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tv   Nightly Business Report  PBS  October 6, 2014 7:00pm-7:31pm PDT

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this is "nightly business report" with tyler mathisen and susie gharib. brought in you in part by -- >> the featuring stephanie link who features her market incites with action alerts plus. the multimillion dollar portfolio she manages with jim krae cramer. splitsville, hewlett-packard things two companies are better than one. but why is hp splitting now? and what do investors think of the move? >> taking the stand. paulson, geithner, bernanke, familiar faces from the financial crisis in court this week defending their actions in the bailout of aig. today it was former treasury secretary hank paulson's turn. >> turn of events. one of apple's suppliers surprised investors this morning
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by filing for bankruptcy. all that and more tonight on "nightly business report" for monday, october 6th. good evening, everybody. i'm bill griffeth. glad to be back. i'm in for tyler mathisen tonight. >> i'm susie gharib. the big news today was about the big breakup of hewlett-packard announcing plans to split the company in two after ebay. it will focus on its personal computers and printers, the other on the fast growing corporate i.t. and technology. investors rushed in to buy hp stock sending shares up nearly 5%. josh lipton has more on the reasons behind the split and what's ahead for the two companies. >> think internet scale with billions of users and devices. >> hewlett-packard's ceo meg whitman used to argue that the company's business lines worked,
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in her words, better together. not any more. now the company is splitting in two. one company, which is going to be called hp inc. will be devoted to printers and personal computers and led by an executive in that division. whitman will lead the other company which will be known as hewlett enterprise. it's dedicated to enterprise hardware, software and services. the breakup creates two companies that can be more focused and agile in a rapidly changing marketplace. >> today is only possible because the turnaround has succeeded. think about what we've accomplished over the last three year, a rebuilt balance sheet, an innovation pipeline that is significantly improved over three years ago. i would argue best in class in the industry now. an inspired workforce, a new leadership team, renewed confidence of our partner, our shareholders as well. but we have to gather ourselves
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as one hp, but now we're in position to take advantage of what's going on in the marketplace and position these two companies for growth. >> but there's another reason whitman might have acted now. the tech new site says hp tried to sell its pc division but rivals such as lenovo and dell weren't interested. investors cheered the news today. the stock is up 70% in just the past 12 months. analysts who cover hp say the two companies could also be attractive takeover targets. >> one of the things we wrote about this morning in our note was separating these two companies gives hp huge flexibility. emco someone else would not want to take on hp in total because you get the pc business. now you separate these businesses your options are open. if someone wants to come in and buy the hp enterprise, they can do it. if somebody wanted to buy the hppc they can do it. >> but other financial analysts
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are skeptical. they remind investors that hp's business lines are challenged for growth and face long-term headwinds. whether this spin-off can address the concerns and unlock value is the open question. josh lipton, "nightly business report" silicon valley. it didn't get as much attention but not to be left out liberty interactive announced plans to split into two companies. one will consist of qvc group, the other on e-commerce. shares up 6% in today's trade. the hewlett-packard plit is putting pressure on other companies to break up for the benefit of shareholders. we take a look at which firms could be next to spin off a division. >> sometimes investors think that bigger and more diverse companies are better off as separate entities rather than joined together. and when they say better off, they mean a higher stock price. >> companies do this often
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because, you know, up with part of their business, it might be part of their business that they pioneered. it's become over time less attractive, is growing a little bit more slowly and so to try to avoid having that part of their business continue to be sort of a drag on their more exciting part of their business, they spin it off into two parts. >> on the heels of the hp and ebay separation announcements, some investors are wondering who is next. one analyst is suggesting that cisco do a similar type of thing. pepsico has also been the target of an activist investor who wants to separate its soda from its snack food business. pepsico's ceo has made it very clear that the company is better off with both units under the same roof. then there's general electric. shares have underperformed the market in the last decade and some blame the immense size and
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scope of all their businesses. they've been shedding units but still have energy, water, transportation, aviation and health care devices. now the question is will other companies also choose to take a look at separation? >> when you see major players starting to move towards, you know, splitting up and focus is better, you know, invariably others in the industry follow. >> investors should keep a close eye on larger companies that have lots of different business units. in the stocks do underperform, someone could step in and propose a value-enhancing move like a spin-off. for "nightly business report," dominic chu. >> chevron isn't splitting up but it is selling assets. the oil giant and dow component announced plans to sell a 30% steak in its shale properties up in canada to a kuwaiti oil company. the price tag on that $1.5 billion. on wall street today stocks kicked off the week on the down side as small caps resumed their
