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tv   Nightly Business Report  PBS  July 18, 2013 1:00am-1:31am PDT

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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 local life, to cultural treasures. viking river cruises, exploring the world in comfort. >> dow, ibm raises guidance, intel cuts the revenue forecast and ebay warns of head winds ahead as a wave of corporate earnings reports flood in. >> back from the brink five years after the financial crisis, bank of america posts blowout earnings. is the past behind them? bernanke speaks and when that happens the market usually proves a lot. that wasn't the case today. have investors finally gotten the message?
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that and more tonight on "nightly business report" for wednesday, july 17th. i'm susie gharib with my colleague bill griffith and tyler will join us in a moment. after the market closed, ibm reported strong quarterly earnings but intel's numbers disappointed. with more on the details. >> these are two very important things on the sector. let's start with ibm as results are used as a barometer for measuring it and earnings per share managed to beat wall street expectations and that's why the stock is moving higher. after hours revenue came in lower at $24.9 billion. ibm raised four-year outlook. the ceo said ibm deliver add strong performance in mainframe
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businesses. she says she expects continued improve the through the second half of the year for the big blue. a slightly different story for intel, second quarter revenue of 12. 8 billion-dollars reached it. the semi conductors out look came in shy. forecasting sales of $13.5 billion. analysts voiced concern regarding intel's delayed entry into the smart phone space. intel's new ceo brian in the press release wrote he's made it intel's highest priority to ever the mobile market sector and personal computers will become a hybrid of the pc and tablet so something interesting to watch. >> and interesting to see how investors react to this information tomorrow. >> absolutely. >> thanks for coming along. >> very good, seema thank you.
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ebay the online auction company's profits grew year over year but shy a penny of estimates. revenue rose 14% but the ceo warned of head winds in europe and korea in the second half of the year. ebay trimmed the estimates for the current quarter. shares dropped on the news on those trading comments. we heard from another moment from the dow. american express second quarter profit rose nearly 5% beating estimates by a nickel a share as spending by card holders grew 7%. american express shares were lower before it's earnings came out on news the european commission is considering a plan to sharply cut lucrative debit and credit card fees charged by companies like visa and master card. they call for a cap on debit and
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credit card transactions. american express finished at $76.80. visa and mastercard rose. what ben bernanke was telling congress about the economy. they were reassured by the comment there is no set timetable for pulling back on the bond buying stimulus program and strong quarterly earnings from bank of america. we'll take a closer look in a moment. despite all of that and an upbeat outlook of economic condipgco conditions in the federal nation, stocks still posted small gains. the dow added 18 and nasdaq 11.5 and the s&p up 4.5 points. more on today's testimony from bernanke before the committee. the fed was on message with lawmakers when the central bank might pull back on asset buying
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plans. hampton pearson has more on the testimony. federal reserve chairman ben bernanke said markets are more stable now that investors understand the central bank is in no rush to take respond buying program or raise key short-term interest rates. >> we are very focused on main street. we're trying to create jobs. we're trying to ever housing affordable. we're -- our low interest rates creates a lot of ability to buy automobiles. >> reporter: persistent microphone problems in the hearing room did not stop the chairman from fine tuning. policy makers agree 7% unemployment is a good threshold to begin thinking about tapering the bond purchases. now at $85 billion per month. key rates at historic lows as long as the unemployment rate remains well above 6.5%. >> the phrase at least as long
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as is a key component. these words say the specific numbers for unemployment are thresholds, not triggers. once they begin are likely to be gradual. >> reporter: the fed is closely watching the impact of rising mortgage rates on the housing recovery. housing starts fell 10% last month. >> we will watch to see if the movement in mortgage rates has any material effect on housing. i mean, the main thing to see housing continue to grow, more jobs in construction and the like. >> reporter: on what may be ben bernanke's last monetary reports as chairman, there was praise for his service. >> you served us well under difficult terms and i appreciate your commitment to your country. >> reporter: he was mum today about his future plans. but the here and now debate over
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the effectiveness of the extraordinary economic measures resumes tomorrow when the fed chairman testifies before the senate banking committee. for "nightly business report," i'm hampton pearson on capitol hill. our guest tonight says ben bernanke got his message out to investors and they are feeling calmer. she's rebecca patterson, chief investment officer. rebecca, we agreed to have you. you have listened to ben bernanke give multiple forms of testimony and speeches. now that you have this clear message, are you doing anything different with your investment strategy? >> actually not. we have been over weight equities. we've had a maximum under weight allocation to traditional government bonds, treasuries. for a couple months we had the view the federal reserve doesn't want to do anything but be gradual. bernanke does not want his legacy to be that he moved too fast and drove the economy into a new recession.
