tv Nightly Business Report PBS October 18, 2014 1:00am-1:31am PDT
. this is "nightly business report" with tyler mathisen and susie gharib. brought to you by. >> the street.com, with stephanie link who shares her market insights, the multi-million dollar portfolio she shares with jim cramer. stock revival, at least for today, the stocks one of the best days of the year. is it safe to say the bottom is in? small cap disconnect as big company stocks sizzle today, small cap shares fizzle. what is ailing the little guys this year and where are the bargains now? >> and deepening divide.
the public disagreement within the federal reserve over what it should do next. we have all that and more on the "nightly business report" for friday, october 17th. good evening, everyone, and welcome. rarely in recent years has the friday been so welcome on wall street. and this thankfully for the most part was a friday of healing for stocks after a week that laid bare practically every one of the markets vulnerabilities. today, the dow jones industrial average ended a six-day losing streak, a slide marked by the kind of turbulence that investors had not seen in years. it shot up, pushed by strong earnings, good economic news and fierce rally overseas in european stocks. all 30 dow blue chips ended in the green, the nasdaq gained 40 s&ps, fourth week in a row of losses, the dow fell a percent,
the nasdaq down a half percentage point, the s&p lost a percent. by the way, for the ten-year treasury it took a magical mystery tour for its own this week before ending with a yield of 2.2%, where it was a week ago. bob pasani on the wild week that was in the markets and whether investors have seen the worst for a while. >> large cap stocks, big rally, although not enough to bring the s&p 500 into positive territory for the week. the initial catalyst was commented by a central bank representative that they would begin to buy as sets to support the markets in a matter of days. that was news, and stocks moved up. it was tough to call. two issues, the slowdown in europe has not been resolved. european leaders still need to reenact reform. but today's comments indicate the central bank there is
willing to keep rates low and begin to buy as sets to support the market, the issue is not re solved but is looking better than expected. the second issue is ebola. no one knows how to model this. this is a real x factor for stocks. this could be a nonissue in a month or it could be a big problem. travel airlines all rally today but that is just today. and the rally, by the way, was largely a big cap event today. the s&p 500 was up on the day, but the small cap turned negative in mid-day. the russell out-performed the s&p all week so it is likely the s&p is just playing catch-up. for "nightly business report," i'm bob pasani at the new york stock exchange. and this week, investors witnessed a sort of david and goliath scenario with small caps easily out-performing larger companies and the overall market, as well. could this signal the opportunity for investors to
make a big move into small caps? morgan brennan has a look. it has been a rough month, with the cap down 10% from the july high. investors have watched the group closely because they are seen as an indicator for the broader market. but this week, the index saw something of a rally, out-performing the dow jones and the s&p 500 in what was a very difficult week for stocks, some experts say this could be the start of a new trend, for small caps, possibly for the markets. >> we've seen the bottom in that we're going to have a pretty good fourth quarter in terms of performance. the goal is to get back to at least break even for a first cap performance on a year to year basic. >> small caps with 300 million to $200 billion, the high momentum tends to experience bigger swings in the larger blue chip stocks, but unlike the
companies on the dow the small caps drive more than 80% of their revenue on average from the u.s., so are more insulated from currency and stronger dollar. analysts say small caps look expensive for the rest of the year but the recent sell-off makes them for fairly valued. as investors worry about the slow growth abroad, this attracts investment. >> we see the gdp growth, the earning estimates for the third quarter look pretty reasonable. so i think you will see pretty big beats and that will drive performance. >> for that reason, he remains wary of discretionary, particularly of retailers, nonetheless there are plenty of risks, small caps are very volatile and it is expected to continue. they're more sensitive to interest rate hikes. analysts swore that it is important to be picky, to do research and invest in certain