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sell-off. also investors turned a bit cautious ahead of the release of the minutes from the last federal reserve meeting on wednesday. the dow fell 17, the nasdaq down 20 and the s&p lower by 3%. and we have an acquisition medical device mark is paying $12 billion cash to acquire a san diego based company best known for making infulgs pumps. both companies went higher. bd rose 8% while the other shot up by 23% today. the president of the new york federal reserve says the u.s. economy still needs a central bank's help but says he would be, quote, delighted to raise interest rates next year. in a radio interview bill dudley said he believes the fed should let the u.s. economy, quote, run a little hot in order to boost inflation and get more of the nation's long-term unemployed
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back to work and then the fed can begin raising rates, which he says would be a sign of economic success. the economic outlook for china still calls for strong growth but not as much as previous estimates. just today the world bank cut its growth forecast for china and for developing east asian countries for the years 2014 through 2016. that forecast now calls for growth of 6.9% for this fiscal year. that's down -- and next year. down from 7.1%. still healthy though, right? >> but that modest slowdown in china is expect to be a factor in the upcoming earnings season on wall street. bob pisani takes a look at what investors will be watching for. >> earnings season starts this week and there's good news and potentially bad news. the good news is the u.s. economy sis improving and companies with a strong forecast are expected to report strong results.
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but the largest companies, those in the s&p 500 only get about half of their revenues in the u.s. the other half comes from places like europe as well as china and latin america. now, the concern is that, while the u.s. is recovering, europe's growth is flat at best and some countries like italy are seeing negative growth. there's concerns about a softer chinese economy. in the past strength in china was enough to offset disappointment in europe. that may not be the case in time. the world bank today said china's growth is slowing and that gdp growth will be lower this year and next. that's why there's a lot of interest in yum! brands. they report earnings tomorrow. the company gets 53% of its revenues from china, only 23% from the u.s. the concern is that we could have a split earnings season. good news for smaller companies with a u.s.-based focus but more cautious commentary from those
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larger companies that have operations in europe and in asia. for "nightly business report," i'm bob pisani at the new york stock exchange. mike thompson says corporate america could reveal that earnings rose by as much as 10% in the third quarter. of course, mike is head of research and advisory services at s&p capital and he joins us. welcome back. the expectations we have to keep saying start high, then they have to keep coming down. you're looking for a pretty good quarter this time. >> oh, yeah, from october to the beginning of october to now, you know, earnings are probably going to start moving up, but you know if you look back six months they were higher. they were probably just shy of 10%. so this is kind of the way the earnings expectation game is sort of played and it cycles up. you can expect something in the 9% to 10% range when all is said and done. >> so mike, what's driving all that positiveness? >> well, you know, in particular
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there are three sectors that are going to lead this quarter. it will be the material sector, up 14%, telecoms up 1 1, and health care, health care is really becoming a solid contributor to the s&p earnings growth. they'll be up in double digits as well. the consumer is actually having a modest quarter, but such a big sector that, you know, anything 5%, 6% is additive. so you have a pretty good dynamic going on with the way these sectors are -- and the constituents work in the s&p 500. but generally at the core of this is that the economy is in a bit of a recovery. that's the good news thing. i'll underline that by talking about revenues. revenue growth is going to come in around 4%, which after several years of really anemic top line growth is a real breath of fresh air. >> revenues have been lagged and companies have had to cut costs to keep that bottom line growing there at the same time. alcoa per tradition starts the parade tomorrow by reporting earnings that are not the
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bellwether that we used to be, but what can we learn from alcoa's earnings for this season? >> it's really interesting but i think alcoa is well possessioned. the numbers i saw 11 cents, the expectation for them to do 22 cents this quarter. i think you'll see demand, you know, strengthen their top line. i think what you'll see is potential improvement or at least beginnings of improvement and maybe positive comments out of their management team. largely because commodities, the aggregate that goes into their finished goods, there's favorable currents there for them as commodities continue to go down in price. >> you heard, mike, our report from bob pisani talking about some of the themes especially of china. and what do you expect to hear from ceos in the conference calls with analysts after the numbers come out about the, you know, quarter pass, current quarter and the quarter looking
