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tv   Nightly Business Report  PBS  April 30, 2014 7:00pm-7:31pm PDT

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this is "nightly business report" with tyler mathisen and susie gharib. brought to you in part by. >>, featuring stephanie link who shares her investment strategy, stock picks and market insights with action alerts plus, the
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stimulus. and the develop of apps, all that and more on "nightly business report," april 30th. good evening, everyone, wall street ended april with an important record, the dow, the blue chip index now at an all-time high, the first record close for 2014. the milestone came on a day when the federal reserve wrapped up its policy meeting deciding to keep its key interest rate unchanged at zero percent and despite mixed reports about the u.s. economy. first let's get numbers on wall street, dow rose to 16,580, that is the new record, the dow is now higher for the month, nasdaq up 11 points, down 2% for april and the s&p added five points and is also higher for the month. after that data, economic growth in the first three months of this year was much weaker than expected up just 1 tenth of
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one percent. adp reported 220,000 private sector jobs added in april the most since november. steve liesman has more on the numbers and the economic reports and tell us ab)wá the state of the economy. >> two reports ending in dp, adp and gdp and they could not be more different. gdp was a real shocker at a just barely positive 0.1%, consumer spending up 3% but a good portion of that was increased spending on health care as a result of the affordable care act. housing down nearly 6% for the second lousy quarter in a row. business equipment continues to disappoint. and government spending was down a half a point failing to bounce back from the depressed numbers resulting from the government shutdown. economists at bmo said the american economy virtually stalled earlier this year in the face of severe winter weather. one reason for the optimism
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ahead were numbers like adp, the payroll company whose data is used to forecast the jobs report this friday for just the private sector. those numbers continue to show good job growth, seeing twenty% cared to an estimate of 210,000, non-farm payroll estimate for wall street, 210,000 for the government report on friday. late in the day the fed seemed to take the data in stride, blaming the report at least in part on the weather and following wall street's expectation to drive down interest rates. the feds signalled more tapering ahead while at the same time promising to keep the short-term interest rates low it looks like well into 2015. for "nightly business report," i'm steve liesman. and chief economic adviser at allions. mohammed, good to have you back with us. i want to get your reaction to a couple of things.
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you have the economy basically flat in the first quarter. you have the fed pulling back on its stimulus, something that worried investors, and yet the dow sets an all-time high. whats not computing, if anything. so tyler, think of it this way, the fed is on auto pilot. we know what they will do, reduce by 10 billion at every meeting, and they will keep the interest rates low and continue to encourage us that interest rates will stay low for a long time. so the fed is predictable. markets like that. the markets also look at the economy and say yes, we had a weak gdp number, but as steve and susie said, we had a good barometer number. so put these two things together and what the markets see is basically a range-bound outlook. the lower volatile range-bound outlook. what it does is encourage the
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market to leverage and reach for yield and return and pushes both the bond market and the equity market higher. >> mohammed, first of all nice to see you again, glad you're back on "nightly business report." you have heard the new buzz word with policy-makers is lift-off. they're talking about the time when they will raise interest rates. when do you think it will be? and when it does happen is that going to be good and bad for investors and for the economy? >> so nothing today suggests that we really are near lift-off. if you look at the poor gdp number, yes, business investment, weather impacting it was an issue. but also exports were an issue and the rest of the world is simply not as boinuoyant. so we're not at lift-off or full speed. i don't expect you will see interest rates hike for a long time. >> mohammed, is it a non-factor for equities and asset prices? >> it is a factor but a factor
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whose impact will be felt later on. you know, at the end of the day in delivery returns, lots of people are very short-term. so when valuations keep on going up, when your return objective stays the same and when you don't see the turn in valuations until much further down the road you are tempted to stretch a little bit more. you are tempted to do the extra bit of leverage. and that is what we're going to see. and it is going to continue to do so. hopefully, and this is really important. hopefully, a better economy will validate these valuations. right? the risk is that it doesn't. but this is difficult, technical behavior when you tell people you're in a range-bound world and you give them high return objectives. >> right, right, let's look a little bit outside the united states. i would like to get your thoughts on all the headlines we have been seeing about new sanctions, ukraine, how much does it concern you especially if they get to be really serious sanctions. and also what is on your worry
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list? >> so if they get serious, and let's define that. it means from going from targeting individuals to targeting sectors. and if these sanctions hit finance and energy then you can expect two things to happen. you can expect the russian economy to start to suffer really negative growth. which means it will trade less with europe. and you can expect counter section, you can expect them to take steps to limit the supply to europe. if that happens you tip it into recession, and then the markets look at something very different. right now the markets are discounting this. because it is in no one's interest to tip both russia and europe into recession. the problem is that every day the news out of ukraine suggests that everybody is losing control of developments on the ground. >> mohammed, you'r leaving pimc was said by many as abrupt.
