tv Nightly Business Report PBS October 9, 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 strategies, stock picks and market insights with action alerts plus, the multi-million dollar portfolio she manages with jim cramer. you can learn more at the street.com/nbr. about face, stocks tumble just one day after the biggest rally of the year making this the most volatile stretch for the markets since 2011. >> why now? and should investors like you get used to more ups and downs? two experts share insight and advice on this volatile market. all that and more tonight on "nightly business report" for thursday, october 9th. good evening, everyone, and welcome. only three times this year has
the dow jones industrial average lost 300 points or more. today made four and the losses were the highest in point terms, all three of the broad market barometers fell 2% just a day after the advance of the year. the bottom line, volatility is back and the pros say it is not going anywhere any time soon so get used to it. crude oil crumbled, investors fretted about slowing growth and mario draghi in washington signalled his worries about deflation. >> we are accountable to the european people for delivers price stability. which today means lifting inflation from its excessively low level and we'll do exactly that. >> here is the damage on wall street, it was thorough, the dow fall 309 points, the s&p off by
40. the industry was especially hard hit as the domestic oil prices closed below $86 a barrel for the first time since december of 2012, the crude dropped below 90 for the first time in two years. >> the issues dogging the market are essentially the same as what has been dogging it for the last several days. there is a collision between the slowing growth between the rest of the world and the debate between the feds should raise the interest rates, first, a slowdown in europe. german exports dropped 6% in august, the biggest drop since the financial crisis several years ago. the head of the european central bank, mario draghi again reiterated there could be no recovery in europe without structural and economic reforms but a lot of experts are increasingly doubtful that the european agencies can reenact those reforms and get back on the track. a drop in oil, good news for the
economy but very tough news for people who own oil stocks, big oil names bike exxon, chevron, bp, down 3 to 9% just this month alone. finally there is general concerns about the ability to control the spread of ebola particularly if it spreads to other parts of the world like southeast asia or central america. the u.s. is not in a recession, the u.s. economy is growing, the drop in oil is good for us, the s&p is about 4% from the historic highs which hit only about three weeks ago. "nightly business report." and the worries about a slowdown in the global economy were just one of the hot button issues facing delegates at the international monetary fund. sarah eisen has more. >> reporter: the annual meeting of the world bank is under way.
financial heavyweights gathered to discuss risks after the ims cut its outlook for world growth. >> next year we revised it to 3.8%, it is mediocre, but a recovery. >> the ims says germany must spend more to boost infrastructure and the european central bank should be prepared to do more to boost growth and consumer prices. and while the u.s. is growing faster, leaders are trying to solve issues like income. >> who is benefitting from growth and where is income going? how much inequality can the systems bear for growth to continue to be sustainable. and we have a concern that if inequality continues to increase then growth will not be sustainable. >> our people are dying.
>> policymakers here also are discussing ways to fight the spreading risk of ebola, after the world bank said it could cost african nations by as much as $32 billion next year. >> that money is because 80 to 90% of inversion behavior, the stop in productivity, kids don't go to school, people don't go to work, trades slow down. >> the bottom line with the financial crisis, the world is recovering but the recovery is bumpy and it is fragile leaving it vulnerable to economic hiccups, bad weather and geo-politics, wall street has taken notice. for "nightly business report," i'm sarah eisen. >> let's get more now on today's selloff, spending time with the chief investment officer at merrill lynch investment group. and chief investment officer. folks, good to have you with us, chris, why has volatility come
back as strong as it has, and is there anything individual investors can do about it? >> i think there are woutwo reasons, one, economic factors, the speech from draghi today, china has recently been weak, you see earnings revisions in the united states come down a little bit. the good ride of having your cake and eating it too, all the volatility seems to be coming to an end. now that doesn't necessarily mean bad things, there are good elements going on, cape kx is picking up a bit, while there are concerns that europe is slowing down, many companies still have ways to manage their margins in order to generate the strong cash flows. the individual investors benefit from being patient, let this settle a bit, we're coming into the earnings season, there is
likely to be more noise, look for opportunities and higher quality spaces. these are the places that have that volatility with the international risks. >> aaron, let me ask you about the volatility, why the sudden swings, even from what chris is saying, we have heard that rationale before, the fundamental concerns, concerns about europe, it is the same conversation we have had all year long. so is the beginning of something different and something bad? >> no, i still see this as something within the normal range of volatility. so another point, we have been trading at fairly high valuations when we talk about price to earnings we have had trading at about 16 times forward earnings, which is a bit on the high side, above average, let's say. so when you start seeing the global risks come in, naturally it is perfectly natural to have a bit of a pullback and a bit of a correction. but volatility levels are still
well below five-year averages. in fact, we still have not hit the volatility we saw back in february. so investors need to have a slightly longer term memory. and basically stick to their game plans and stick to long-term investing. >> chris, is this the correction so many have been warning about? >> i mean, that is a good questi question. it's part of the question the investors have been looking for since the beginning of the year, lots of days since we've gone with the 5% move. going up and down again may indicate that investors want to look at opportunities from a longer term perspective. the line around volatility, the expectations, this was the normal. always up and no volatility, that is not how things are. >> chris, have you changed your investment strategy and changed your outlook for the rest of the year and where the stocks averages are going to end the
year? >> our strategists haven't met changes, we are trying to ensure clients with the opportunities. we have been bullish with the sectors, they have been hammered recently. some of the defensive needs have come down. for clients looking to reposition, where there is more cash, for clients looking for opportunities to pick up the u.s. centric growth, more than the companies with the risks we've se developing. >> let -- where would you look on the dips to buy? >> so i have two companies, both that have mostly domestic revenues, one thing that we are concerned about is the huge increase we've seen in the dollar was actually up almost 8% over the past three months, which is a big change for just three months. so two companies that i like are lockheed martin, which is more the defense of very high quality
dividend yield just like chris said. the other is southwest airlines which really picked up great market share with the acquisition of air tran airlines. and this is one that we recommend buying on any dips. >> chris, just to wrap it up. still, i'm sort of thinking -- like a lot of viewers watching this wondering why is this happening? to what extent does any of this have to do with washington and the mid-term elections coming up. is this related to that? >> i think a lot of times when you see big moves like this, oftentimes, the match was struck, the weak german data and mario draghi's speech where he talked about his speech in jackson hole where he said expectations in europe are unhinged, which is economist speak for this is a lot lower than i thought. that was a surprise to markets. that is the match that got people reassessing whether or not the european growth story is as strong as expected next year.
