tv Nightly Business Report PBS October 16, 2014 1:00am-1:31am PDT
. this is "nightly business report," with tyler mathisen and susie gharib brought to you in part by. the street.com feature 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. what a day, a wave of selling gripped wall street for most of the day with the s&p 500 flirting with correction territory. and that does not tell the whole story. >> but wait, there is more. netflix shares take a sharp spike lower on earnings after the closing bell as disappointed investors shun the stock. and protecting your retirement, how to work with your nest egg, the answer may
surprise you, more coming up for wednesday, october 15th. good evening, everyone, and welcome, take a deep, deep, deep breath. now exhale. it was that kind of day on wall street, the kind that makes you hold your breath, the kind we have not seen in more than three years. at one point today around is 3:00, the dow was off 100 points, the steepest dive since 2011. right now, the numbers tanked in athens, oil skidding again, to cap it all off, a fresh ebola scare. then something happened, the buyers or maybe the algorithms came back, by the end of the day the dow was off just 11 points, the nasdaq down 11, the s&p just 15, the investors, and the
ten-year low dipped 2%, the lowest in more than a year before moving back above that level. as for oil, domestic crude oil dropped $81 a barrel but ended just 6 cents low, posting the lowest decline. brent crude oil fell to 80 a barrel in the biggest one-day drop in about four years, gold was up. hitting a one-month high. we have a report today about the jump in the markets. steve liesman, but first, bob pasani from the floor of the new york stock exchange. >> what a day, the dow industrials were down 370 points at the open, at now 460 points heading before pairing for most of the losses, the turnaround was more dramatic, the dow transports turning positive. the russell 2,000 was down about 2% in the day.
it, too, turning positive. there were plenty of positives, the disappointing retail sales, high-end numbers like nordstrom, down 2% in the middle of the day as an indication that u.s. weaker growth is an issue, look at the transports, truckers and railroads down 2%, airlines down 2 to 3% on ebola concerns with a ripple effect through health care facilities. so big hospitals like universal health were down 4 or 5% in the middle of the day. walmart didn't particularly help, late in the day it lowered the sales guidance. but some concerns about the weaker u.s. economy will pass, including the top performing hedge fund manager last year. >> our own checks with companies indicate that the economy is doing reasonably well in the u.s. clearly some challenges overseas. so we don't believe that this is a change in tone in the market that is likely to be here to stay. >> oil threatening to break
below $80 for the first time since 2012 again weighing on energy stocks, big export production and companies like chesapeake down 2% in the middle of the day. gasoline prices have been dropping as well. as for mergers and acquisitions, the apparent demise of the shire deal also weighed on the markets. despite the problems, the volume was twice normal. there were encouraging signs with an effort to buy when the markets were at their bottom. for "nightly business report," i'm bob pasani at the new york stock exchange. a perfect storm of bad news hitting stocks today with a second case of ebola diagnosed in a texas health care worker who had traveled on an airline. and the u.s. economic data came in weaker than expected raising fears that the u.s. could be coming down with the same case of economic weakness hitting europe. >> we had a fairly rich set of valuations given underlining
growth prospects. and i believe that the market is beginning to price in future fed actions, midland growth, this is all beginning to come together. >> retail sales fell worse than forecast, there were declines in gasoline and auto sales that were expected. but other weaknesses were broad-based including furniture and clothing sales. with tremendous uncertainty over the outlook, world markets gathered the american consumer to step up and spend, instead they stayed home. the strong downdraft in the stock market and the weakened economic data had a strong impact on the markets. the u.s. fell below 2%, the lowest in 16 months. >> that came with a much more benign outlook from the interest rate hikes with the federal reserve. they may not raise them above the current level at all.
morgan stanley in a recent report said that higher wages and job growth put more than $20 billion in the pockets of people that was not there last year. the decline in oil prices could add another 40 billion. the hope for the u.s. economy could be that consumers take their windfall from the gas station and spend it at the mall. i'm steve liesman. and investors have something to watch on the nasdaq tomorrow. netflix, earnings came out after the bell today and it was not pretty. the streaming video service scored profits 3 cents a share better than the analysts' consensus, revenue exactly in line with forecasts and higher this year. red is the new black, they took a real fall after hours down as much as 20% on the news of subscribers enrollment, likely charging higher prices for the service.