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was it as abrupt as it seemed, and it seemed to be in the aftermath quite personal, i wonder if there was a connection how personal it became and the fact that pimco corporately has had a lot of outflow of capital in the past two years, so two things, was it was as abrupt as it seemed and why did it get so personal as it did? >> so i can't speak to how it was viewed. i can tell you what it is like from my end. i spent 14 wonderful years there, six years as ceo as one of the world's best investors. it was time for me to do something more different, time for me to spend more time with my daughter and have a portfolio of activities as opposed to one full-time drop. so the time is right. and what is wonderful, tyler, i leave behind a very strong firm full of talented people and full of great investors and that is what matters ultimately for clients. >> if you were still ceo how
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would you deal with this $50 billion of out-flow what would you continue to do? >> so you continue to do what you did for years, which is continue to deliver long-term value for clients and continue to deliver leadership. and the best service. and that is what pimco does. we have to remember it took pimco 39 years to go from zero to a trillion. it took over three years to go to 30 trillion. you have to put the stock in perspective. >> mohammed, good to see you, you look well and rested. we look forward to seeing you again. >> general electric's ceo was making the rounds today saying he is confident his deal to buy allstum will get done, offering $17 billion in cash for the energy division of this french engineering company. he met with the french president and said that the assets will fit right in at ge. i think it is an acquisition that is very consistent with our
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execution skills, our ability to drive synergies. it is in a market we understand. i think it has relatively low execution risks for investors. it is going to increase our earnings growth rate and it is going to increase the industrial mix up to 75% of our earnings by 2016. >> now, despite that positive pitch, this is not a done deal just yet. allstom gave siemens, the german industrial giant until the end of may to come up with a counter offer. did you ever have a fender bender and find out the damage was a lot worse than first appeared? the new report showed the government lost much more than it thought after bailing out general motors. the treasury lost $11.2 billion by rescuing the automaker, not the estimated $10.3 billion loss when it sold its last remaining shares in the company. that was back in december. the revised loss includes more than $800 million of write-offs
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just last month in its investment in the old gm. two other companies bailed out by uncle sam could mean a lot more taxpayer money. after running through some stress tests, the federal housing finance agency which oversees government run mortgage giants fannie mae and freddie mac says that in a worst case scenario the companies may need as much as $200 billion in federal aid if the economy and housing market suffer another di downturn. as expected, the push to raise the minimum wage to $10.10 an hour failed. the vote fell shy of the numbers needed for democrats. they say it would be too spec s expensive for employers and would actually cost jobs. the u.s. may be the world's leading economist for years, but
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that could all change, bun economist is calling it a wake-up call for investors and american businesses.un economist is calling it a wake-up call for investors and american businesses.oun economist is calling it a wake-up call for investors and american businessenun economist is calling it a wake-up call for investors and american businesseeun economist is calling it a wake-up call for investors and american businessen economist is calling it a wake-up call for investors and american businesse economist is calling it a wake-up call for investors and american businesses. the international monetary fund approves a $17 billion emergency package for ukraine, the aid designed to stop a collapse of that country's economy. the loan was put together in a matter of weeks and was approved unanimously. americans would like to see the u.s. pull back from the world stage, the conclusion of a new survey. in a big change from year's past, the new nbc news wall street journal poll shows that the u.s. wants the u.s. to be less active in global affairs with only a fifth of the respond dents hoping for more u.s. engagement. this comes after tough economic
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sanctions against russia. >> quick, what is the world's biggest economy? you said the u.s., you are correct at least for now. a new report shows that the u.s. could lose the distinction to china sometime over the next year. scott cohn has more. >> reporter: china's economy may become the world's largest this year passing the united states earlier than most expected. according to a new report by 2011 china's economy was already 87% the size of the u.s., leading some experts to predict china will top the u.s. as the world's biggest economy by tend of 2014. dan greenhouse says we should not be surprised. >> with the number of people in china, there are about 1.3 or 4 billion people, compared to 310 million in the united states. they should have a much larger economy. >> even though china's economy may soon outstrip is that of the united states, the average worker makes much less than the average american worker who