stocks specifically. for "nightly business report," i'm morgan brennan. and more about what is going on in those small cap stocks which remain down about 7% for the year, and off about 10%. from their intraday summertime highs. mike good to see you, we shouldn't be surprised i guess that small caps haven't been as volatile. they're doing what we expected them to do, aren't they? >> certainly they're doing what we expect them to do. usually october is one of the worst months for small cap performance in the year each time and again we're not really surprised. maybe theyb volatility has been little more, but given the small caps this year and last, it is not a surprise. >> so is it a new trend to buy small caps? is this a time to fill your
por portfolio with some of the smaller companies? >> we certainly think so we found valuations, and the last few weeks gave us great buying opportunities. some of the analysts were looking at where the stocks have gone in the last few weeks, we think this is good time to buy small caps. that is not to say there is going to be a few especially bumps along the way. small caps act poorli. >> you say you have been buying, what have you been buying? >> well, i tell you, i have to shoot you if i told you what we would be buying. but there is a lot of tech stocks that look a lot more interesting to us right now. and we're actually starting to dabble a bit arod the edges on some of the consumer names. on the whole things are looking a lot more interesting across all the sectors. >> but you know, mike, it is hard to find good smal caps, how do you even research this if
you're an individual investor. with the large cap you know to look at the blue chips. some of the big household names and companies in america, when it comes to small caps, even morgan, you have to be selective and picky. are you better off buying into a small cap fund like yours? how do you identify these small winners? >> well, i tell you again i think buying a fund makes a lot more sense, now again, i'm biassed, since i do run a small cap fund. it is difficult to go out on your own and do research. we have ten analysts across the sectors scouring across the nation looking for some of the best small cap companies out there. buying companies with fundamentals, over the long valuations, you will make good money. >> is the economic climate right now favorable to small caps? in other words, large cap shares are vulnerable to a rising
dollar. small caps less so because they derive most of their income from domestic sales. >> yeah, i think that is right. i mean, again, small caps being less liquid do tend to be a lot more volatile than the large caps. but i think people right now, earlier in the year it was let's buy the large cap stocks with good international exposure. because everybody thought europe was recovering and china was getting stronger. now, some of the recent news, europe is weakening, china is slowing down, people are coming back to the united states and buying some of the smaller cap companies. that is part of what is happening here. >> mike, thank you very much for steering us through the areas of the small cap company shares. turning to the oil markets now, oil prices rose along with stocks today bouncing off a four-year low but not by much. domestic crude added 5 cents a barrel closing at 82.75, brant
crude rose by 4 cents. west texas's down for the fourth week in a row, brant crude was lower by almost 5%. and more on the bell earnings, one of the big drivers in the dow today was general electric, reporting an earnings beat, out-stripping analyst profits up 13% after the industrial giant sold more jet engines and more oil and gas drilling gear. shares today up more than 2%. also topping wall street estimates, morgan stanley profits at the investment bank surged 87% in the third quarter thanks to a jump in bond stock trading. morgan stanley shares rose 2% to 33.22. in economic news, good news about housing, construction of new homes, up more than 6% thanks to a spike in new apartment complexes and multi family units sending shares of
some of the nation's largest home builders, take a look, dr, lanar, polte, up more than 4%. meanwhile, mortgage giants fannie mae and freddie mac are close to a deal with enders that would greatly expand credit to would-be home buyers while protecting the same lenders from allegations of making bad loans, over the past ten years they have caused penalties because of under-writing loans sold to the guarantors, lenders have blamed them for forcing them to have tighter credit restrictions. and members of the federal reserve, will the fed re-think what to do about the bond-buying program that sounds like a cruise ship? qe 3, steve liesman has more.
>> recent market turmoil, low inflation and global economic weakness prompted the federal reserve to end the bond buying program at the meeting just two weeks away. there is something within a public disagreement within the fed on the matter. eric rosengrant in an interview suggested the fed is likely to follow through on plans to end the easing program otherwise known as qe later this month. >> we've made a lot of progress in labor market, we're at 5.9% on the unemployment rate, much higher at the outset of the program. the program was really designed that once we made substantial progress in labor markets, that program would end. if it looks like we're not going to get that kind of progress now and going forward, we'll have to reconsider. i'd be surprised that we would change or mind on that. >> rosengrant, one of the doves on the federal market committee did say the fed needs to monitor
europe more carefully. cheap inflation would keep it tighter for sometime. some are at odds, jim bullard said yesterday the fed should consider lowering the expectations. it is not clear where fed chairman janet yellin stands, she made no mention of current monetary policy, but instead spoke about income inequality. >> instead, the continuing increase in inequality in the united states greatly concerns me. the past several decades have seen the most sustained rise in inequality since the 19th century. i think it is appropriate to ask whether this trend is compatible with values rooted in our nation's history. >> if you really want to read the tea leaves the absence of any comment on current economic policy could be a sign to despite the recent market
volatility, yellin is content to leave in place for now the market expectation that qe will end as scheduled in october. for "nightly business report," i'm steve liesman. still ahead, look follow steady eddy stocks to buy and hold in this volatile market. our next guest has a list of recommendations. that is next. the u.s. now has an ebola czar, president obama has tapped trusted political adviser ron clain, a one chief of staff to vice presidents joe biden and al
gore to spearhead the response to the deadly virus. he will monitor the care of the nurse who cared for the patient who later died. meanwhile, the drug maker has the okay to test the anti-viral drug on patients. still, shares of chirmecic fell, and the drugs were down a fraction. and honeywell may be in a buying mood, the company says it is considering potential acquisition targets after it posted better than third quarter profits and raised earnings and revenue outcome, the strong quarter was driven by sales gains, shares rose to 90 and change. bank of america mellen saw profits rise as it made more money from investment fees in the third quarter, but revenue
came below estimates. still, the stock was up 30 cents. texturon reports a 30% jump in profits thanks to the list in aviation units. encouraged by the strong demand, the maker of cessna, shares rose to 3.65. amgen has filed a paint infringement lawsuit over the experimental cholesterol drug. the suit alleges that the two companies are violating three of amgen's patents and it is seeking to stop the company from marketing the drugs, shares of all companies ended higher with regeneron up 8%. and the french food giant reportedly has its eye on the company as a takeover target, sending shares of that firm about 10% to $100, 23 cents. cf industries in norway's
yara international called off their $30 billion merger deal. that deal would have created a massive player in the fertilizer industry. apparently the two teams couldn't agree on the terms, shares of cf down 3.5% to 244.96. news that cliffs natural will take a big charge in the third quarter sent shares falling. the mining company said it would write down the value of its core and iron assets by $6 billion because of weak prices. stock fell 8% to $8.74. and general motors, millican retiring next year, he was heavily criticized for how he handled the ignition switch recall. the automaker will look for an external search of his replacement. shares of gm up 30 cents today finishing at $30.24. our market guest says he is
looking at the good quality stocks, kevin karen, so nice to have you with us. >> let's get right to it, the top of your list, you're saying the stock over the next 12 months can be up 18%, what is so special? >> well, all three of these stocks to lead off with ratheon, the idea is to have very steady companies, we have had an improving economy for five years, we want to think about how to get through the next several years which may be a little more difficult at some point, so ratheon is good cash flow, excellent balance sheet and buying back shares, ultimately the business is sound, they're the business of making patriot missiles and given the instability we have in the middle east it is obviously an attractive spot for the products they sell in the region. >> so that is sort of a bet on an unsafe world. >> in a way, they also realize this is a very steady company in
terms of their underlying fundamentals. if you look at the cash flow and balance sheet, very sound. ultimately what we want to make sure is they -- >> you have a price target with a 20% gain, the second choice has a more modest price target. tell us about that. >> we're talking about intel, what we're looking at is a company that obviously is best in its class in terms of being able to deliver very low cost, very efficient processers for computers. and even though the pc, there has been a lot of talk about the way the pc is going in terms of sales, one thing we do know the sales are getting smaller. they need to have very efficient processers. intel is leader in the pack to do that kind of work. there is none other that can compete as effectively as intel given their size and scope. secondly in terms of the server
marketplace which is very profitable, they are dominating. with the trends expected to pick up we think they do very well. >> you have the health care recommendation on the new york stock exchange, a lot of news over the last couple of weeks. >> so avet labs is a slim down avet lab, you are looking at a company well diversified in terms of its product mix, they have medical devices, they're also diversified internationally with half of their revenue just shy of half the revenue coming from merging markets which are growing very nicely. they're paying a decent dividend. overall you have a diversified company with a dividend and a very good balance sheet consistent with the profitability. they should be able to get through just about anything the world throws at them. >> these are buy and hold, even if the markets do crazy swinginswings.
