul kgas wishing all you the best of good buys. "nigly business report" is made possible by: