tv Nightly Business Report PBS May 5, 2010 12:30am-1:00am EDT
>> susie: u.s. stocks tumble as worries about europe's stability move beyond greece. the dow tumbled 225 points, its second biggest point loss of the year, and the nasdaq fell nearly 75. >> tom: in greece, protestors took to the streets, worried the bailout package arranged by european leaders and the international monetary fund won't be enough. we get the latest from the imf's john lipsky. you're watching "nightly business report" for tuesday, may 4. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening, everyone. worries about too much debt in europe triggered a big stock market sell-off around the world today. tom, behind the selling-- serious questions about that plan to bail out greece. >> tom: susie, on wall street, the dow tumbled 225 points, the nasdaq plunged 74, and the s&p 500 lost 28 points. volume picked up considerably on both the new york stock exchange and the nasdaq. but the one silver lining was the u.s. dollar-- it rose as the euro fell to a one-year low against the dollar, thanks to the european debt worries. >> susie: the crisis of
confidence comes as investors worry about the greek debt crisis spreading to other countries in europe. we have two guests to analyze the issues-- a wall street market strategist, and a top economist from the international monetary fund. the imf is funding that greek bailout package with the european union. let's start on wall street. joining us now, art hogan, chief market strategist at jeffries & co. >> hi, susie. >> susie: art, if this debt crisis in europe spreads to other countries beyond greece,ç what will happen with the u.s. stock market. >> susie, one of the biggest things that has happened today and has been a consistent pattern, the more we're concerned with what is going on with the sovereign debt situation and all of greece, in particular, the euro sells off, and that's going to continue to be the case, as we're concerned with how much debt other european nations, and when that happens, the dollar goes
up, as tom alluded to in the opening. but that has an effect on commodities. understanding that all commodities are dollar-based, we saw it sell off specifically. and that's a big part of the s&p 500. that's part of the story. the dollar strengthening makes commodities go down. if it is 25% of the s&p 500 that is represented by the commodities, you'll see thqá be a natural drag. and another story that hasn't gotten much attention is the china demand story. and the china demand story has come back into play. >> susie: let's get back to the european situation. is it possible for the u.s. stock market to decouple from the european financial worries? >> well, it is. it certainly is in the median term. in the short-term it is hard for us. if you track the downgrades we've had, it has been caused by two things: either china demand or the sovereign debt issues. we're concerned about debt. but in essence, if you look at the fundamentals for the u.s. stock market,
they're extremely strong. the economic data we've got today and over the last week or so has been very supportive of this market. the earning season hasbeen spectacular. i think we would be coupling sooner rather than later from the u.s. market. >> susie: so is this selloff today a signal to buy, or is it possibly the beginning of a stock market correction? >> you know, susie, we've talked about this for a bit now. everybody has been looking for a correction since the market started to climb in march of last year. with every 10% move on the upside, everybody has been waiting for the pullback to get money back in the market. this may well be that opportunity. we have to see how well this plays out and how long the correction is. we haven't seen a 10% correction since the march lows. we almost got there in february of thispycertainly unds will be be a volatile situation for quite sometime. i think investorsç can be patient, but i believe this presents a great opportunity. because what happens is we throw all stocks in the
same basket and sell them all and create a great market. >> susie: the employment comes out on friday and it is expected to be good. if it is good, do you think people will sh rug off what is going on in europe and buy stocks, or is this european crisis a lingering issue for the market? >> i think one piece of the economic calendar data that hasn't been wrong is the employment. i think that will be stronger than even the current estimates, which is the addition of 188,000 jobs. i thinkç if you look at the i.s. manufacturing number shows that 10% of the economy has done much better. i think we'll see an upside surprise on friday's number. i think it could be very constructive for these markets and act as a catalyst to get people back into this market. >> susie: we're going to have to leave it there. thanks a lot, art, for coming on the program.