a lot of volatility. >> the spot you just had about small caps for example, that indicated the market for the past few years, very rewarding to companies that have been more exciting. that can't go on forever. so what we're thinking about is how even right now though we see the economy growing, we see the data coming in very strong on terms of industrial sales and employment, all of these things. we want to make sure over the long-term if and when we do have a slowdown in the more consistent kind of characteristics or demands by investors -- >> and boring is beautiful, or it can be in certain markets. very quick thought here as we end this very turbulent week, what did you make of it. what do you think is ahead? >> i think a lot of what we saw this week has to do with discontinuity from central banks who on the one hand are struggling to find ways to continue quantitative easing. >> or start it in europe.
>> or start it in europe. so you have this kind of conflict and the fiscal authorities around the world who are dialing back deficits. so one of the difficult things we are seeing is that the economy is getting better it is suggesting we need less stimulus, the market has been spawned largely by huey, the question is whether we need to start the untaper. >> real quick, stocks up or down? >> i think ultimately as long as the data is moving in the right direction this is a time to go and look for quality stocks to put in the portfolio. >> thank you so much for coming by. have a great weekend. kevin jooirn and still ahead. the iphone 6 made the debut in china, does the device wow consumers in one of the most important markets?
china's economy is still growing but at a slower pace than official there is would like. so now, china's central bank is planning to inreject up to $33 billion in national and regional banks to boost lending in the world's second largest economy. apple's all-new iphone 6 finally went on sale in china today. so what was the reaction in the world's largest smartphone market? eunice yoon has more from beijing. >> reporter: the lines outside the apple stores in china were
orderly and calm for the official debut of the iphone 6 but that doesn't mean people were not excited about the phone. the launch was delayed about a month because of the licensing issue, creating a flourishing market. however, people here can now get the iphone 6 and 6-plus for more reasonable prices only a couple more $100 than the united states. most of the buyers here love the big screen. >> i like the wide front, the golden coloring. >> the iphone 6 is better to watch movies. it is faster and supports 4 g, so faster on the internet. >> unofficial reports put pre-orders here at 20 million, although some analysts warn that the figure is heavily inflated by eager customers who register multiple times. china is one of apple's biggest markets, but the company is facing growing competition here. one local company is doing what
they can to help offering free tailoring systems so they can buy it to fit their iphone 6. and finally tonight, if it can happen to the president it can happen to just about anyone. while signing an executive order boosting security on federally insured credit and debit cards, president obama said his personal credit card was rejected at a new york city restaurant last month during a u.n. visit. >> went to a restaurant up in new york, when i was at the u.n. general assembly. and my credit card was rejected. turned out i guess i don't use it enough. they thought there was fraud going on. fortunately michelle had hers. >> oh, the late-night comics will have fun with that. the white house press secretary confessed he didn't know the current status of his card, they know where he lives.
he also joked he didn't know if he left a tip at the bottom of the executive order he was just signing. >> wlas going on? ben bernanke can't get a mortgage, obama can't use his credit card, what is going on? that is "nightly business report," thank you for joining us. >> i'm tyler mathisen, thank you for joining us. have a great week, everybody, monday, right here. "nightly business report" has been brought to you in part by. the street.com, feature stephanie link who shares her investment avalancstrategy and insights, the multi-million dollar portfolio she manages with jim cramer. you can learn more at the street.com/nbr.
>> on ebola, the economy, mid term politics and the fight against isis. scary, what do you really need to know? tonight onkle it all "washington week." the ebola scare reaches washington. is not a drill. people's lives are at stake and so far has and unacceptable. >> i'm confident that we can prevent a serious outbreak of the disease here in the united it becomes more difficult to do so if this out ofc of ebola rages control in west africa. gwen: the nation's health on the spot. a czar in place. dropping every day. health