julie borsten has more. >> the netflix numbers dropping after hours, reporting fewer new subscribers than analysts projected, then the company itself had forecast. netflix says it was not competition from the likes of amazon or who, but rather the impact of the price increase back in the second quarter. the company's revenue was right in line with expectations and earnings per share beat projections, the selloff coming on the heels of hbo announcing wednesday that it would launch a stand-alone streaming service to compete with netflix next year, back to you. we turn to two experts for more analysis, jim paulson is chief investment strategist with wells capital management. and rick reeder, investment strategist for black rock. rick, let me begin with you, you know it is one thing for the dow to be down 160 points. but i believe what surprised a lot of people today was seeing that the yield on the treasury
was below 2%. what is the bond market telling us? is it telling us that now the u.s.'s economy is weakening just like we see in europe and china? >> well, there are a few things, one not enough safe assets in the world. whenever there is volatility in the world, the treasury is a big part of that i had dropped today. today was one of the main volatile days we had in the treasury market in the past ten or 20 years, very incredible move. a, political move, b, health care risks as you cited with ebola. and then, volatility coming from other markets and crowded trade, we call it short interest rate positioning out there that causes a flight to eequality. >> with a little bit of a technical issue i would assume you're saying there, rick, jim paulson, let me turn to you.
you don't exactly ring a bell and say the correction is over. but could today have been the low point for the markets? what do you think? do we grind lower before the market moves back up? what is going to happen? >> well, that is always really difficult to tell, tyler. it is very difficult. i guess science leads in these market bottoms and because an art form and gut feel, i'm looking for a sense of fear. and today -- >> you didn't see it today? >> today was the first day -- i felt that for the first time in this entire corrective process which has been going on in recent weeks, today it felt more not like a healthy correction or refreshing pause. it felt fearful. and so there is that element. the problem is it ended very cheerily with the big rally at the end of the day kind of removing that sense. my gut is we're going to go down and revisit that 10% correction area, 1810, 20, i think we'll
break and fall into the 1700s yet. but i would say we're probably in the 5 or 6% in the lows of this market. and i would be looking now on the days of weakness to be adding to my portfolio rather than be exiting from this market. even though i do think there could be some downside in the next few weeks. >> rick, what is your fear with the investors, fear that is driving the selloff? fear of what? is it the end of qe, the fear that the fed is coming to the end -- what is it? >> i think it is hard, hard to separate them out. i think -- you think about when the market rallied dramatically when the fed minutes came out last week. it rallied for a while then headed down. i think there is confusion on the part of the investors as to where is the fed. it looked like we were looking towards normalizing interest rates, the dow was rallying. there was a bit of confusion. then you throw in today global
growth is slowing, everybody knows it is slowing. when you started the look at the empire reading with new orders down and the view that maybe the global growth is infecting the u.s. you take all of those events and marry it to a couple of the factors, what is the fed doing or seeing plus a bit of weakness in the u.s. that is what created that -- >> rick, there are a lot of different types of bonds and i don't want to paint them with the same brush, but broadly speaking, are trading different than equities? >> i think today's price action was exactly the answer to where everybody goes to where there is risk in the system. they go to treasuries, fair value in the treasury we think is closer -- in the ten year's closer to 265, 270, we hit 186, the dynamic is incredibly liquid, possibly the most liquid instrument in the world as well as the flight to safety.
