tv Nightly Business Report PBS October 2, 2014 7:00pm-7:31pm PDT
this is "nightly business report" with tyler mathisen and susie gharib. brought to you in part by. the street.com, featuring stephanie link who shares her investment strategy, stock picks and market insight with action alerts plus, the multi-million dollar portfolio she manages with jim cramer. you can learn more at street.com. waiting for the number, hiring in september, after a disappointing august, what wall street and main street should look for tomorrow in the monthly report. kicking the tires, the world's most noticeable investor, warren buffet, buying the auto dealership. why now when some say demands for cars may be peaking. and we look at what is next
for bonds and commodities as an increasingly difficult 2014 enters the fourth quarter with the investment gain on line. all that and more on "nightly business report" for thursday, october 2nd. good evening, everyone, a turbulent day on wall street as stocks posted deep early losses before closing mixed and little change. that up and down trading followed steep declines in asian and european markets after the european central bank left interest rates unchanged today and provided few details about plans to purchase bonds to boost the economy. here is how things looked, dow lost just three points after being down as much as 130 points, the nasdaq actually rose eight points and the s&p was a fraction higher. now, some good news about jobs might have helped investor confidence especially come a day ahead of the september job's report. first time jobless claims unexpectedly declined by 8,000 last week falling to an
eight-year low. but will that be enough to lift hiring for the month? hampton pearson looks ahead for the month, who is finding work and where the jobs are coming from. >> reporter: leading economists predict a job market rebound in september from the surprising downturn in august that saw employers adding just 142,000 workers to payroll. breaking a six-month winning streak of more than 200,000 jobs per month. new claims for jobless benefits fell again last week, the four-week moving average is now below 300,000, moving back to pre-recession levels and planned layoffs from major businesses are more. they predict strong private sector growth up 213,000 in september according to the payroll processer adp with the accent on better paying jobs. >> it is across every industry
and across every size, looking at the data the quality of the job growth is improving. if you go back early in the recovery it was mostly low-paying. two to three years ago we see high paying, now we see job growth across the spectrum. >> manufacturing and construction have slowed in the last two months. and auto sales, while still on the rise, are off the record face of a year ago. but those new jobs and lower gasoline prices are boosting incomes. and consumer spending. that is according to the latest government data. the september jobs report could be a key indicator of what lies ahead for the economy in the fourth quarter. >> even while we have seen some positive momentum in recent economic numbers, it really has been somewhat of a fits and starts kind of recovery. a few good quarters and then slall
of a sudden a big negative surprise, it is hard to forecast. >> at 6.1, the unemployment rate is historically low, but going inside the numbers tomorrow leading economists are looking for people to come off the sidelines and back into the work force because they believe their prospects for finding a job are improving. for "nightly business report," i'm hampton pearson, in washington. and what about small businesses? what is holding them back from hiring? we'll have that story later in the program. sluggishness in the euro is creating a weaker economy. christine lagarde said that the world's modest economic rebound has not been as strong as her group predicted a month ago. >> the global economy is weaker than we had hoped only six months ago, so there is recovery, don't get me wrong, but it is weaker than what we thought. and we have forecasted a modest
pickup in 2015, an important factor. the outlook for potential growth has been pared down. >> lagarde said the whole world needs to aim higher and try harder. >> and that feeling was echoed today, mario draghi said there would not be anymore rate cuts even though the economy is in trouble. >> the economy is still fundamentally weak, i said many times our recovery is weak, fragile, and even -- and still is. >> but draghi said that policy makers will take action if inflation targets are not met and that the threat of deflation increases. stocks up and down amid the supplies, steep losses and crude oil sinking to $88 a barrel
before rebounding and ending 28 cents a barrel. international crude oil at the lowest level in more than two years. so how do all the global issues impact investors? let's talk more about that as we continue our special look at vesti i investing scenes for the fourth quarter, tonight we focus on commodities and bonds, tonight we talk for global head of asset management. meg, thank you for joining us. let me start by asking you what is your outlook for bonds and for u.s. treasuries and where do you see the yield on the tenure by the end of the quarter? by the end of the year. >> we believe through the end of the year you will see interest rates very range bound, a reason for that, the fundamental growth of wage is picking up, you have a lot of geopolitical