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so what bernanke said today and in the last week or so, really is kind of under scoring what we think will be a very gradual but a very real turn in the bond market. >> so let me -- let's be clear about that. a lot of people rush to the bond market for safety but bonds lost principle as yields have gone up and in anticipation of the tapering by the fed. do you think that will continue? >> well, i think yields will keep going up this year and in the coming years. so i do think those investors who over the last 30 years enjoyed bonds need to change expectations on what bonds can do and cannot do. they can help protect a portfolio of stocks but in other times, they will be eroding value. you don't want too much of it. look for other ways to get safety. it will be a slow, gradual process. >> ben bernanke talked also a lot about fiscal policy saying it's too short-term oriented.
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to what extent what is going on in washington over the next couple months will be impacting what happens in the stock market over those next couple months? >> absolutely. you know, when i think what keeps me up at night most, it's not really an issue today, it's a time frame and that time frame is september. we have the continuing resolution that funds the u.s. government expiring in september. we have a very important federal reserve hemeeting. they might begin tapering that month and ben bernanke's proceeder and fiscal policy front and center. does washington use a continuing resolution and the debt ceiling further thus fall to create controversy. are we going to have a game of chicken like in summer of 2011? or are we going to get more bipartisanship like in march this year? depending how that plays out, i think that will either help
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equity markets go higher or possibly give us a pretty ugly pull back. so september will be a critical month to watch. >> in the meantime, you do have to much client's money to work. which way are you going? do you go anticipating that growth or stay defensive? >> for the moment we're optimistic. we'll give bernanke the benefit of the doubt. there is a lot of risk from the exit of quantitative easing but as we see descent signs of housing, honors, higher taxes, europe stabilizing somewhat, you know, we're over weight equities and over weight u.s. equities. we're riding along, but we're staying nimble enough if we get closer to september and things don't look so pretty, we can pull back at least on a temporary basis. >> a lot of good information. thank you so much for coming on the program. >> thank you. >> chief investment office. we all know that paying for college is not cheap, but
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student loan debt just crossed a new threshold. total outstanding federal student loan debt has now topped $1 trillion, that according to the government's consumer financial protection burro and that's more than the total outstanding debt on credit cards and car loans. when you add in private loans thanks total debt tops $1.2 trillion. looking at housing news today, applications for new mortgages and refinances fell again last week down more than 2.5% as higher loan rates cut into demand. meanwhile, housing stats tumbled in june down 10% on a huge drop in demand for multifamily apartment buildings. one bright spot, permits for future construction hit a five-year high on growing demand for more single family homes. bank of america, a big organize nay tore of home loans and today they posted a surge in profits. the second largest bank said higher revenue from the trading
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division and lots of cost cutting helped boost the bottom line. the report pushed the stock to multi year highs but while the earning looked good on the surface, the troubled past may not be behind it. kayla is covering the story for us. how different is it today than where it was? is it in better shape financially? >> better than a year ago just in this most recent quart e. bank of america got 200,000 bad loans off of it's books. it also shifted a billion dollars in legal reserves that it had to cover some of those loans from those reserves into it's normal balance sheet. they had a lot of legal costs but looks like their returning capital to shareholders and investing in the business again and meeting the regulatory capital ratios. this is a far healthier company. >> let's talk about legal costs because they are still not all resolved and have a big chunk, $8.5 billion, something like that.