my guest, art hogan, chief strategist at >> tom: as susie mentioned, the international monetary fund has played a key role in arranging a bailout package for greece. we sat down with the agency's first deputy managing director this afternoon. darren gersh began by asking john lipsky if the greek rescue package is big enough. >> of course we think it is large enough. it's very large relative to the greek economy.çó and it should provide adequate breathing space for the greek authorities as they implement a very strenuous program of fiscal adjustment and structure reforms that will put their economy in a position to resume solid growth and sustainable growth in the future. >> you talked about a very strenuous program. you're talking about having greece cutting 10% of their annual output? how is that going to work when the country is already sliding into a recession. >> well, the next year-and-a-half or two years are going to be very difficult period. but the starting point is
one of very large fiscal deficit. nearly 14% of g.d.p. have large primary deficit, that means evenç taking out debt payments, they have a very large deficit. this simply has to be adjusted. at the same time, the economy has to regain competitiveness in -- with its euro trading partners. all of this is going to require an actual decline in nominal g.d.p. this year and next year. it seems unavoidable. >> isn't this where people criticize the i.m.f. for coming in and insisting on a package,. >> this was a package designed by the greek authorities. recognizing they had lost market access and needed to regain and take the measures that would establish the basis for renewed economic growth.ç our european partners, and euro group partners and
the i.m.f. are providing very large financial support. $$140 billion to help ease this transition. >> does this crisis show signs of catching on. is it in danger of becoming a self-fulfilling prophecy in the markets. spain, portugal, ireland have to fail, so they're going to fail? >> of course, this is one of the reasons why the greece's euro group partners and the i.m.f., presumably when it acts officially, is willing to support this program, in large part because ofñi the willingness of theñi greek authorities, their desire to make this adjustment.ó[ but also to show them the rest of the euro zone and elsewhere, that action is possible and help restore confidence. now remember, more broadly, in the wake of the global crisis, 2008 and 2009, we have said in 2011 and beyond there is going to be a general need
for fiscal adjustment around the world, especially in the advanced economies, including in greece's european partners. so there will be a need for measures elsewhere. the greek action will help to give investors confidence that governmewhat is necessary. >> greece seems like it is far away, and a small country. but what does it mean for the united states? why is this becoming aç world-wide event, and why is it affecting the united states, and what does it mean for us? >> from the perspective of the united states economy, greece is very small. and the level of commercial interaction is notable for greece, but, again, from a u.s. perspective, it is very small. in fact, u.s. financial institutions have very limited exposure to greece. at the same time, just as european partners had concluded, it is necessary -- it is important to show that the challenges that are represented by greece could be dealt with successful to help cement
global economic and financial stability. so from the point of view of the u.s., an interest here is to heldi improve confidence, improve financialw stability.help reestablish thes for stronger global growth. >> john lipsky, the first director of the international monetary fund, thanks for your time. >> thank you. >> tom: here are the stories in tonight's "nbr newswheel." pending home sales jumped 5.3% in march as more americans rushed to get in on tax breaks for first-time buyers. the national association of realtors says the gain was better than expected. manufacturing also picked up in march, with new orders to u.s. factories rising almost 1.5% to $391 billion. more legal troubles for goldman sachs-- the company today settled with nyse euronext and the s.e.c. over a book-keeping error relating to short sales. goldman will pay $450,000, but
admits no wrongdoing. still ahead-- brewing up profits as molson coors posts strong profits. we look at how mergers are driving the beer market. >> susie: progress today on efforts to contain that massive oil spill in the gulf of mexico. b.p. is sending a containment dome that will try to scoop up the oil. it should be in place on thursday. but today, talk of paying for the disaster topped the agenda in washington. stephanie dhue reports. >> reporter: when it comes to cleaning up the massive gulf spill, the oil pollution act puts b.p. on the hook for all cleanup costs. that law was passed after the 1989 "exxon valdez" spill. it puts a $75 million limit on what companies are required to pay for economic damages. with the potential for huge economic costs in the gulf, new jersey senator robert menendez wants that cap pushed to $10 billion. >> i don't think $75 million is going to help the shrimp fisherman in louisiana.
i don't think it's going to help the commercial fishermen. i don't think it's going to help the tourism industry. i don't think it's going to be enough to help the coastal communities. i don't think it's going to be enough to help restore estuaries that are incredibly important to our way of life. >> reporter: there is other money available to cover damages. the oil industry pays into a government-run oil spill liability trust fund that can pay out a billion dollars each year for each incident. the $75 million cap can also be lifted if b.p. violated any federal laws or acted negligently. still, senator bill nelson says waiting for that determination could be costly. >> but is it not a logical conclusion that, when they get around to it, if they don't prove negligence or any violation of the regulation, he'd say, "well, we're just complying with the law"? >> reporter: b.p. has already said it will pay people for what it calls "legitimate and objectively verifiable" claims from the explosion and spill. the current law has a process to pay claims without having to go through the courts. environmental attorney barry
hartman says it's worked in the past, and should be given a chance to work now. >> people have been compensated quickly for losses. there's never been a problem that i know of with limits being breached or people complaining about limits being approached, and its been funded adequately. and i think you see that... until you see whether it works, it's very hard to know whether it needs to be fixed. >> reporter: b.p. has released $25 million to four gulf states to help pay for clean up costs. lawmakers are keeping the heat on b.p. to make sure it keeps paying, with several making the point today that the company made close to $6 billion just last quarter. stephanie dhue, "nightly business report," washington.