put the imf forecast in that mix, you get a reassessment of how strong the growth will be. the corporate leverage, probably a little lower than people anticipate, markets adjust to that. >> erin, thank you, as well, you helped us out a good bit, thank you. here is something else that adolesceded to the market worri strong words from the president of the st. louis bank about the timing of interest rate hikes. james bullard was worried about when investors expected to raise rates and when the fed itself actually plans to do so. bullard said when there is a mismatch in thinking it does not end well, those are his words. >> well, he should just tell us when they're going to do it. despite the selloffs, one of the stocks ending higher was apple. it comes after another round of
pressure from a well-known activist investor about what apple should do for shareholders like him, with a massive pile of cash, josh lipton has more. >> you can say this about carl icahn, he is consistent, the billionaire investors urged apple to buy back more stock, today he was at it again in an open letter to the ceo, tim cook. he said they first praised the ceo, then the investor told cook what he is doing wrong, saying the apple shares are massively under-valued, worth two times the current price. he says the company should buy back more stock. >> nobody is smart enough to know when do you buy at the bottom and when don't you, and hey, i'm not telling apple go spend 1$100 billion tomorrow an buy the stock. i am saying this is a great opportunity to buy this company and hey, i'm not going to pick
the day you buy it. >> in response to icahn, they are responding to the largest corporate hit in history. the company said it returned $74 billion to shareholders and plans to return $130 billion, what is icahn's real motivation here. the analysts say they want to see the stock move higher, and buybacks could help. >> i think the single biggest motivation for the letter is that icahn is fearful that investors are going to sell apple shares after the big iphone-6 release quarters and ultimately he is going to lay the groundwork for the longer term. >> while monster doesn't see the stock going as high as $203, he agrees that icahn should buy
back more stock but says tim cook will not be looking to them for shares. and still ahead on the program, general electric's big bet on what it believes will drive the future of manufacturing. that story right after this. general electric has a vision for the future of manufacturing, and it is launching a new initiative to hopefully get ahead of it, save money and improve efficiency. the goal, to get some of the
biggist industrial machines to communicate with each other. morgan brennan tells us how under general electricals it the industrial internet, big machines like airplanes, turbines, or automotives. >> you will wake up with the industrialists and software companies, there is no difference, those days are over. >> ge has created an operating system to automate industrial machinery. working to increase productivity and cut down on waste. >> you know, if you look at the wind turbine, what we're doing is using software coupled with the data and the wind speed and things like that. we're optimizing each wind turbine and can generate more than 4% electricity.
