tv Nightly Business Report PBS August 18, 2009 1:00am-1:30am EDT
captning sponsored by wpbt paul: u.s. stocks take it o the chin with the dow posting its biggest drop in ov a month, down 2% at has some wondering if the summerally's over or just taking a breather. >> jeff:oday's selling started in asia and spread arounthe globe, despi japan's emergence from recession. glal markets strategist stu schweitzer joins us r a look at the b picture. just to be on the safe sid we decided not tkill any engines shred any cars until the government funds the program. d pays for it. >> paul: sam mansouri'among thousands of car dealers waing on a "cash forlunkers" payday d wondering what's nexfor the industry >> jeff: then, shares of lows
this program was me possible byontributions to your pbs station from viewe like you. thk you. >> jeff: good eveng, everyone. stoc tumbled today as a global sell-o spilled over to wall street. dragging the globaeconomy lower. on wall street, the lling was broad and deep, thedow dropped 186 points,nasdaq fel 54 and thes&p 500 los 24. woies about the recovery and consumers' willingness t spend has se wonderi the summer rally is over. erika miller gets some answs. >> reporter: these may bthe dog days of mmer. t man's best friend isn't th only one trying beat the heat. stocks are also tang breather.
after a steamy summer lly that sent the s&p 500 u15% in a month. the bulls say 's just a temporily lull. s&p's sam stovall sees more an 20% upside forhe s&p 500 from re, although he won't give a timeframe. >> i think there a combination ofoth fear of missing out on the rally. d an economic rationale. i think now, based omost recent data,hat we will probably see a positive thir quarter g.d.p. rather than the negativehat we were earli expecting. >> reporter: b not everyone is optimistic. the bes say the government's massive stimulus effortsave made consumedemand look healier than it really is. that's why porolio manager emmael ferreira warns against buying most u.s. stos now. >> it makes the picte extremely clou because you are talking about so many one me events that arso large in natu. th they're tremendously disturbing and distortivof what the actuaeconomic view is
>> reporr: he says investors should position themselves defensively by loong for stocks wh low valuations, strong earnings growth and a conservative balan sheet. ferrei says he won't turn bullish on the broader mart until there's gnificant improvement in housing. >> fst and foremost i think in the u.s. you have toee housing start grow again. and we're not eing that. as a mter of fact, theousing numbers coinue to be bad. >> reporter: but even the bulls are warning of wild market swings in the comingeeks. september is fast approaching, historally a terrible month for the stock market. >> sepmber is by far the worst month for the s&p 500. whetr you look back to 1990, 1970, 1945 or 1929. it the only month that has a negative price perfoance, on average, for allf those four peris. and it has a frequency of decline of more than0% >> reporter: with th kind of reputati, you might even call september a month for thdogs.
erika ller "nightly business report" new york. >> jeff: our guest tonights optimistic abo the stock market he thinks today's seoff is merely a pse that refreshes. stu schweitzer is glal markets stratest at jp morgan private bank. stu welce back to "nightly business report". >> always a easure. >> jeff:ou know, i n't know you've sn the headlines or not these days but things loo rather bad out there, so w the optimism? well, you know when -- when people feel that there's no, no potentiafor things to d better, when all you hear is bad news, then i start think that mayb it's pretty well priced in. admittedlyhe market mod awfully far, aully fast the month of july but i think after meetback here while we wait for third-quarter earnis that the market will endupoving sowhat higher in the balance of theear. >> jeff: stu, if theconomys bottoming he, what's dring this growth or at least this
botting process? if the consumersre not still spending, whois doingthe bung out there? >> wl, for sure, the conmer 70% ofthis economy and the consumer is not read tostart spenng yet, not until the j market comes bac, but compani have been underproducing a ar long. they've en producing fa ss than people have been selling and that mea there's a big deficiency now in the amot of goods on thehelves. even some of thes retairs that have repord disappointing sales ve nonetless reported decent profit mains because they've nohad that much on the shelves they've ha to diount sharply. now think we're going to see output start to increase. ere's already ite a bit of evidence of is, not only here but around the wod. and wh cporate costs having been cut srply, iwould expect any irease in oput will mean an increase in reven and much of that ll drop straight through to the bottom line. >> jeff: so for now, this is companies rebuilding their inventories, restockg their
warehousesthat sort of tng? >> exactly. thenhe question, jeff, becomes do ty have to hire peopl back? hang cut laborosts so sharply, having fired so many workers with suc a he han ll, do mpanies now find at they need more people now that they're gointo ramp up pruction to some extent? that's going to termine to wh degree the csumer is able to come back. >> jeff: do you takeny optism from some of the bits of news we s out there with japan emerging fr recession an some sort of signs of spring if you will, in the economies in europe? >> i tnk all of themare revering to the extent they are and to me it looks pretty minimal so far. mainlyrom the same process, the process inventory rebuilding. japan had its production c the sharpest of any major economy around the world and it has no nearly seen thebounce backven though it had positive p reported tay, it's not nearly seen the unce back in
production that would need to have to make up for t shortfall of the las6-9 months. i do think tt the world does need the u. consumeto come back eveually. you know, look at china how mh ey were exporting to the u.s and tse exports have slowed down,ut for a time, thi economy and the stock mket, i think, can benef from incrsed production from e shortage of goods on thshelve shelves. eventually, that's not goingo be enough and i wouldn be rribly optimistic abt the pace of growth yond this inveory rebuilding period. i think that'set to be determin, buthile inventories are being reilt and tput is creasing, expect companiesre going to make a lot mor money. >> jeff: you kw, onehing you said in the past, you saidthis recory will not feel the way it should feeln terms of consumer sentiment. elaborate a little bit on that for us? i think th's extly it.