>> susie: all of the volatility in the markets, there were still some buyers, and some stocks disall right. >> very few, a small pocket in the health care. and we'll take a look at those coming up in tonight's market focus. >> tom: this was the worst day for stockholders since early february, with the losses led by materials and industrial stocks. stocks like caterpillar and alcoa weighed on the market. those two were the biggest percentage losers in the dow. iron ore producer cliffs natural resources was the biggest loser of the s&p 500, down to a two- month low. for every advancing stock on the
new york exchange, six traded lower. the volatility index jumped to its highest level since february, an indication the latest leg of the market rally may be weakening. pfizer was one of a handful of healthcare stocks that were up today. its quarter was better than expected. it paid $68 billion for wyeth in october, and that helped fuel a 54% jump in sales. lipitor continues to be pfizer's best-selling drug, with sales up 1%. shares were among the few to beat back sellers, rising about 2% up to a six-week high. fellow drug giant merck also swallowed a big merger. in november, merck bought schering-plough for almost $50 billion. that helped sales more than double, with earnings beating estimates. eight of its ten biggest drug groups saw increases. m-r-k stock also bucked the weak trend, even though the low end of its 2010 forecast means
results could miss estimates. a couple of other health stocks made some earnings-related moves. mckesson is the biggest pharmaceutical distributor in the u.s. profits were up, thanks to the h1n1 vaccine. the stock rallied 4%. but a light flu season hurt admissions at hospital operator tenet healthcare. earnings were better than expected, but its unpaid patient bills rose. the stock dropped 7%. as if the market didn't have enough to worry about, u.s. anti-trust regulators are looking at apple's licensing agreement with iphone application developers. shares dropped almost 3%, and are now at the same price they hit after reporting that blow- out quarter two weeks ago. the big concern hitting the market today, similar to last week's selling trigger-- european government debt, including spain. this crisis began in greece, but there are worries the rescue package may not be enough to stop the problems from spreading. the spanish exchange traded fund
saw significant selling, dropping to an 11-month low. two big spanish backs, banco bilbao and banco santander, led the losses. each saw at least four times usual volume. the other continuing story is the gulf oil leak, as stephanie dhue reported on earlier. while efforts continue to estimate the economic impact of the spill, the lost market value of the five companies involved in the disaster approaches $44 billion. the drop in b.p.'s american depository receipts has erased more than $29 billion from its value. the operator of the rig, transocean, has lost more than $6 billion. maker of the failsafe device, cameron, has seen its market value drop $1.8 billion. halliburton's value has fallen almost $3 billion. and partial owner of the rig, anadarko, has lost more than $4 billion. after the market drop today, this bit of market history: tomorrow is cinco de mayo, and s&p finds, over the past 60 years, the fifth of may has seen
positive stock moves two-thirds of the time. and that's tonight's market focus. >> susie: higher taxes and a consumer shift to premium beers helped molson coors boost revenues in the first quarter. but volume was-- you'll excuse the expression-- "flat" for the maker of brands including coors lite, molson canadian, and blue moon. the beer industry has been in an aggressive cost-cutting mode for several years, and as scott gurvey reports, that has brewed up several mergers and marketing partnerships.
