tv First Business KICU August 2, 2013 4:00am-4:31am PDT
will stocks be rocked? how today's jobs numbers could slow the record roll in the market. in today's cover story, the fight for better pay is spreading across the fast food nation. plus, if you think the housing crisis is over - not so fast! and, as a problem at microsoft surfaces, traders prepare to dig deep. first business starts now! you're watching first business: financial news, analysis, and today's investment ideas. good morning! it's friday, august 2nd. i'm angela miles. in today's first look: a record rally starts off the new month. the dow soared 128 points to its highest level ever. the nasdaq moved up 50,
and the s&p broke through was the other big event, topping $107 per barrell in a sign of potential upcoming demand as the economy strengths. will it be a july jobs jubilee today? the market expects 175,000 jobs were added to payrolls last month, and the unemployment rate could tick down to 7.5%. in earnings after-hours, linkedin, aig, and kraft all rallied after posting better- than-expected results even though revenues were shy. and billionaire investor carl ichan reportedly is suing dell to stop michael dell's effort to take over the company. scott shellady of trean group joins us on this friday morning, and of course the jobs number is due out today. scott, what do you think we're in for? - well, if you're a taper tiger, you better hope for a big one, because that will supposedly put some pressure on the fed to start tapering in that september-october time frame that most people have
been talking about. i think the fed has said over and over they're data-dependant, so i think you're going to have to see something really good to change that unemployment rate from 7.6% to something much healthier. so, i think right now we're going to be around that 200 range, which was the adp number. i think that's fair. but let's just see if that comes through. and then gdp, we're not doing too well there. - what is the stock market, though, telling us about the economy? - the stock market's had a dovish fed speak a couple days ago. yesterday, draghi was also seen as dovish. that's given a boost to the market with "accomodation." then we've had a couple things trickle across the tapes that haven't been as bad as expected, or slightly better than expected, and that's just been enough rocket fuel to get this market on fire. - what could put pressure on the market? - what would put pressure on the market right now is you have
to be careful about saying a really bad jobs number, because a really bad jobs number could say, "hey, i thought there was going to be more accomodation." but i think the market has really started to focus on numbers that are actually good for the market verses being bad for the market, so, i'm going to say a disappointing jobs number tomorrow will kind of throw a little bit of cold water over this rally we've had over the last couple of days, especially yesterday, and i think that's the risk here, that we don't get a good jobs number, and we kind of ruin the work we've done this week - have a good trading day. - all right. thank you. fast-food workers, angry that the minimum wage barely keeps their head above water, expanded their protest to other minimum wage retailers in seven cities this week. our cover story takes a look at how their claims fit with the latest employment picture. "come out, come out!" in downtown chicago, more than 100 demonstrators tried to convince walgreens employees to join them in protest of the retailer's minimum wage pay scale - employees who bristle at the term "unskilled labor." "i don't consider myself unskilled. i do things to assess stocking and inventory so the store can make its profits."
the so-called "fight for 15" has become a multi-city campaign, hoping to more than double the federal minimum wage of $7.25 an hour. it also seeks to unionize workers at fast-food and other retail outlets. "they've become jobs for people with families. these are not just teens anymore. these are not transitional jobs, these are all the jobs that are available right now." "what we're seeing is symptomatic of a jobs environment that is not what we'd like it to be. yes, there have been a number of new jobs, but they're of this nature." walgreens, the nation's largest drugstore chain, with sales last year of $72 billion, stated "no comment" on the protests or how many employees were paid minimum wage. grocer whole foods called its pay and benefits "competitive and extraordinary in the supermarket industry." but workers say they risk being fired if they are more than seven minutes late. the illinois retail merchants' association said "this is a losing battle for these workers. if retailers are forced to increase their wages above the
market, they'll have to cut employees' hours." in the broader view, some say the economy in transition is squeezing these workers. "now we're in an economy moving from manufacturing to service- oriented, and the education system hasn't caught up, so these kinds of wage issues are at the core." overall, challenger, gray and christmas reports 7% fewer layoffs from a year ago, with two exceptions: two months before health insurance exchanges begin enrollment under obamacare, healthcare is seeing a brief spike in layoffs, along with defense contractors. before lawmakers take off today for the august recess, republican and democratic leaders are squaring off over unresolved issues, including the president's call for creating jobs for the middle class through corporate tax reforms. "there's been a tug of war going on in the republican party
