tv Nightly Business Report PBS October 30, 2014 1:00am-1:31am PDT
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 insights with action alerts plus, the multi-million dollar portfolio she manages with jim cramer. you can learn more at the street.com/nbr. good-bye and fare wl, the federal reserve ends its bond buying program, and assesses the economy and what will chair janet yellin do next? the $1.6 million question, did the move to restore the economy work?
and the fed effect, what happens to the hous pro is over. we have all that and more tonight on "nightly business report" for wednesday, october 29th. good evening, everyone, tyler is off tonight. they say all good things must come to an end, and today the federal reserve announced the end of its latest bond buying stimulus program known as qe3, the decision ends a six-year stretch where the central bank expanded its holdings of mortgage securities to an unprecedented $4.5 trillion. in a statement, the policymakers gave an upbeat report on the economy and job market. the u.s. dollar sparked higher on the news, bond prices dipped as yields moved up, gold prices fell a bit and cautious investments kept the market in negative territory. the dow lost, and the s&p was off about three points, the yield on the benchmark ten-year note hit a three-week high today before easing back and closing
at 2.3%. hampton pierson has more on the feds' decision. >> reporter: just a few hours after janet yellin arrived at fed headquarters, the fed chair and her monetary policymakers made history, ending the fed's trillion dollar bond buying program nearly six year after the financial crisis. but the fed will continue to keep the interest rates at an historic level for a considerable period of time even after the program comes to an end, key money managers say the move is long overdue. >> given all the numbers we looked at i'm glad they are there. i would like to see the fed go sooner, that would mean the economy was stronger, earnings better, good for the stock market. >> reporter: while the fed is ending qe this month, comments from policymakers about labor market conditions and the outlook for inflation are heating up the debate over who
is next for short-term interest rates. with the job market improving and unemployment at 5.9%, the statement suggests there may be less slack in the labor market. policymakers say the under utilizization of resources is gradually diminishing. and while they may keep a lid on them for the short run, the fed said that the likelihood of it running below 2% has diminished somewhat this year, fed watchers say the hawkish tone could move up to time table for an interest hike. >> i think those looking at the fed for an excuse, could be disappointed. the thing they're saying is we're looking past the weakness. >> even as the labor market is tightening up fast i think the real key to whether we get our quotes is what do wages do from here? >> the u.s. economy is enjoying
increased business and consumer spending, manufactuturing growt and an unemployment rate at a six-year low. but housing is still struggling and the slowdown in global growth poses the biggest threat to the recovery. for "nightly business report," i'm hampton pierson, in washington. now that qe3 is over, the big questions, why did the fed launch that third round of asset buying? and did the central bank's historic spending really work? steve liesman takes a look. >> the fed's decision to end the third round of quantative easing raises one question, did it work. did the $1.6 trillion of bond purchases in the fed's two years achieve the fed's goal of helping the u.s. economy, pumping up inflation and lowering the unemployment rate. there is two ways to look at it. you can start with the u.s. data. since qe 3 has launched, growth
rate has been at an unremarkable rate, about a half a point. job growth went to 245,000 now. and the unemployment rate fell by about two points. the stock market surged. but another way to find out if qe worked in the u.s. is to look at europe. over the same time the u.s. bought hundreds of billions of dollars of bonds, the rate climbed by two million euros, now, the fed is fretting over economies that are near inflation. >> history has told us the central banks who tightened too soon have a lot of consequences they then cannot deal with after a financial crisis. and the biggest mistake they can make is 1937, or the japanese mistakes or missteps and they don't want to be there. >> of course, the qe had its
failings, and it actually declined during qe 3, bank lending has croppdropped, housis faltered. but supporters say just look at europe. it could have been much worse here in the u.s. for "nightly business report," i'm steve liesman. joining us now for the fed decision, we're happy to have with us the former president of the federal reserve bank of dallas, and the global chief investment strategist at black rock, gentlemen, thank you for joining us on this big day. bob, let me begin with you. so qe is over. how do you think the economy does from here? does it continue to grow or does it stall out? >> i think it continues to grow. we're no longer adding stimulus, but stopping qe doesn't take any stimulus away. the fed's balance sheet is still intact, and there are a lot fewer bonds on the market because they're owned by the fed