uncertainty out there, the protests in hong kong, and slowdown in growth. certainly we'll watch the labor market numbers tomorrow that will keep that potential rise in check. there is also a lot of foreign buying from countries in europe, also in asia that are looking at the higher yields in the u.s. and thinking they look relatively cheap. that will help us keep a lid on interest rates, our basis is probably say 250 to 3%, given the balance between fundamentally having a good story and technicals actually driving those interest rates down. >> so it sounds like you don't see, meg, a lot of risks in owning bonds, at least treasuries right now. i was going to ask you where the money was coming from. you just answered. a lot of it is coming from europe. >> a lot of it is coming from europe and asia, and insurance companies here and pension funds here domestically that have to do asset liability matching, they need to do fixed income,
and hiring, because of the purchase program they have been competing with the feds, which is also keeping rates low. >> let's bring in the chief investment asset manager. tim, let me ask you about oil prices because you pretty much cover commodities. they have been coming down a lot recently, and so have gasoline prices, what is your outlook on oil price is and where do you believe they will be by the end of this quarter? >> well, susie, there is obviously a short-term and a long-term. i think commodities in general over the -- certainly the last few months have really taken it on the chin. and two of the three factors really relate to sort of a commonalty. one being the higher u.s. dollar, going parabolic in the past month, bringing down the prices of all commodities. the second forgotten, meg touched on it, global prices in
general, you have recession-like numbers in europe, and japan and china sort of slowing. so those are the particulars in general. with oil, i think that you're really putting in a bottom here. you have a couple of issues going on. one obviously, the seasonality in the oil business, meaning that refineries take turnarounds, there is obviously a slowdown as mentioned before with the dollar. people are mentioning the massive opportunity for investors, production, heading into 2015 is not going to be anywhere near as robust as people believe it is. the illusion that everybody is suffering, somehow because we're drilling out free zones in the u.s. that everything is hunky dory. it is not, if you look at the globe, and you guys cover this well. you know, you look at libya, iraq, venezuela, and now the information coming in from russia based on sanctions, et cetera. this is all going to kind of
play through in 2015. and we're looking for a very big bounce in oil. >> so i hear you say to consumers enjoy the oil prices as much as you can because they wouldn't last, let me give you two other categories on metals, i assume you are going to say that is an economically driven issue, the other are the agricultural commodities, wheat, corn, whose prices have come way down. >> right, tyler, i think the issue on your first point is 100% right. nice offset for consumers in terms of gasoline prices, i'm not a believer that they're going to hold down at these levels, turning to the metals, obviously the metal that everybody is always interested in is gold. you know, gold is interesting, it certainly stopped going down, it has not done anything, it is in that low 1200 area and we've done a bit of work. we're primarily putting on our themes with debt. and so one of the reasons we like debt and gold bonds is that
all the sustaining costs for gold is around 1250 bucks, i think gold is interesting. i'll tell you one other thing that i think gold is interesting because of. and that is because all of this activity that the globe has been engaged with in terms of whether it was qes, call it government manipulation at the end of the day, has it worked? i think it has done some good, people will be tired of paper and go back to gold. >> all right, tim, meg mclellan, at j.p. morgan. the ebola crisis is impacting exxon mobil's action, they are prohibiting employees from traveling to west african countries who are experiencing
ebola outbreaks. it is disrupting the drilling plans the company had planned to engage in off the coast of liberia. and mid-term elections about a month away, with the power in the senate up for grabs and the economy playing an increasingly bigger role for candidates. one of the senate races that is too close to call is in colorado. john harwood has more from the rocky mountain state. >> reporter: we're now about a month away from the election day and democrats need to win this state of colorado to keep control of the united states senate. in the dozen battle ground states that matter most the improving economy so far has not helped democrats with voters nearly as much as they would like. with the report showing a fresh drop in consumer confidence, president obama went to chicago today to talk up the economy and the role his policies have played in the recovery from the recession. >> the progress has been hard, but it has been steady and real. the direct result of the
american people's drive and their determination and their resilience. but it is also the result of sound decisions made by my administration. >> instead of the economy, democratic incumbents like mark udall here in colorado are targeting women with issues like abortion and contraception. corey gardner wants to change the subject to economic anxiety, even though colorado's rate is a full point below the national average. >> senator udall is a campaigns warrior, he made his career on that. i think the people of colorado are talking about the economy. you know if you look at the last several years the median household income has declined over $4,000, people are working fewer hours because of obama care, you scratch the surface and people are hurting. >> tomorrow's jobs reports will provide another scenario where the economy is heading.