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ahead? >> i don't think china's going to be a big problem in terms of what you're going to hear in terms of verbiage out of the o ceos of s&p 500 companies. you'll have questions around a rapidly -- well, a dollar that's improved in terms of price against other currencies. you know, and i guess the threat of interest rates going up, right? but i think with china, you know, in a lot of ways the benefit is not always, you know, with exceptions to certain companies, a lot of the benefits to the u.s. economy is actually as a producer and advancer because what happens is costs may actually the advantage of that if there's a softening, there will be more competition among manufacturers for american companies to provide in their supply chain, so in effect, i'm not sure this is -- you know, it might be a problem for a previously reported yum! brands which have a top line business
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but generally a little bit more muted. >> we will see. mike thompson the head of research and advisory at s&p capital. in court and under oath. what hank paulson revealed about the bailout of aig, that's next. well, as you heard, former treasury secretary hank paulson took the stand together as the second week of former aig ceo hank greenberg's trial against the federal government got under way. mr. paulson defended treasury's
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2008 bailout of the insurance giant saying it was needed at that time to stabilize the u.s. financial system. mary thompson has more tonight from federal claims court in washington, d.c. >> six years after the financial crisis, former treasury secretary hank paulson returning to d.c. to defend his and the government's actions in putting together what became a bailout for the insurance giant aig. in less than two hours on the stand, paulson defending the harsher terms of aig's bailout saying the public saw aig as a scapegoat for everything wrong on wall street. paulson equating aig to citigroup, a firm set to fail without government help. the difference being, citi's failure would lead to other bank failures whereas aig stood along among insurance companies. paulson said aig's tough terps were needed to get a reluctant
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congress and an angry american public to buy into a bailout and to pave the way for the delivery of t.a.r.p. money paulson said he needed to help other firms. his first priority during the crisis was always to maintain financial stability. aig's former ceo hank greenberg and its investment firm star international alleging the government cheated shareholders by violating their fifth amendment rights. despite charging unusually high interest rates on loans and failing to pursue other options to save the company. to that end greenberg's lawyer questioned paulson at lebt about interest shown by chinese investors in aig at the time. paulson, who says he was constantly engaged with the chinese, said, i was 100% certain the chinese would not come in and make an investment of the size needed to save the company. without assurances i couldn't give. paulson was on the stand about four hours less than expected. causing a scramble in the
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courtroom when he was dismissed. paulson's successor timothy geithner who ran the new york federal reserve at the time is the next key witness to take the stand followed by ben bernanke on wednesday and thursday morning. in washington, d.c., i'm mary thompson, for "nightly business report." walmart will soon be helping customers choose a health insurance plan. the world's biggest retailer is teaming up with to put agents inside walmart stores to help shoppers compare various private insurance plans as well as medicare and medicaid. the goal is to help them pick one that best suits their needs and their budget. we begin tonight's market focus with an update on the ebola crisis. the food and drug administration has now authorized an experimental drug made by a company called chimerix for use as an emergency treatment against the virus. that drug is being used to street thomas duncan, the man hospitalized in dallas with
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ebola. shares of chimerix continue to rise throughout the day as word got out about this. it finished up about 4 1/2% at $41.47. h & r block's plans to sell its banking business have been delayed sending those shares lower. the tax preparer says regulatory approval to sell its banking unit to b of i federal bank is not going to go through this year. that means h & r block will continue to offer financial services through the coming tax season. as a result shares fell to $29.91. and shares of durota therapeutics soared after activists said it would wie the company. the move will help activist bolster its infectious disease portfolio. shares up almost 75%, activist fell almost 1% to $243.95. disney and time warner's turner broadcasting both inked
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contracts with the nba. both companies have a new nine-year deal with the nba under which their channels will be able to televise games starting with the 2016 season running all the way through year 2025. disney shares rose slightly to 88.56. time warner shares were down 1% to $73.82. after the bell the container store posted weaker than expected second quarter revenue. the retailer's sales slipped below forecast. after hours the stock initially fell. during the regular session shares were off 4% to $21.89. and gt advanced technologies plunged today after a surprise filing for bankruptcy. the company makes sapphire glass which was once speculated to be a component of the newly released iphone. but the stock tum peled after apple said it would not use the screens in its new devices.