than they would be otherwise. so the effect that the stimulus will still linger. >> and how much does it grow? >> well, i think at the very least, the two to 2.5% it has been growing, i would think probably up closer to three by now. >> so russ, stocks were in the red in reaction to all of this news today. not by a whole lot. but they were on the down side. what is the market response? >> i think the market response was fairly muted. stocks were down a bit before the announcement actually recouped some of the losses, yields ended just about where they were this morning. most investors expected qe to end. if anything i think people are a little bit more interested in the fed language than the qe, which was widely anticipate. >> what happens with the markets going from here, russ? >> i think we see modestly more
volatility, stocks are not cheap, but they're reasonable. fundamentals are relatively sound, what we're doing is probably moving into an environment in which volatility will be higher than the levels we have had in the last couple of years and we have had a taste of that since september. >> a lot of what will happen in the market, bob, depends on what the fed will do with interest rates. you served in many, many meetings where the decision was raised about interest rates. so what do you think the fed is going to do? when will they start to raise interest rates and by how much on the first move? >> i am guessing that it will be in the middle of next year, somewhere around july when they start. and i believe the first move would be to go to a quarter percent on the feds rate, now considered between zero and a quarter percent. so i think they would start with a quarter and they would go slow
and make it clear they were going to go slow. we're not going to have high interest rates any time soon. >> russ, is that how you see it. how do you think the markets will respond to that plan? >> i think that is it. i do believe it will be a very slow process given the fact there is not much inflationary pressure. this is pretty much where the markets are discounted. if you look at where expectations are, somewhere next summer, next fall, we're likely to see the start of the tightening cycle. i think the key thing for the markets is assuming the cycle is happening in the context of a stronger u.s. economy, better growth, stocks will continue to move higher despite having a somewhat higher rate. >> let me ask you this, too, russ, how important is all of this coming out of the fed today for individual investors. do they need to make changes in their portfolios whether we're talking about stocks or bonds? >> well, it is an excellent question, the short answer is
no. most of what happened today was largely discounted. for most individuals, the good news is we're moving into an environment which should be closer to normal, where the market is more driven by economic and company fundamentals than by every utterance by the feds. they should keep to their investment plan, nothing that happened today should really leave you to change that. >> bob, we're seeing improvement in the jobs market, we're getting the next jobs report in about a week or so do you think we'll continue to see a trend with the robust hiring with the unemployment rate coming down? >> i think so the new claims data in the past few weeks have been fairly encouraging. we now have several months of over 200,000 new payroll jobs. so it probably won't be as good as the september report but i think it will be pretty good. >> and russ, is that what you see? also can you give us quickly what you think the year-end forecast for the dow will be? >> well, we think we'll continue
to see improvement in the labor market. again, we see the environment where the initial jobless claims are low, seeing the monthly numbers better. could use views on the s&p, we think that stocks will make modest gains for the remainder of the year, with the s&p 500 and probably somewhere between 2,000 and maybe better than that. maybe about 2,020. >> all right, thank you so much, appreciate you coming on the program. former president of the dallas federal reserve bank and russ kosterich with black rock. as the fed tapered the purchases over the last year u.s. banks have been picking up the slack. since december, records show that commercial banks bought up $150 billion worth of treasuries and 1 of 0 billion in mortgage backed securities. and later in the program, why small business owners
haven't been borrowing and taking advantage of interest rates, kate rogers has more. now that the fed stimulus plan will end and super low interest rates will go eventually higher what will the impact be on housing? diana olick has more from washington, so diana, efficient let's look at the path. did the lower rates really boost home buying over the past six years? what have you seen? >> well, not home buying so much, what they really did was help millions of borrowers refinance. we saw the rates go to 6% in 2008, to as low as 3.5% a year and a half ago, that again helped people refinance, but it didn't push as many home buyers as expected. what we did see was other stimulus from the government, being the first-time buyer tax credit. that really boosted the home buyers in 2009 and 2010. were there any negatives to all of this? what was the down side to these