we normallyhink a recovery ans more job growth and means consumers feel better, open their llets and start to spend more liberally. here, i thk the start of recovery has to emanate fro, recovery h to emanate from the corporate sector, from the entrepreural and animal irits almost of the corporate sector that reonds to the opportunity to make a bigger profit by hing people back. >> jeff: all right. we'll wait to see what the consumer does aftethat. >> let's hope. >> jeff: stu, i appreciate your time on thprogram. >> aays a pleasure. >> jeff: ourguest, stu schweitzer global market sttegist at g.p. morgan. >> paul: wall street took it opening cue fromteep selloffs inost world stock markets which gave way to pessism over e staying power of recent gains because of cauous consumer speing. e dow tumbled nearly 200 points by 11 a.m. withhe nasdaq off 50 ints. stocks stabilized er the mid- sessn hours with the help of a rise in e new york region's manufacturing activity. then, thanks to ate buying of so committed bulls, the market ended slightly abo the day's lows.
buyer tax cred. but builde are also concerned because that pgram which has helped lift sales ends nember 30. they're rried the sales mentum will dry up when the tax credit ends. >> paul:hile policymakers say the economy's improving ey're extendg a key consumer lending program. e federal reserve's term ass lendg facility or talf was suppos to end on december 31, it wl now run through march 31. the move comes athe central bank released its latesturvey of loan ofcers showing they expect bank lending to rain tight througthe middle of next year. the talf has held provide more credit for auto, stude and coercial real estate loans since the market for pvate credit seiz up. >> jeff: thebama administration is trling the numb of workers processing cash for clunkers claims the move com as clunkers pile up at auto dealers across th country th few dealers being reimbursed. stephanie dhue reports whil
dealers are thried with the new-und sales they're anxiously awaiting a cck from uncle sa >> reporter: cash for clunke has en a boon for auto dealers like sam mansouri. hiback lot is jammed full. >> we had a record month las month in sales >> reporter: while salesre soaring, his hyundaiealership is sti waiting for the vernment to pay for the 250 clunkers he's takein. >> i tnk it's gonna be all fine, but it'sery nerve- racking sitting, waiting forll the funds. >> reporter:1.2 million worth. to play it safe, he's decide not to kill any gines or shred any cars until the money isafe in hand. >> a delightfucatastrophe is the best w to put it, we're excited because we are selng cars, doina lot of work, but it's been a mess becauseo some degree it's anlement of unknown, it's something new at neither us nor t government real had any idea how to do it. >> rorter: the story is similar at oer dealers we spe with. sheehy auto stores is waitinon nearly $3 llion for its 700 clunker deals. the dealership recved its first paent from the
government on fridayor $4,500. a survey lt week of virginia dealers found the governnt ocessed 9% of trade-in's, rejected 9 and paid fewer than 3%. and while dealerworry about being paidthey are also woied about what's next. auto analyst recca linland lowered her sales focast for next year, as someuyers moved up pchases to take advantage of the program. >> we have seen somencremental sales or really true new buys in thearket, probably about 150,000 to 200,000 new bers in the rket, so they're not all pull ahead, some lonterm benefits he, but we'll feel a little bit of this in 2010 >> reporr: dealers are already working to stimulate newemand, consering programs to keep the ca for clunkers sales momentum rolling. but nsouri worries about customer expectations. >> evebody will think that there car is worth somethi, the reality ist'll sink in,
you're $500 car isorth that, $500 there's no inceive, no program it. reporter: the cash for clunkers program is excted to run out money around labor day. dealers have mixedeelings about thprogram ending, worried abouthe impact on sas, but also eager to get paid and move on. stephanie dhue, ightly business rort", fairfax, viinia. >> jeff: t justice department calls ithe biggest identity theft case in u.s. history three mehave been charged with
haing more than 130 million credit and debit card number from the cputer systems of five companies, including eleven and superrket chain hannafd brothers. federaauthorities say 28-year- old american albertoonzales and two ruian men, used software programs steal the informion. gonzaless no stranger to these types of charges. he's already in jail, awting trial relateto a security each at tjx stores, that snagged million credit card numbers. >> paul: sears and k-mart wa customers to sta saving for holiy presents, now. today, parent sears holdings dusted off the conpt of a christmaclub account. it lets shoprs store funds on a ses or kmart holiday card to be used for chrimas spending. consumers have uil october 31st to start saving and quafy for a matchi 3% reward of up $100. last year, theetail siblings resurrected their lay-away progms to help consumers manage holiday speing without rackg up credit card debt.