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what could go wrong in that area? >> they already reserved or put aside $8.5 billion to kovcover t settlement. it in court now. there is expected to be a ruling whether that $8.5 billion is enough. it could go higher that could be kopsly. we expect a decision in a couple months. remember, this is a bank that spent nearly $50 billion to get out of the woods with a lot of issues from the financial crisis. it spent a lot of money. the good news is it's near the end. it can count on one hand the number of lawsuits outstanding. that doesn't sound like a great thing but it is for a bank with this troubled past. >> that's for sure. when you compare it to the rivals, city, jp morgan chase, revenue wasn't as strong for b of a. >> bank of america was hit the hardest by the low rate environment. we know what happened in the last two weeks of june. there was incredible volatility as people wondered when ben b r
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bernanke and the feds would do. they had very low rates, didn't ever as much in interest revenue as previously. they had volatility in the fixed income trading side. they lost some money there where some of their peers faired better. >> could he turn the bank around, the c erkszeo does he h support? >> he built with executives and expertise turning around a big company into something that actually can be a profit machine. he hired a lot of people in the investment bank to do more deals with big corporations. he's putting more loan officers in the branchs even though they have fewer hoping when consumers start to borrow again, they will borrow with bank of america. >> thanks for spending part of your birthday with us tonight. >> thank you. still ahead, why a big
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american company many invest tors own is the target of an influential short seller but first how the international markets closed today. three years after it was signed into law, the overhaul of the rules governing wall street and the nationest biggest banks are still falling into place and today jack lu said implementing new rule social security nes is. a u.s. attorney for the southern district of new york, his jurisdiction covers wall street and he said even the biggest banks and top executives have to follow those rules. >> going forward, we'll measure
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the progress in weeks and months, in the hospital yeanot . let me repeat, by the end of this year, core elements of the dodd frank act will be in place. >> i don't think anybody is too big to indict or jail. there is enough moral hazard in the industry and if you give people a blank check and tell people they have a get out of jail free card because of their size or connectedness to the economy, that's a dangerous thing. we should never do it, and we don't do it. >> the u.s. secretary and u.s. attorney made those comments at institutional investor delivering alpha conference. tonight, we want to take you inside the annual conference where top money managers and washington insideers speak their mind. now in the past, comments made here have made -- have been market and stock moving and today was no different. tyler mathisen is at the conference and has more.
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>> reporter: thanks very much, suzy. apart from hearing from jack lu or law enforcers, the real reason to come to delivering alpha is to hear from the world's top investors and on that score, this event did not disappointment. leon cooperman knocked it off and out of the park. last year, he had ten predictions, all ten came true. we heard from a guy they call the king of all shorts, he told us that caterpillar was the one that he is shorting now. also, john paulson, the guy who they say had the greatest trade of all time, nelson peltz talked about holdings and then computing the day with carl icon. take a listen. >> tomorrow is the scheduled shareholder vote about dell. >> right. >> what will happen? >> i'm not allowed to tell you. let's go onto the next one. >> yeah, right. >> i think we're feeling pretty -- i mean, you know, we obviously have some insights
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about it and we feel pretty good but the fcc doesn't want you to go and comment. sand ranch hidge has the potentr doubling and they could go bankrupt. so risk -- risk and reward -- >> we are shorting caterpillar. iconic american company. leader in the class but tied to the wrong products at the wrong time in the cycle. >> i still feel buying a home is the best investment any individual can ever. affordability is at an all-time high. it still costs less to own than rent and get locked in the rates and gets the benefits of depressionuation. if anyone bought a home last year, let's say for $100, you put down $20, today that home is worth 112 so you made $12 on a $20 investment, 60% return. >> i'm asking shareholders, get
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your cards and letters out and send them to the bored of pepsi for these transactions because if the transaction is structured the way it suggests, pepsi by 2015 is $175. it's $80 something today. >> all and all delivering alpha was about ideas, news on the one hand from policy makers and folks but ideas mostly that can help you ever money in 2013 and beyond. back to you. >> and here is how those stocks finished the day, most were winners. sand ridge energy, coke closed higher but caterpillar came down and dell was also lower. turning now to market focus, we begin with yahoo. shares surged 10% today as investors zeroed in on the 24% stake in alibaba in this china