super low rates? were there any adverse effects that impacted housing? for one thing, a lot of investors were seeking yield. because they couldn't buy it in the government they went into yield rate. they bought all the distressed properties and helped to put a floor on home prices. the problem was investors had all cash and bought so many properties, competed for these properties and pushed home prices up much higher and faster than expected and faster than normal income growth. so now, home buyers who are coming into the market mortgage-dependent are looking at higher prices, that one turned out to be a double edged sword. >> now going forward we know that interest rates will eventually go higher. and what will that do to home buying and especially now that the fed is going to be out of the picture and will not be buying anymore bonds? >> well, we already know rates jumped higher just this
afternoon after the fomc announcement. we know they are the highest rate now in the last three weeks, but they didn't jump dramatically higher. we will see rates inch slightly higher but it will not be a big dramatic move. and what is important to note it has not been the rate but the credit availability that is really affecting home buying today. it is buyers who need to have good credit and have a down payment. they need to have full documentation. so i don't think we need to worry quite as much about the rate as we do about the credit availability going forward. >> absolutely, the process is really longer for any of us who have gone through this. thank you so much, diana olick in washington. and still ahead on the program, twitter and facebook are two very different businesses but they're both struggling from some of the same issues. that story is next.
any investor will tell you that every second counts when executing a trade. and two new studies have found that hedge funds, high frequency traders and others are marketing data seconds before other investors. that gives them a potentially unfair edge over the rest of the market. the findings from researchers at the universities of colorado and chicago show the difference in -- the data releases range from
milliseco p that is taking on apple pay has already been hacked. currency, this is the fledgeling payment system backed by a group of retailers including walmart, rite-aid and cvs is sending e-mails to customers warning them that their e-mail addresses may have been stolen. a more familiar payment system posted solid quarterly earnings after the close today. visa, the world's largest debit and credit card processer, had a better than expected report despite a drop in net income and visa set aside nearly half a billion dollars for litigation costs, shares were better than kplted. revenues of the dow component topped estimates and after retaining the earnings guidance and a stock buy back plan, shares were up sharply after
hours trading. mary thompson joining us now, i know you were looking at all of this stuff, what are the takeaways? >> the first one is that visa continues to be investors' friends, the stock buy back comes on the heels of the interest dividend announced this week. the company performs well despite head winds, those being low volatility in currencies, the threat of ebola. and they mentioned threats about modest economic growth. what you want to see is increasing the cost board volume, it is challenging becaus of the currency volatility and secondly what it is doing with the digital platform. because these payments are only 9% of its business now but it is a quick growing business, apple pay say the early results from this so far are encouraging, but that is not all they're planning. >> that follows up with what tim cook from apple said earlier the
other day. well points has more people signed up for its insurance, helping post strong earnings that is where we begin tonight's market focus. the company reported higher than expected profit as the medical costs stayed low. well point also hiked the earnings outlook for the year, with shares rising 122.20. shares of hershey melted after reporting an earnings myth. the company gave a trifecta earnings guidance, including higher milk prospects and a stronger dollar. shares fell 1.5%. ralph lauren disappointed with a dismalsales forecast, lowering the guidance for the current quarter and the year blaming unfavorable currency issues. the profit topped estimates but the revenue came in short of estimates. despite all that, shares rose a fraction closing at 161.79. after the bell, kraft
announced that their profits fell as price hikes hurt sales. the increased prices were designed to offset higher commodity costs but sales of some of kraft's meat and cheese products suffered. shares were down initially in the after hours trading, stock was off just slightly to $56.91. and old tech and new tech teaming up. ibm announcing a partnership with twitter to deliver data analytics, the goal is to shape businesses using data collected from tweets. shares of ibm off slightly, twitter down almost 4% at $42.08. and twitter had company shares of facebook also lower despite facing better than expected quarterly results which we reported to you last night. twitter and facebook may operate two very different businesses, but as julie borsten tells us,