president obama hopes to give democrats like senator mark udall something to brag about. i'm john harwood in more son, colorado. still ahead, would you buy a car from warren buffet. why he decided to get into the auto selling business. warren buffet is getting into the auto business, his company, berkshire has bought the auto dealer. the economy has rebounded and that caught buffet's attention. phil lebeau has more. >> reporter: it is the big business that has made a big
comeback, running an auto dealership. now, warren buffet is getting into the game, buying the tire group which is the majority of the owners around the u.s. >> this is just a very, very good operation. the partnership approach that he has worked extraordinarily well. he is just getting better. >> reporter: buffet wants to sell and service cars because it is very, very lucrative. last year the average dealership's net profit was almost a million dollars, more than doubling in the last five years. with the biggest earnings coming from the service department, which has done well as americans hold onto their trucks and cars longer. >> but if you stand in the service departments, the average mileage is 70,000 miles so that is the highest it has been all my life, i've been in this business 40-plus years myself. right? so there is a lot of old vehicles out there that still need to be replaced.
>> berkshire is buying into the business at a time when auto sales are so strong, many believe that the demand for old cars reached its peak. buffet thinks there is still room for consolidation with independent dealers around the country. and even if the economy starts to slow, buffet knows there will still be people buying and servicing their vehicles. >> the fundamental need has not gone down. >> don't be surprised if buffet drives further into the auto business. in fact, he says he would like to buy even more dealerships. berkshire automotive, they have a deal waiting for you. phil lebeau, chicago. a number of dealerships getting a bounce off that investment by buffet today. auto nation up 6%, sonic automotive, almost 3% higher.
lithia, shares going up 10%. an update on the massive cyber attack this summer at j.p. morgan chase, they admit now that the financial data was breached on 7 million households and small businesses were compromised in the breach. the bank contends the customers are safe. and the bond company that bill grosso left, today it was the ceo, michael diekman will step down next spring after more than ten years as chief executive. charles schwab is dropping the flagship fund from its ten target date funds. and sears is cutting the stake in the canadian unit, where we begin the focus tonight. the cash-strapped retailer says it will raise up to $380 million by selling a large portion of sears canada, ahead of the
crucial holiday shopping season. the move comes after a year-long attempt to find an outside buyer. the 380 million dollar price target is about half what the company had previously said it was worth. shares nevertheless popped about 7.5% to $26.7. and shares on the nyse, the on-line home goods retailer offered a million shares at 29 apiece above the expected range, the company will take in almost 20 million from the sale. the founders of go pronounced they are breaking a lock up to set up a new charity, investors were not too thrilled about it. j.p. morgan which managed the company's june ipo agreed to release the restriction that prevents insiders from selling shares within a certain time frame after the shares debut. and real d, a company that
supplies 3-d technology to theaters received a takeover bid from starboard value. the activist investor offered $12 a share. shares rose 27% to $11.78. after a massive investment of capital, alcoa opened the world's largest lithium manufacturing facility today. making aircraft. the u.s. production for the aerospace industry is ready to take off. morgan brennan has more from lafayette, indiana. >> what are some of the products you are making here? >> so what this plant does is make aerospace product going into commercial airplanes, military airplanes and other defense applications. and this plant is particular, makes the most advanced aluminum lithium alloy. >> this is alcoa's brand-new lithium facility, the biggest in the world. the plant will generate 44 million pounds of the lightweight super strong alloy in years, also to be used for
aerospace. parts will be managed for boeing and air stream, and the partner with alcoa for a brand-new invention. >> what we did over seven years of development with whitney, just a technical collaboration, we created a fan blade that changed the game, lighter than titanium, cheaper than titanium. >> aerospace is a high growth, high space margin business. the back log means the business will last a long time. but perhaps most importantly it is not a revenue stream hurt by the weak aluminum prices that hit alcoa and its competitors so hard since the recession. >> if you can be on the cutting edge of application development so that when a new airplane is designed or a new engine is being designed and you're the only one at the table with the customers, then in many ways you're insulated from commodities because you're not
making commodities. >> alcoa has been on the forefront on this element. with the f-150 pickups to spacex rockets. >> the strength in the aluminum market has really propelled the stock over the last 12 months or so. however, alcoa is also going through a transition where they're focusing on their value products, particularly in their aerospace products. >> those products sold $4 billion in 2013, and analysts expect alcoa sales to grow dramatically in 2020, thanks to new facilities like this one and the company's $2.8 billion acquisition. other aluminum makers like kiser aluminum have been increasingly focusing on aerospace as well. as for this brand-new facility it already has $100 million in revenues booked for 2017. a sign that this business is set to fly. for "nightly business report," i'm morgan brennan in lafayette,
indiana. coming up, wall street and main street are waiting for tomorrow's report on how many americans got jobs in september. tonight, we look at why many small businesses are reluctant to hire. that is next. federal judges ruled there is no constitutional protection for public employee pensions in a municipal bankruptcy case. the city of stockton, california, thought it had to make pension payments to calpers, the california public employment retiree system before bondholders and other creditors got paid. but the ruling allows the city to treat pension obligations like any other debt. meaning it can start cutting those retiree contributions.