for months now. some in the party want to find common ground and compromise, while others want to stop every single government program dead in its tracks." "i think we're stimied. i mean, we're stimied by the desire of the majority to raise taxes again." the republican-led house is expected to vote today on repealing obamacare. it's at least the 40th attempt to bring down the law. the sec is celebrating a big win. this week, a jury ruled that former goldman sachs trader fabrice tourre is liable for misleading investors in a mortgage-related investment. the jury said tourre had violated federal securities law. he faces fines and a possible ban from the industry. in a statement, the sec says tourre put together a complicated financial product designed to maximize the likelihood that it would fail, and marketed and sold it to investors without appropriate disclosure. an emotional horse-slaughtering dilemma is unfolding in new mexico. in a federal hearing
will fight for permission to convert its cattle operation into a horse slaughterhouse. it's viewed as a way to control the overpopulation of wild horses in the west. however, animal rights groups call it cruel. a plant in iowa could become the first in the nation to resume the slaughters. valley meat is prepared to export the horse meat. 50,000 pounds of ground beef are being recalled over concerns of e. coli contamination. the beef was packaged in mid july at national beef packing company and shipped to distributors across the nation. all of the meat was sold in 10-pound packages. for more information, call 866-761-9472 or visit nationalbeef.com. so far, no illnesses have been reported. american airlines' merger with u.s. airways is nearly set to fly. the airline won creditor approval, which brings it a step closer to sealing the deal and exiting bankruptcy protection. a federal bankruptcy judge is expected to approve the
plan at the august 15 hearing. ford is paying a hefty fine for delaying a recall of ford escape suvs. ford will pay the maximum $17 million fine to the federal government for failing to alert the public about possible stuck gas pedals. the national highway traffic safety administration says ford was aware of the problem for a week before recalling the vehicles. car buyers are still in overdrive. for the month of july, gm posted the highest sales gain among u.s. automakers with an 16% increase. ford and chrysler both reported 11% growth. foreign automakers also turned in solid results. toyota posted a 17% rise. car sales continue to be a strong sector in the economy, with automakers adding thousands of jobs. the pain at the pump isn't over yet. aaa warns that august gas prices could head higher. prices hinge on several factors, including hurricanes and refinery problems. gas prices jumped 14 cents per gallon from june to july. the average cost of a gallon of gas
in july was $3.58, up 16 cents from last year. last month goes down as the third most expensive driving july ever. a combination of higher crude oil futures, refineries off-line and increased demand from summer travelers drove up the price. investors in an organic food grocer doubled their money in the first day of trade. sprouts farmers market, which is in direct competition with whole foods, went public on wall street thursday. the stock priced in at $18 and shot up $22 to $40.11, good for a 123% gain on the day. the latest earnings from wall street are a mixed bag. exxon mobil missed the mark, reporting results that declined, mostly due to higher expenses. it also says it will issue a dividend. proctor and gamble however shared good news, as earnings and revenue both rose in the second quarter. that stock closed at 81 dollars yesterday. fewer breakfast fans hurt kellogg. breakfast sales dropped, while its snacks division did well. still, results fell below wall street's expectations.
and an animated hit helped dreamworks. "the croods" led the animation studio to higher profits. that stock soared 8%, closing above 26 dollars. jcpenney shareholders are feeling relief! shares rose 7% yesterday as the company defended itself over a report the retailer was having credit problems with vendors. shares shed 10% wednesday when the report was released. target stores are pushing into the baby market. the retailer is testing a section of the store devoted to baby gear in 11 illinois locations. the sections will operate similar to a specialty shop. target wants to compete with retailers such as babies r' us and bed bath and beyond's buybuy baby. crayola is improving its mark on the environment. the iconic crayon and marker company is out with a new way to recycle used markers that keeps plastic out of landfills. the special process converts the markers into clean energy. the company says 308 markers produce a
gallon of fuel, enough to power an suv for 15 miles. the chips are down in vegas: the city is in the midst of robust recovery after being hit hard during the recession. however, as tourstis return, city officials find they are spending more on high-end restaurants and shows and less on gambling. still to come, how high can it go? a look at the latest record run-up in the s&p. plus, ditching the dollar: is the u.s. setting up for a currency change? but first, is wall street moving in or out of the housing market? that's after the break.