they may have something in common, especially for their vision for the future. >> facebook has over a billion more active user than twitter, and twitter conversations are more public, while facebook is between friends, the two company stocks are both suffering from forecasted disappointing stocks at wall street. twitter not growing fast enough, facebook by slowing revenue growth in an upcoming jump in expenses. >> the critical question here is around expenses, the level of spending they will ramp up next year and we felt like that would have an impact on the price target. >> both companies also laid out a vision for extending their reach beyond their own social networks, providing the tools to developers so they can be the back bone of all varieties of mobile apps and provide avenues for them as well. >> for the next few years, our goal is to make facebook the platform to enable others to grow. just last week, twitter
jumped into the game, unveiling the game called fabric, to help developers with apps that have nothing to do with twitter. >> fabric is about being part of the foundation of the entire mobile application eco system. helping developers around the world build apps across platforms from the moment they start developing them to the day they want to start moneytizing them at scale. if we are part of the foundation of every mobile application in the world then enormous opportunities will appear to us. >> but some analysts see a pull back of opportunity saying the company's stocks should not be moving in the same direction. >> we did down grade twitter, the metrics are moving in the wrong direction at twitter, much more demanding at twitter than facebook. >> the question, how both ceos will deliver on the plans they laid out this week. for "nightly business report," i'm julia borsten, in los angeles. coming up, wall street
keeping a close eye on the federal reserve's next move. but are small business owners doing the same? that story right after this. detect systems reevaluating its merger with orbital sciences after the unmanned rocket exploded into a fire ball last night just moments after liftoff in virginia, orbital was
carrying food and supplies to station.people on boare no one was injured. but orbital shares plunged almost 16% today, and alliance shares fell 6.5%. if you ever dreamed of owning a fiat, there will ab spinoff, selling a 10% stake in ferrari, using it in the u.s. shares of fiat chrysler went up nearly 12%. ups is predicting record deliveries this holiday season, forecasting more than 585 package deliveries in december. that is up 11% from last year. ups expects its peak day will be december 22nd when 34 million packages will be delivered worldwide. circling back now to our top story, the fed and tend of its stimulus program, those record-low interest rates were designed to jump start lending.
but did they help small businesses as well as big ones? kate rogers reports. low interest rates would seem to be a positive for small businesses, allowing them to access cash for cheap. but for patrick martin, owner of brooklyn-based food wholesaler, heritage foods usa, low rates are hardly a consideration when it comes to making business decisions? >> i make eight dollars a pound on chops and if i could make nine that is a lot more meaningful to go up a dollar a pound on 16,000 pounds of meat a week, much more powerful than worrying about things outside of my control. >> and martin is not alone, a survey found nearly half of small companies saying the current business environment is holding them back from growing. main street is seeing a lack of consumer demand and sluggish spending across many industries. experts say low interest rates
actually matter less to small business owners compared to consumer spending and overall economic confidence. in fact, the latest survey from independent business finds only 2% citing financing as a top business problem. and half flat out saying they don't want a loan right now as low rates have not triggered the growth in spending that would promise a good cash flow in business. >> the new expected sales in profits and cash flow, that of course doesn't look very good. >> martins relies on a line of credit which is easier to access. other small businesses turned to alternative lenders which has easier application criteria. >> it doesn't force me to dedicate too much of my time with banks, you know, talking to people, contracts, filling out forms. i can contract on finding chefs to spend more for our meats because they're the right kind of meats. >> in the end it is really all about demand. so while wall street is eyeing
the fed for any clues when the interest rates will rise, it is likely small business will not care either way. i'm susie gharib, this is "nightly business report," thank you for joining us. "nightly business report" has been brought to you in part by. >> the street.com, featuring stephanie link who shares her market insights, the multi-million dollar portfolio she manages with jim cramer, you can learn more at the street.com/nbr.
. next a special report on key election issues involving science. a look at hydraulic fracturing or fracking and why opponents want it banned. the drought and proposition 1 and how would the bond measure change california's bond measure and genetically engineered food. the technology behind it and debate on the labels on it. science at the ballot box. good evening and welcome to science at the ballot box an election special produc by kqed newsroom and science series quest. i'm t