>> i like to switch off once in a while, different beers. heineken or budweiser, i switch on and off. >> reporter: some people, like raymond reder, don't really care which brand of beer they are drinking. they are in the minority. for everyone else, there are far more than 99 bottles of beer on the wall. people can be passionate about their favorites. for israel low, that beer is molson. >> it tastes very good. high alcohol content. it's an all-around good beer. >> reporter: all beer is mostly water, a grain which can be fermented, and yeast. but different flavorings, like hops, are added. the result is literally thousands of beers to choose from. some are imported from overseas. others are specific to a region or even a neighborhood. but economies of scale are important. beer is not seen as a necessity by most consumers, and sales have been suffering because of weak economic conditions, as well as high commodity prices. in the u.s., two mass producers
dominate-- anheuser-busch inbev and millercoors. as you can tell by the names, these companies are the result of corporate combinations. millercoors is a joint venture between s.a.b. miller and molson coors, itself a combination of canadian and american brands. analyst david silver says industry consolidation is putting pressure on the mid- sized brewer, and he expects the trend to continue. >> i think that this joint venture with s.a.b. miller in north america is going to eventually take over the whole company. again, it may not be for another three years. it could be six months away. but i do expect that, because of the success that this joint venture is having, that molson coors will eventually be taken over by s.a.b. miller to better compete with the anheiser-bush inbev giant... beer giant that we have today. >> reporter: at the same time, molsoncoors is said to be looking for acquisitions on its own. australia's fosters beer is frequently mentioned, although molsoncoors c.e.o. peter swinburn was quick to agree when i suggested he probably didn't
want to talk about it. >> you've got it right-- we never speculate on anything. >> reporter: and as for our beer drinker, he doesn't care where his favorite brand is made-- america, australia or even canada. >> i wouldn't go there for medical purposes, but for beer absolutely, anytime. they make a delicious beer. >> reporter: tomorrow, tweeting about beer. we talk social networking and the beer business with molsoncoors c.e.o. peter swinburn. scott gurvey, "nightly business report," new york. >> tom: also tomorrow, molsoncoors big rival, anheuser busch inbev, reports earnings. the energy department reports its latest crude oil and gasoline inventories. and "the new affluence"-- what it really means these days to be financially secure and comfortable. jonathan pond has some new approaches and advice in tomorrow's "money file." >> susie: the pentagon has pushed back the start date for a new airborne tanker contract. the additional time will let
e.a.d.s. north america submit a bid. boeing is currently the sole bidder, since northrop grumman dropped out. the contract is worth at least $35 billion, but might go as high as $100 billion if the air force replaces its entire fleet of refueling tankers. it could end up being the most expensive contract ever awarded by the pentagon. work on the new jets would begin in november. >> tom: general motors may be on a bumpy road over claims made in recent ads. a conservative think tank accuses g.m. of misleading consumers. in the commercials, g.m. says it repaid government bailout loans "in full, with interest, five years ahead of schedule." but the competitive enterprise institute says that's wrong, because that loan was repaid with another government loan. the group complained to the federal trade commission. neither the f.t.c. nor g.m. has commented.
>> susie: social networking is changing the face of corporate marketing and bringing more voices into the mix. tonight's commentator explains. she's jessica faye carter, c.e.o. of nette media. >> from pepsi to state farm, and lexus to the nba, more companies than ever are using social media to connect with multicultural consumers, and little wonder. with spending power of approximately $2 trillion and a population equaling 34% of u.s.
residents, diverse consumers are an attractive, fast-growing group. part of the reason that social media is such an effective tool for reaching diverse groups is because it acts as a market aggregator, providing a relatively low-cost way for companies to find and connect with consumers across interests, geography and, yes, cultural distinctions. add to that the widespread use of social media, particularly mobile technologies, among african-americans, latinos, and asian americans, and its easy to see why more and more companies are investing in multicultural social media strategies. as the multicultural population continues to grow, and we'll have more specific numbers after this year's census, companies without a well-defined strategy to tap into multicultural markets risk getting left behind. to get ahead of the curve, companies should engage diverse consumers by listening to their concerns, understanding their interests, and offering goods and services that correspond to their lifestyles-- in short, through social media. it may not seem like targeting multicultural markets is a particularly profitable business
strategy, but these markets are part of the long tail-- the expanse of surprisingly profitable niche markets often abandoned by companies in their quest to develop the next worldwide sensation. companies that target these markets are fast becoming the future of business, and they're using social media to do it. i'm jessica faye carter. >> tom: that's "nightly business report" for tuesday, may 4. i'm tom hudson. good night, everyone, and good night to you, too, susie. >> tom: good night, tom. i'm susie gharib. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:
this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> more information about investing is available in "nightly business report's" video: to order this dvd, call 1-800- play-pbs or visit online at shoppbs.org. 'm very sorry, sir.