now, that ruling is expected to be appealed. some good news about hiring from small business owners. the latest monthly survey from the national federation of independent business shows that small companies hired workers at the fastest pace in eight months in september. that is a sign that the job market continues to gain strength. >> that survey showed an average gain of just one quarter of one employee. getting hired last month. that means a lot of other small businesses are just not taking on new workers so what is holding them back? ahead of tomorrow's big jobs report, kate rogers takes a look. >> reporter: ask small business owners what is bothering them and you wouldn't find a single answer. >> this is for that order that we're donating. >> reporter: for the owner of the bakery near chicago it is wages that have him worried. >> and the reason that is stopping me from hiring more people is that many of our staff, our wait staff are high school kids.
and many of them, i find it hard to pay them a higher rate, like ten or even 13 dollars an hour, and then still have to train them. >> on top of that, rising health insurance costs have garrish concerned he will have to hike his prices which could drive customers out the door. >> and those expenses, those training costs add up quickly. just this morning my insurance broker was here, just this morning we looked at the renewal, going up 6%, not happy but we can handle it. we looked at potentially what next year is going to be, it is over 30% increase. >> reporter: it is not just wages and health care that have small businesses concerned. some on wall street say the over-arching regulatory environment has many concerned with resource officers doubling as compliance officers. >> you have to remember the business owner, him or her is complying with the regulations,
when they ought to be going out, building the business, recruiting customers, mentoring employees and building a strong business. >> reporter: but even in the middle of the strong business, there is encouraging signs. pnc's latest outlook for small businesses show that the number of businesses that plan to hire has not changed over the last six months but that hiring is still much stronger than it was a year ago. and the nsba says the environment could improve further following mid-term elections. >> well, i think there is always a bit of optimism after any election. and especially if the optimism can snowball into a little bit of progress on getting a handle on our long-term issues as a country. >> reporter: but for garrish, whose concern that higher costs could take a toll on his business the outlook for hiring at his bakery is cloudy at best. >> that gives me absolutely no incentive to hire additional staff, replacement staff, sure, but additional staff, i don't see it. >> reporter: and for a labor market that is driven by hiring
among small business owners that could be troubling news. for "nightly business report," i'm kate rogers. >> and that is "nightly business report" for tonight, i'm susie gharib, thank you so much for joining us. and thank you from me, as well. i'm tyler mathisen, have a great evening, everybody. we'll see you back here tomorrow on jobs friday. "nightly business report" has been brought to you in part by the street.com, featuring stephanie link who shares her market insight and stock picks, the multi-million dollar portfolio she manages with jim cramer, you can learn more at the street.com/nbr.
man: it's like holy mother of comfort food.ion. kastner: throw it down. it's noodle crack. patel: you have to be ready for the heart attack on a platter. crowell: okay, i'm the bacon guy. man: oh, i just did a jig every time i dipped into it. man #2: it just completely blew my mind. woman: it felt like i had a mouthful of raw vegetables and dry dough. sbrocco: oh, please. i want the dessert first! [ laughs ] i told him he had to wait.