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today ge stock plummeted. this is one time that you can really say that. falling more than 92% to under $1. >> it's a rough day for gt advanced technology, the company that makes what's called sapphire glass an extra hard type of glass that a number of companies including apple try to use on the touch id button of its iphones and also on certain apple watch models. apple has backed this company with some advanced payments like loans for them to be able to outfit a factory in arizona with equipment to produce more sapphire glass. this company now saying they're moving into chapter 11 bankruptcy. earlier filings said that they were having trouble producing the amount of sapphire glass they thought they would be able to under agreements with apple. as far as apple itself is concerned, it's important to point out none of what gt has produced has actually gone into any apple products that are
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upped production. my understanding is that gt advances might not go into any apple watches either. but right now a rough trade for gt advance as they try to go into chapter 11 bankruptcy and get production up for sapphire glass. you may want to start thinking about drinking tea if that of morning joe starts getting too expensive. a severe drought in the largest coffee-growing region of brazil has sent the price of coffee beans to a fresh 2 1/2-year high, nearly double what prices were a year ago. experts are already concerned about how those weakened trees will fare next season as well. at least gas prices are going down. gas reports that 10% of all u.s. gas stations are now selling regular gasoline for under $3 a gallon. the states with the lowest prices include south carolina, oklahoma and illinois, and in
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st. louis gas is the cheapest. now $2.95 a gallon on average. no such luck in honolulu, gas prices there are the highest in the nation, averaging over $4 a gallon. >> i paid $2.97 this morning. i was thrilled. coming up an iconic new york city landmark has a new claim to fame. the most expensive hotel ever sold. that story next. a luxurious landmark hotel in new york city is changing hands as more cash-rich foreign
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investors pour money into u.s. hospitality properties. robert franks has more. >> capital from china has found a new place to stay in new york, the waldorf astoria. anbang buying the iconic hotel for $1.95 billion. that makes it the most expensive single hotel ever sold in the u.s., and it works out to be about $1.4 million per room key. hilton will continue to operate the hotel for 100 years but anbang will invest in the hotel's renovations. all part of a flood of foreign money buying up commercial real estate. >> money is flowing overseas to the united states. much is considered flight capital looking for safety and the united states is the safest place on the planet to invest. >> chinese companies are quickly buying up hotels and commercial real estate around new york. soho china bought a 40% stake in
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the gm building last may. and another company is putting a billion into a luxury hotel project here in manhattan. but not just money from china. two years ago an indian investment group bought a controlling stake in the plaza for $500 million. but for their $2 billion anbang insurance gets this, one of the trophy properties in all of new york and they get a full square block of real estate in the heart of midtown manhattan. while this purchase marks a new peak for chinese buyers of hotels, the question now some are asking is whether or not this peak is a bubble. robert frank, nightly business report. finally tonight, who will be instrumental in shaping the future of business and finance over the next 25 years? cnbc, which produces this program, has put together a list of individuals who are at the forefront of the changes that could define the business landscape for years to come.
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we're calling it the next list. this follows cnbc's earlier look at the people who have had the greatest influence and sparked the biggest changes over the past 25 years. steve jobs came in at number one on that list. although the next list isn't ranked, it does include some familiar names like alibaba's jack ma, tim cook, the current ceo of apple, hedge fund billionaire ackman and tesla's elon musk. some that are not, co-president of the carlisle group, mike cavanaugh, the founder and ceo of spotify and the ceo of solar city. some flames that you'll want to pay attention to in the future. you can find the full list of future movers, shakers and power players on our website, of course, at some of the names that aren't familiar now they'll roll off people's tongues, as well known as ste jobs.
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>> i'm susie gharib. >> i'm bill griffeth. see you tomorrow. >> "nightly business report" has been brought to you in part by -- >> the, featuring stephanie link who shares her stock picks and market incites with action alerts plus. the monthly million dollar portfolio she manages with jim kramer.
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>> welcome to "film school shorts," a showcase of the most exciting new talent from across the country. experience the future of film, next on "film school shorts." >> "film school shorts" is made possible by a grant from maurice kanbar, celebrating the vitality and power of the moving image. and by the members of kqed.


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