>> ge developed it 13 years ago, today, they announced the new business will generate more than a billion dollars in revenue in 2014, still a small fraction of the company's overall sales but one that analysts expect to grow dramatically over the long-term. >> you're talking about something that is a percentage of ge's industry at this point. but the opportunity is enormous, and i think the question is not whether there is an opportunity but how will they take advantage of the opportunity over time, and monetize that opportunity. >> an estimated 2 billion machines will be automated by 2020, and not just ge. >> i think you can say most of the large industrial companies are trying to find a way to take advantage of it. everybody is doing something. >> companies like honeywell are all investing in the space as well. there are risks, the growth and
the cyber security, the companies are working hard to address and the possibility that more productive machines could lead to less demand for replacements in the future. for "nightly business report," i'm morgan brennan in new york city. >> shares of the beverage giant bubbled up. they fizzled out and had to. pepsico raising the earnings, and the quarterly profit, beating wall street expectations. the company says the smack sales which include brands like frito lay, pepsico has been urged by an activist investor to spin off the snack beverage. shares ended at 93.57. endo international buying the pharmaceuticals for more than $2 and a half billion. they value it at a 12% premium. it was a rough day for endo, 6%
lower at 66.78, axiliiom up. and kendra buying gentiva who provides home health and hospice services. shares of both companies ending higher. kendra finishing at 20.75. gentiva up to 19.49. allergan, the maker of botox says it is under-valued, it has been reported that allergan raised the bid. shares closed at 187.55 apiece. amazon, the 800-pound guerilla wanting to open the first brick and mortar store. opening in manhattan across from the empire straight building. the store would also reportedly function as a mini warehouse
with limited inventory for same-day delivery right within new york city. the stock lost more than 2% closing at $315 and change. semantec the latest company to split up. after of the closing bell, the tech firm known best for the anti-virus software will trade two companies. one focusing on software seales they finished the regular session down at 2.5% to close at 23.44. mixed quarterly results after the closing bell from family dollar, the discount chain reporting better than expected revenues. a slight lift on earnings per share. the company didn't provide forward guidance because of the pending acquisition by the rival, dollar tree. family dollar up 4 cents a share, closing at $70.75. a warning for many of the millions of americans with an account at fidelity investments,
the financial times reports that fidelity is among the financial institutions to got hacked by the same cyber thieves that breached the server at j.p. morgan chase. the representative said there is no evidence that customer data was stolen. bond king bill gross holding a web cast since his sudden leaving from pimco, speaking from his new office, gross says stocks are not in a bear market but he says that investors need to quote, recognize that times have changed. he expects stock gains of as much as 5 to 6% over the next couple of years and 3 to 4% for bonds. >> still ahead, the chairman of the federal reserve took the stand and faced tough questions about the bailout of federal reserve giant aig.
home equity loans on the rise, more homeowners, especially those who bought at the bottom of the market are tracking up. the home equities rose 21% compared to a year ago. here is the story from to where are they now files, it has been six years from anybody heard from the former ceo of lehman brothers, the investment bank that collapsed at the height of
financial crisis. he is reportedly back and doing deals again. his new firm, matrix advisers is advising a company called match holdings to acquire the stock exchange, they shut down in may because of trading activity, but they are helping match to reopen. and a number of people on the stand in hank greenberg's trial against the government over the terms of the insurance giant's bailout. tim geithner ended his testimony, while former reserve chairman ben bernanke began his. mary thompson has more from federal claims court in washington. mary, what happened in court today? >> reporter: well, you know, it was interesting to watch ben bernanke's testimony today, tyler, because he appeared vaguely annoyed and slightly combative when he took the witness stand. he replied to the questions with curt answers like yes, sir, and i don't recall.
but he did defend the government's actions with the aig bailout saying the tough terms of the package were needed to a, to compensate packages for the risks they were taking and to minimize any windfalls that shareholders may have received. ben bernanke was on the stand for about two and a half hours and returned to the claims court for more testimony. susie. >> and he spent a lot of time grilling ben bernanke on the equity portion of the bailout, tell us what that was all about? >> reporter: well, this is key to the shareholder's lawsuit. they say their fifth amendment rights were violated when the government didn't adequately compensate them for what became a 92% stake in aig that the government took. so he was repeatedly asking ben bernanke why did you take this equity stake. did you know a loan rate included ben bernanke. boyds pushed him. what about this equity stake, he
said it was taken in order again to protect the taxpayers who were assuming so much risk. >> boise had three big names, ben bernanke and the former treasury secretary, mr. paulson and mr. tim geithner, where is he going with the questioning? >> what he is trying to do, tyler is paint a picture of a government or government officials that really did not do proper analysis on the value of aig and the subsidiaries. so as a result they put together this kind of slap dash agreement and didn't ask the proper questions or seek any kind of outside analysis, you know when they put this rescue package together. so that is what boise is trying to show that the government when it had the excessive hours to use, they did not use the proper due diligence to create the rescue package, and again did not treat the aig shareholders fairly. >> all right, mary thompson, thank you very much. mary, reporting from washington
tonight. >> and from washington to wall street, we recap our top story, a massive selloff in the markets, the worst day of the year for major averages on worries about the global economy and after a sharp drive in oil prices sent the energy prices lower, the nasdaq fell 90, the s&p 500 losing 40 points. >> and before we go, fortune magazine out with this year's 40 under-40 of the most powerful and influential and big wig people in business under the age of 40, number five, co-founder and ceo of what is app, which is just acquired by facebook for $19 billion, number four, the head of ukraine's state-owned oil and gas, and the prime minister of italy, and second, facebook founder mark zuckerberg and a tie for number one between travis kalanic, the brains
behind uber. we didn't give everybody's ages, but the prime minister of italy is 39. >> 39, jut gets in under the wire and not really a business guy, a government guy. >> that is "nightly business report" for us, thank you for joining us. i'm tyler mathisen, thank you, we'll see you back here tomorrow night. "nightly business report" has been brought to you in part by the street.com. featuring stephanie link who shares her investment strategies, stock picks and action alert insights, the portfolio she manages with jim cramer, you can learn more at the street.com slash 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.