mortage rates are on the rise again. after taking a slight tumble in recent weeks, the 30- year ticked up to 4.39% from 4.31% last week, while the 15- year hit 3.43%, up from 3.39%. meanwhile, president obama is preparing for a speech on the housing market monday in arizona. momentum appears to be on the side of the housing market, with home prices up 38% since last year. but will it continue into the second half of the year? jed kolko, chief economist at trulia, is skyping with us
this morning. hello jed. - good morning. - and how far into the housing recory are we? - we're more than halfway back to normal. we look at several measures of the housing recovery to see where we are today compared to the worst point during the recession, and the long-term normal level. and right now, we're a little more than halfway back, but there's still a ways to go before the housing market returns to normal. - what trends do you see forming in the second half of the year? - we've seen very big price increases over the past year. i expect we're going to see those start to slow down a bit. higher mortgage rates; more inventory coming onto the market, which is good news for buyers; and investors getting a little less eager to buy now that prices are higher should all slow down those price gains a bit. so rising mortgage rates, more inventory, a little bit less investor interest should equal prices rising a little more slowly than they have been. - what are you seeing among younger buyers? this has been a real problem.
- young people had a their unemployment rate went way up, higher than it did for adults overall, and even though more of them are starting to get back to work, almost as many are living with their parents as at the worst point of the recession. young adults haven't started to leave the nest yet. now, that means that they're not going out and either becoming first-time homebuyers or renters. so, not only are they not buying, they're not even renting. that means fewer households, and that means less demand for new construction. - do you think it's going to become easier for people to get loans for a home? - mortgages are a key question for the rest of this year. mortgage credit still remains tight, but there are a couple reasons why we might see more mortgage credit coming later this year or next year. first of all, because rates are rising, fewer people are refinancing, and that could mean some banks will focus instead on writing mortgages for home
purchases instead of refinances. the second thing is that there are some new mortgage rules that come into effect next year, and those help define what counts as a safer mortgage for banks to lend. with a bit more of that clarity, banks might be more willing to lend the types of mortgages that are deemed safer. - and quickly before you take off, do you see any signs of a serious bubble forming? - i do not see a serious bubble forming. right now, prices compared to incomes and rents look, if anything, a little bit undervalued - about 7% undervalued nationally. prices would have to keep rising at the rate that they're rising today for several more years before we get back into bubble territory, and i expect we're going to see price rates slow down. - thank you for your thoughts. that's jed kolko of trulia. thanks again. - thank you. coming up in traders uplugged, surface tablets are not selling well for microsoft. will it cause the stock to crumble? and the s&p 500 breakout above 1,700 - is the index setting up for a run to 1,800? stay with us for chart talk.
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the band is back together: alan knuckman and jared levy are tuning up on the floor of cme group for this week's traders unplugged. hello guys. let's get you going with topic number 1: on the surface - microsoft is stuck with millions of surface tablets. what's next for the stock price? - i think it was a big mistake, but i look at this as a great opportunity. the stock's 15% off its recent highs, so it's holding at its midpoint support for the year between $36 and $26, so you can lean on that $31 and buy it here. - you know, alan is still holding onto that zune that microsoft came out with several years ago that was a complete failure. microsoft is like a child: it just cannot execute a plan completely, and the company lacks a cohesion, a cohesive vision. they lose it.
they spent all this money on marketing, and they've got a product that's half decent, but they can't get it out to the people. i think microsoft is dead money. i don't think the stock's going to sell off from here, 'cause it already has, but i think if you want to stay in a stock that does nothing, stay in microsoft. - buy a $25 call - the break- even's about 30 or 40¢ above where we are now. for 2015 strike price, be in position. the nasdaq made new highs this week. microsoft is the way to go. - be ready to wait for 2015. - topic 2: a brazillian billionaire recently lost $33 billion in 16 months. he was big into oil. what commodities are you guys big into? - all right, that's part of the game, right? money flows from one person to another. unfortunately that's the way the cookie crumbles sometimes- - $33 billion! - that's a lot of money. - that's a lot of billions. - here's the deal: the thing is, oil actually has been on the rise, right? one commodity i am looking at is natural gas. in fact, chesapeake energy, i think, is a great innovator. i like the way they hedge their bets. natural gas prices have come off a bit. i think moving forward- - because we haven't had a very hot summer.