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based company are booming. so analysts upped their targets for yahoo based on that performance. investors piled into yahoo betting on a big alibaba ib down the road. closing at $29.66 after coutoucg a six-year high. st. jude medical was a gain you are but reported better than expected sales and raised the outlook. they rose more than 5% touching a new high on four times normal volume. several regional banks, bank of new york melon and m and t touched new highs on strong profits. m and t up 49% while bny m lrkm jumped. up a fraction and shares of bank of new york mellon rose to
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$30.92. tech stron and more reported lower revenues. profits fell by 34% in the quarter. textron said that there were strong orders for helicopters. shares were roughly flat closing the day at $27.74, up a penny. mattel fell by 24% in the quarter on sales declines and impairment charges. sales of fisher price brands drooped and the barbie brand continues to be in a slump, but the company did announce an increase in $500 million. shares dropped almost 7% on five times the normal volume and closed the day at $43.16. executive from smith may be feeling overwhelmed right now. choir neels
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chinese authorities barred him from leaving china. officials are investigating claims of bribery and corporation by employees of the pharmacy giant involving doctors, hospitals and government officials to boost drug sales and get regulatory approvals. coming up later on the program, as competition among grocery stores heats up, you'll never guess what some are doing to get their hands on your food dollars but first how commodities, treasuries and currencies performed today. grocery stores need a lot of power to keep food fresh and fresh ideas to get consumers in the door and spending money. with lots of giant discounters,
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courtney regan shows us how the grocery business is fighting for your business. >> reporter: when price no longer becomes the differentiating factor, retailers have to get creative to drive sales and grocery is no different. safe way reports earnings thursday and wall street is expecting results to be largely unchanged from a year ago. the trouble is, while everybody eats, food buying has stayed relatively constant over the past several years. but the options for consumers to purchase groceries has exploded, which means competition for your food dollars is only getting more aggressive. >> i go for the best price, yeah, i do about three stores. >> i usually just shop around and look through the paper to see what deals are out. >> price is certainly a consideration, but selection and quality are important. >> reporter: dollar store groceries have tripled in growth since 2000.
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where the profit margin is 1%, cutting prices much further isn't a viable option. that means more and more groceries are pushing invasion from offering chef demonstrat n demonstrations in store and refining private label product and instituting technology to ever trips earlier. grocery retailers are doing it all. kroger uses technology that collects data that analyzes shopping patterns at various times during the week. the grocery store then uses the data to determine how many cash registers should be open during different type periods throughout the day cutting the way from 4 minutes to 26 seconds. >> this next ten years in grocery will be some of the most fascinating years we've seen because we'll expect a complete transformation of what the grocery experience will be. we'll expect tremendous pen dou -- amounts of products to be home and an environment that benefits
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the consumer. >> reporter: while they may frustrate investorsinvestors, c will benefit. for "nightly business report," i'm courtney regan. great story, a pennsylvania public relations executive who sales auto parts on the side became the richest man in the world this week because when chris reynolds opened up an e-mail statement from paypal, the online payment system credited him more than 92 quadrillion dollars. paypal admitted the mistake and corrected his bank account back to zero and after admitting, they offered to donate a thousand dollars to the charity of his choice. you wonder what would he have done with that much money? here is his answer. >> i would retire the national debt. i'm a responsible guy. i feel a little bit of guilt over the debt and then i'll buy
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the philadelphia phillies. >> so what would you do with that much money? >> i would retire the national debt and buy something else, not the phillies, that's for sure. >> that's "nightly business report" for tonight. i'm susie gharib. >> i'm phil griffiht. have a great night. nightly business report has been brought to you by. >> sailing through the heart of historic cities on a river, you get close to iconic landmarks, to local life, to cultural pressures, viking river cruises, exploring the world in comfort.
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tonight on "quest" -- if you think that bats are scary or ugly, you haven't talked to the people who have made it their life's mission to study and care for them. "quest" rediscovers these unique mammals through the eyes of four northern california bat lovers. and renewable energy is hot, but there's one type of clean energy that provides more electricity to california than all the solar and wind power combined. major funding for quest is provided by the national science foundation and the corporation for public broadcasting. additional support is provided by -- the richard and rhoda goldman fund.


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