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makes 12 times the number they make. >> china has been coming on quite strong for sometime, the world businesses are aware of that. i don't think even if we pass the particular benchmark that is a tipping point. that can't mean the u.s. will maintain its full strength. >> and investors should remember that economic growth doesn't always translate into stock market returns. >> even though they're growing 7% or more and even though the economy is set to become the largest in tehe world, the stoc market has gone down. >> while the stock market may struggle, there is no question that china may be a growing force in the years to come. for "nightly business report," i'm scott cohn. here now to talk is barry bosworth, a former economic adviser in the carter and johnson administrations, and currently with the brookings institute. let me ask you about this survey, do you believe this one measure that they're looking at is legitimate, in your view, that china will overtake the
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u.s. by the end of this year? >> yes, i think it does, but people should understand it is very complex on the calculation to make. there is a huge range of error in this but the basic message is that there is a total economy, china is beginning to approach the size of the united states is correct. >> mr. bosworth, 25 years ago something like 11 of the wealthiest corporations were japane japanese. we all thought we were going to end up working for japan. is the fear with china over-blown? >> yes, i think so. still, fundamentally, i think china is a much bigger economy in the sense that there is a lot of people. it has room for a lot of further growth because it comes per person, it is still far below those of the united states. i think it is inevitable as we look ahead. we can argue about the year in
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which it occurs but china will be a larger economy than the united states. >> okay, so if that is the case what is the take-away here for whether you run a business or whether you're an american investor. why should you care? >> because it is -- what we should realize, from our economy's perspective this is a very big market now. we have to pay attention to the opportunities, both to invest in china and to sell, export things to china. and particularly in the area of exporting to china we just haven't done very well at all. we're very good at importing for china but we're very bad at exporting to china. and i think the big reason is we don't pay much attention to that market. >> is that because we're bad at it or because they protect their markets? >> i think the bigger problem is that we're bad at it. that stands out as a u.s. -- for countries more than just china we don't have a very good export record. i think there is a good reason for it. for 30 years up until the financial crisis this was a
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fully employed economy. and if you were an american business you would say the way to make money is to focus on the u.s. economy. you didn't have to spend a lot of time trying to find export markets. and when we were fully employed already. but the world has changed since the financial recession. we need to export today. >> right, and some would say and the chinese need to be better consumers. do you see that changing? >> yes, i think that is very important. i think china got a little off track after the wto agreement to bring them into the international system. and i think they feel they have been too much of a focus on exporting and not enough of a focus on developing their own domestic economy. the financial crisis revealed to them that they were very exposed. i mean, the shock of the collapse, the world trade was a big problem for china. and they're still struggling with how to adjust to that. so i think yes, they want to develop their domestic economy.
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that is good for them. that would be great for american exporters if we're prepared to take advantage of it. >> well, let's hope it turns out good for both sides. thank you so much, barry, appreciate you coming on the program. and we begin the factor with the $6.8 billion power deal. exelon will buy pepco, the combined businesses will have about 10 million customers and create the biggest atlantic gas and utility. shares of pepco went to $26.76, exelon fell to 3% to 35.03. and energizer will split its company in two, planning to sell the household products like schick razors, the company expects the separation to help it focus and to better allocate resources, wall street liked the
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news, shares up 14% today to $111. $111.69. two oil companies raising their dividends, exxon mobil increasing to 69 cents a share, the move continues a 32-year record of upping the annual payout to shareholders. chevron's board raising the dividend by 7% to a buck seven a share and that, too, will be payable in june. exxon mobil up to 141, chevron fell just a bit. wellpoint's first quarter profits drop 1% because of an increase in membership. why do profits drop? because there were higher administrative costs tied to the customer growth. but earnings beat estimates and the insurer raised the outlook for the year, sending shares up 5 and a half percent to $100.6. and shares of weight
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watchers surge, trumping wall street estimates on both the top and bottom line. its guidance was also better than expected. shares jumped initially after the close up nearly 20%, by contrast, shares fell three and a half percent to $19.80 during the regular session. it was the opposite story for jds, after the market closed the fiber optics component maker closed below estimates, the company lowered the estimates for the current quarter citing a delay in carrier orders sending the shares down 8% in the regular session the stock falling 1 and a half percent. and people start to tweet, and twitter has the way to track the hot topics across the globe the moment it happens.