so i think people hold onto their treasuries and quite frankly there are not enough in the world today in terms of what the banks have done in purchasing. >> we've heard from experts in the last couple of weeks saying the markets will do okay because the fundamentals are good and we'll have good corporate earnings. take intel last night, numbers were good, but today its stock was also hammered along with everybody else. so what is really going on here in terms of fundamentals? >> i think that is the saving grace, susie, i agree. i think the idea of a major significant global slowdown is way overblown. i think the united states is growing north of 3% and is likely to continue to do so. the data coming out of the united states by and large where you look at the job market and cap spending and profits is the best it has been in the entire recovery. so i think there is more fear getting built in here than the reality on the ground. that is why i think this thing
is probably maybe -- within 5% of being finished. i kind of agree with rick's comments. i think the bond market is really mispriced relative to growth in the united states. i would say it is -- the ten-year yield should be north of three not south of two. and given that we're growing 3, 3.5 with the fives and the growth rate going over 80% profits still doing well, i think the bond market may be with the biggest risk lies in portfolios. the last thing i would do with investors is reduce the stock exposure and go to bonds. >> all right, interesting stuff, jim paulson and rick reeder, thank you so much. >> so how do investors feel about the return in volatility? we spoke with them about investment strategies right now. >> i'm pretty diversified in my investments and in my age, i'm not a whole lot. you know, i have a lot of other
things besides equities. >> i don't think the stock market is for the little guy. >> i don't really see the difference in gambling. you can do all the research, i did, you can still lose a lot of money. >> down one month, it goes up one month, and if you watch it, it will make you crazy. >> i hope it stays back up, everything goes in cycles, i guess we'll have to see what happens. >> you should go to the hershey store in times square, you will be fine. so despite the recent gyrations in stocks, one expert said you should not worry. chief investment strategist at main stay capital. david, good to have you with us. is this a night or month where i should just not look at my 401(k) statement, my balance? >> sometimes that is the best thing to do, is to ignore the day to day activity in the markets, weak activity for long-term investors, you're investing for years, for
decades. and what we're seeing now is a normal correction in an ongoing bull market. >> you know, david, i saw this headline on a blog saying you're 401(k) will be fine, even though stocks just tanked. and talk a little bit about the tax benefits that you have in your 401(k). so talk us through that thinking. >> sure. well, one advantage to a 401(k) account or define contribution plan is that it is tax-deferred savings. the money goes into the account before taxes. and grows on a tax-deferred basis. you don't pay taxes until you take distributions down the road. so there are advantages in that. also by definition, being retirement savings it is a long-term account. so our long-term investment time rise for this account, these day to day fluctuations, week to week fluctuations in the market, long-term investors can remember they have time on their side.
>> these are days where people often do their own kind of gut-check, david. they sit there and go boy, do i really want to be as exposed as i am to volatile risky investments in the market. can these periods be a good thing in the sense that they may make you focus in a way you had had not when things were moving up when your funds are diversified, spread out among different asset classes? >> yeah, as difficult as these times can be to look at your account balance or to see what is happening in the stock market day to day, these are personal risk investment tallies. ideally, the portfolio investor has a portfolio inline with their goals, their risk tolerance and time horizon so that when a period like this comes out they don't get shaken out at the bottom, that they panic and sell out on a day like
today or yesterday. the key is to maintain that long-term plan. >> so tell us real quickly your key bits of advice you give your clients. >> sure, so number one, don't sell on emotion. as i just said, don't let -- in a period like this where we've really seen a lot of volatility in the markets, don't sell when the market has corrected six or eight or 10%. this is exactly the time -- instead that 401(k) investors should be looking to buy equities or to purchase more shares at these lower prices. and then third, and key, is to have a long-term discipline investment plan. it is aligned with your goals, your risk tolerance and time horizon so that you're comfortable with the level of volatility and seeing in a diversified portfolio. >> david, sound advice, thank you very much. david kudlow with main stay capital. thank you. still ahead, what is the dramatic move in treasury yields meaning for mortgage rates,
refinancing and the overall housing markets? diana olick joins us next. late day earnings also from ebay today, that company earned 68 cents a share in the third quarter, a penny more than analy analysts' estimates, but a little lower than wall street investments in the pay pal unit out scored the units. it has a cautious out look for the current quarter, including the holiday season, ebay shares initially lower in after-hours trading today. >> shares of bank of america fell despite the fact that they
posted a smaller than quarterly loss today. that is where we begin tonight's market focus. revenue did come in below estimates because the bank's bottom line was affected by charges related to the recent settlement with the justice department. shares falling 4.5% to $16.7 oh. and current numbers, as americans spent more, revenues came in below expectations, however, but trends in operating expenses were favorable. after the bell, shares were volatile. during the regular trading session the stock lost a dollar 91 to 80$80.93. >> martha stewart and the company taking over ad sales and production of martha's magazines. the stocks spiked after the closing bell. during the regular session shares were up about 3% to 3.$ 0
$3.70. and advi with a proposed deal to buy shire, this coming as treasury deals make it harder to lower the taxes through overseas deal making known as tax inversions. shire down 30% to $140.79. emvi, up six cents. general motors reporting a 2% rise, the best performance since 1980. china, the biggest driver here, the company saw sales there increase by 14%. despite that, the shares of gm off a percentages point in the market. qualcomm plans to buy the british chip maker csr for $2.5 billion, beating out technology. microsoft tried to buy it but was rebuffed.