- we haven't. - we use a lot of it for electricity. - but wintertime, big consumption there. and also, something else to keep in mind about natural gas: good alternative to oil, which is at all-time highs. - the key for this guy losing all this money was the resurgence of the dollar. the dollar made 2.5-year highs recently. that really hurt a lot of commodities. commodities are a value at some point. i don't know if it's just yet, though. - topic number 3: coin toss - that effort is back to get rid of dollar bills and make a dollar coin. is cash king, and is this a good move? - what's your opinion here? - i'm very bullish, obviously. the market's up to highs like i just alluded to here, in the dow, the nasdaq this week, and it looks like it's going to push the s&p sometime soon. you've got to be careful at these levels of easing into the market. but i still think the stock market has a whole lot more upside- let me explain! if the p/e goes to 17- - oh boy... - if the p/e goes to 17, the s&p goes to 2,000. choke on that! - so what he's saying is maybe you might want to move into cash, actually. interesting point about this coin story: didn't work for the susan b. anthony dollar. it hasn't worked in past times. i don't think
it's going to work now, if you're thinking about the coin itself. - it works in canada. it works in australia- - we're not in canada! we're not in canada! - it saves $20 billion over the next 30 years- - not going to happen. paper's staying, and put your money in the stock market. - you were also against light bulbs, so let's- you don't want coins, you don't want light bulbs. you want to know why? politics. it's about money. let's make it about money. - i just don't like the way it feels in my pants. - you don't like it. it's about politics for you. you're not interested in money. i understand. - time for your bonus round question now: what do students own more of, pcs or tablets? - pcs. - pcs. oh yeah, it's much more. - you both win. terrific job. great job. 82% owning those pcs. thanks guys. first business continues after this.
equities joins us. good morning, dan. - morning, angie. - we are now in uncharted territory. how do you, as a trader, read this market? - i tell you angie, right now, like you said, we are. we saw the russell, the dow, and the s&p 500 all break to all-time highs yesterday, so really right now, the one thing that we are keeping an eye on, because like you said, we are in uncharted territory, is the fibonacci numbers. and the fibonacci numbers we have in the s&p future coming in at 1710 and 1723, so we do see a little bit of resistance there, just from a stretch standpoint from breaking out of these new highs. - you say a little bit. i'm sensing momentum is on the side of this market. what do you think? - well, the numbers across the board the last couple days have been pretty positive, not only from the united states, but globally. the china number yesterday - overnight, actually - was the significant catalyst for this big run-up that we saw
yesterday. so, you're seeing some global stability taking place, and with that we're seeing the market react pretty positively. we do have unemployment this morning, so that's going to impact the market as well. but again, you saw the numbers coming into the unemployment number being pretty good - the adp number was up significantly. yesterday, we saw the weekly jobless claims at a 5.5-year low. so, the momentum there is pretty positive as well. but right now, angie, you have to say, this is a breakout. we're up 21% year- to-date, so, you know, a little bit of caution would be very prudent, i think, at these levels. - but then again, you're always cautious, dan. - this is true, this is true, angie. but at the same time, we saw a significant breakout after the consolidation pattern, and the market does, to me, feel a little bit stretched here from a valuation standpoint. if the numbers continue to come in fairly positively, the market could probably hold these valuation levels, but if it has any shift at all as far as the economic numbers, i think that you could see this market again come under a little bit of selling pressure - probably only back to that 1680 area in the s&p, though. - dan, a pleasure having you on the show. thank you. - thanks angie. as we wrap up our friday, a
reminder to join us next week for insider tips on how to get a great deal when buying a new home. we hope you will join us. from all of us at first business, we wish you a relaxing weekend. >> announcer: the following is a paid presentation for hip hop abs brought to you by beachbody. pay close attention! don't miss your chance to save 75% off hip hop abs. if you're looking to shed the fat... >> in the first week, i lost 12 pounds. >> announcer: a way to flatten and sculpt your core... >> you're hitting every part of your abs. >> announcer: and finally get those tight, sexy, toned abs of your dreams.... then stop doing sit-ups. >> woman: say what?! >> announcer: and start dancing with hip hop abs, the fun, new, ab-sculpting system that takes the world's hottest dance moves and turns them into ab-sculpting, fat-burning routines so you don't even feel