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facebook on the offensive rolling out new features and strengthening its lock on mobile users and helping advertisers target specific clients, morgan brennan has more. >> reporter: at its first developer conference in three years facebook unveiling several new products including its long-awaited highly anticipated mobile ad network. the new ad has been in the works for several years on and off and it is something that the ceo mark zuckerberg told the developers he is really excited about. >> i am really excited about this network, we've done a lot of work in past years to help you build and grow your apps, and this is really the first time we'll help you moneytize in
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a serious way. >> reporter: they will help them better target their ads outside of the facebook platform. so app creators won't have to sell their own ads or collect payment payments. facebook will do it all for them. >> for me it helps to do facebook ads for multiple publishers, and that is really helpful. i don't need to talk to each one directly, so this is really helpful. >> reporter: today this launch helps a new strategy for the company, with advertising data not tied to facebook and most importantly that is not vulnerable to user growth. analysts say this could create a brand-new revenue growth for facebook, despite the fact that ads like google and twitter help with products. >> they will go to a publisher and say we can help you monetize better that twitter and google and established networks.
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if they can hold true to the audience, they will do well. >> reporter: users, too, have something to be excited about. in the coming weeks they will have log-in choices when using facebook to try a new game or app. they can even be anonymous. >> to me, what is important as a part of key notes, it enables users to develop it. it is going to inspire much more confidence in apps that we are developing, i guess. >> reporter: for "nightly business report," i'm morgan brennan in san francisco. and finally tonight, some of the challenges and some eye-opening technology at twitter. shares of the micro-blogging site fell to the lowest price since it wrapped up the first day of trading that is after disappointing investors late tuesday with lower than forecast user growth and a weaker outlook. despite revenue doubling last quarter, still, the ceo offered a positive spin on the earnings report and talked about what twitter needs to focus on right now. >> focused on three things,
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growth, operating efficiency and operating leverage. that second and third are absolutely in service to steadily improving margins, steadily improving margins. so as a high-growth company i want to make sure we're not starving the growth engine while constantly focusing internally on getting better and better at operating efficiency and operating better in service to margins. >> now, we all know that news travels faster these days, and twitter can now see how fast giving us a look at its heat map of tweets moving around the world whenever big news breaks or even after the break of dawn. >> the response to the adam silver press conference regarding donald sterling, when news happens, the reaction to that was the -- >> that is the moment -- >> people responded immediately
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on twitter. something that is really unique. a place where people can discuss this stuff as it happens. >> so then the conversation sort of lingers for the rest of the press conference. >> you can see the peak and spike when the amazing phrase happened. >> and it is not a california story. >> not a california story. in fact, if you zoom out you get the whole world. you can see it down here -- >> this next map is? >> so this is regular beyonce chapter, you may remember she released her album on line last year, and then you can see what happens when the album -- this is normal, this is normal. and then suddenly the album is dropped and the whole world is talking about it. not just in ates, london, istanbul, south africa, around the world it became a major talking point. >> you can almost set your watch to it. this is people tweeting the word sunrise as dawn spreads across the world. you see it happening there,
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people tweet iing there is a sunrise, so you would turn to your friend and say what a beautiful sunrise and now you tweet it. >> that was amazing technology, who knew that beyonce was big in turkey? i guess she is big everywhere. >> sort of cool, the sun never sets on the twitter empire. >> no, indeed. >> that is "nightly business report," i'm susie gharib, thank you for joining us. >> and i'm tyler mathisen, have a great evening, everybody, hope to see you back here tomorrow night.
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