>> jeff: many consumers who ve racked up thatebt are having a rd time paying it off. capital one says its0 day crit card delinquencies rose last month adid its loan char-offs. that's the accounts it bieves will neveray up. capital one cate to borrowers wi lower credit histories. sot's not too surprising that its rivals saw aomewhat better piure. credit card charge-o rates fe slightly at citigroup, american eress and discover financial services. bankf america, which has the highest default and linquency rates ong the top credit card issuers, said its chargeff rate inched do just a bit from ne to july. >> paul: bank of america and citi shares were ang the big board'most active. we'lsee them as we take a look at our stocks in theews tonight.
>>aul: and those are the stocks in the news tonig, jeff. >> jeff: reader'digest associatiowhich publishes the country's most popular genal interestagazine, is filing for chapter 11 banuptcy protection the company has ached a deal withenders for $150 million in financing, so it canperate whilreorganizing. decling circulation, a drop in advertising and a $2-blion debt load dre the move. reader'sigest hopes to shed about $1.5 billion of that debt while in bankptcy protection.
>> paul: tomorw, hewlett packarchecks in with quarterly results. we'll see hocomputer sales are trending as the tion heads back tschool. >> jeff: chaes schwab corp was sued todayy new york attorney general andrew cuo. he accused the brokerage business of misleading custors in the sale and rketing of auction rates securities. cuomo was schwab to repurchase the securities at face vue from investors schwab says the alletions lack merit. instead, theompany says cuomo shld go after the underwriters that deceivebrokers about the safety of auction rate securities. >> paul: dreamworks studioas gotten the grelight on its fundg. even spielberg's company has completed its 5 million dollar financing al with indian conglomera reliance ada group. the financing has be in negotiations since dreworks cut tiesith viacom'saramount picturesast year. walt disney will nowandle dreamworkstudio's marketing and distribution.
haveegs. he's berrd baumohl chief obal economist at the econom outlook group. >> here we are in e middle of aust, with its gentle, mellow days of summer. it's a time to re-energi by joying diversions outside th office. but with august's arril also comes a sense th summer is slowly starting to slip ay and that conjures up the questioof what comes nex that question s taken on more aning now. as the recessi fades this summer, we wonder what comes next for the econo? does the emerging recoveryave legs? will it st through next year? some predict this covery will be temporary a that the u.s. wi slip back into recession in 2010. this group args that household and bank balan sheets are still in awful shape, and th a new wavef bank losses will occur om failing commercial real estate loans. y upturn in the economy will
thus proveo be short-lived, they say. but that scenao is not likely my opinion. one powerful and often overlooked soue of strength during a recovery is the enormo pent up demand by consumers. amicans postpone their spending on aus, houses and ho appliances during an economic downturn anthis downtu was the longest in 80 years. but wi the worst of the cession now history, look fo the 90% of the work force o do have jobs to ueash some of thatent-up demand. that, and the deral stimulus prram, should provide the criticalass needed to keep this recovery onrack through 2010 i'm bernard baumohl. paul: recapping today's market action u.s. stos head lower as t global sell-off ntinues. the dow opped 186 points d the nasdaq tumbled 54 points. to learn more about the sties in tonight'sroadcast, to watch our streaming deo and to take
part in our daily bl, go to "nightlyusiness report" on pbs.org. you can so email us at nbpbs.org. >> jeff: a finally tonight, lotto fever is cooking in ity. the country's ttery jackpot fotonight's drawing has grown to nearly $200 milon. prize officials say it's europe's highe jackpot ever! $6illion of that was raised today as the buying enzy continued. no one has picked the wiing combination numbers since the end of january. and that trend contied today. no one picked today's wiing numbers so tt jackpot remains unclaimed. th's in part because the odds of winning are abo one in 62 million. th said, there is one big winner in all of this:he italian governnt. ckpot hopefuls have spent nearly $3 billioon tickets and ha of the money goes to the italian treasury. >> it's always the governmt that's the biginner. powerball lottery in the u.s. 25 million to. >> and kee growing.
>> jeff: that'"nightly businesseport" for monday, august 17. i'm je yastine. goodnit everyone. and od night to you paul. >> paul: goodnight jeff. i'm paul kangas wiing all of you thbest of good buys. "nightly business port" is madeossible by: this programas made possible by contributions to your p station fromiewers like you. thank you. captioning sponsor by wpbt captned by media cess group at wgbh access.wgbh.org