they specialize in bluetooth technology, the stock of qualcomm down 66 cents to $71.20. well, there was a bit of good news on this down day in the markets, coming out of washington. the federal budget deficit for fiscal year 2014 fell by nearly a third to just under half a trillion dollars. that is the lowest since president obama took office in 2008. well, what will today's dip in treasury yields in the recent market selloff mean for mortgage rates and is it a good time to refinance your current loans if you have not already? diana olick joins us from washington, that is the key question here, diana, most people have refinanced already when rates hit bottom a year or so ago. how many people may actually benefit from this latest drop? >> well, tyler, you're right. it will be a pretty small pool. but you have to look at this as a rate to rate proposition.
i have a 4.75 fix, does that mean i should jump in and refinance? you have to think about what you can get other than that rate change, perhaps you have to do cash out. why? a lot of people were unable to do that cash out re-fi, maybe now they can. also, people who got their mortgage in the past couple of years they were required to get mortgage insurance, you may be able to refinance into a new loan where you don't have to pay the mortgage insurance. so maybe your rate will not be that much different but you will get the savings insurance. >> diana, how about home buyers, do you think the rates will get people to feel much better about buying a home? >> really, that depends on how long the rates stay low. this is not a knee jerk reaction for a home buyer, remember this is the single largest investment in general is going to be your home. so one day of rates moving down may not be enough to get home buyers out there buying.
and remember, what pushed mortgage rates down was uncertainty and volatility in the economy and stock market. and that weighs on people again, do i want to buy a home if i'm not sure about the job or the economy ieven if i have a low mortgage rate. >> very quickly, to the minute, how long do you expect rates to stay this low? >> oh, i wouldn't be able to tell you, i'll tell you they started moving up already this afternoon. and coming up, volatility on wall street and how energy prices are impacting businesses on main street. that is next. . how does the recent market
volatility and this month's steep drop in manager prices impact small business owners? kate rogers spoke with some at the energy conference, more now from phoenix. >> reporter: thousands of miles from wall street, small business owners meeting in the arizona desert are already saying that the drop in oil prices may be a good thing, at least for them. >> if the energy prices continue to fall it will decrease our operational costs in the building as well as costs we pay for services. as we grow it represents a big portion of the expenses. >> when companies have more margins they invest more. they're more aggressive about being creative. >> while falling energy prices may be good for the bottom lines, the ups and downs matter less to the small business operators on main street. >> i think it makes a big difference, like a tax cut. it should stimulate the economy. >> with lower energy prices
filtering in the economy now that may be exactly what happened. despite the recent stock market turbulence, ink magazine found that small business owners are optimistic about the economy. and that in turn has them feeling better about their own businesses. in fact, 57% rated the outlook for their own companies as excellent. for now the hope is that gas prices will stay low heading into the holiday season so that main street can get the rewards. i'm katie rogers in phoenix, for "nightly business report." and finally, a recap of the very volatile day on wall street, as many recovered their loss, the dow down as much as 460 points but by the close was down just 173 points, the nasdaq lost 11 points rebounding from a 100-point drop earlier in the day, and the s&p 500 ended lower by just 15 points, tyler, let's hope things are better tomorrow.
>> hard to take your eyes off the numbers today. i'm susie gharib, thank you for joining us for "nightly business report." and i'm tyler mathisen, thank you for joining us. >> "nightly business report" has been brought to you by the street.com featuring stephanie link, who shares stock 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.
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