tv Nightly Business Report PBS December 11, 2014 1:00am-1:31am PST
report" with tyler mathisen and susie gharib. funded in part by -- thestreet.com and action alerts plus where jim cramer and fellow portfolio manager stephanie link share their investment strategies, stock picks and market insights. you can learn more at thestreet.com/nbr. stocks rock. the declines sharp and severe. the dow jones industrial average falls more than 260 points, as catering crews rattles investors. >> the fast and furious selling in the oil marketssent prices at the barrel, lowest since mid 2009. >> whether there's more selling ahead and the way to ride out the volatility. all that and more tonight on
"nightly business report" for wednesday, december 10th. >> good evening, everyone. we begin tonight with two big selloffs. a massive pullback in stocks which followed another sharp drop in the price of oil. after reports showing u.s. energy stockpiles grew while global energy forced strength. it was a nasty day on wall street. stocks tumbled with the selloff into the close. the dow sold 268 points and nasdaq lost 182 points, biggest one day drop in two months an s&p down 33 points with all ten sectors ending lower. oil markets, another $2.88 and ending $51 a level. lowest since july of 2009. international brandt crude lost at $64.24. we have two reports looking at today's selloff.
first, here's jackie deangeles on what's behind the latest cost in oil. >> reporter: oil prices in free fall. traders who were at the bottom are now ducking for cover. the plunge? outlook provisions for next year. opec with their forecast and 30 million barrels a day. the energy information administration trimming its output forecast, but only by 100,000 barrels. over 9 million barrels a day is still very robust. as for that weekly inventory data from the department of energy that showed another 1.5 million barrels in supply and prices tanked more than 4.5% to $60.94. how low can oil go before the end of the year? many see the 50s in the market's future. >> this market seems to be getting one barish news item after idea. brokers on the floor, traders on the floor, we look at $50 at the bottom for crude oil and we
expect that in early january. that's a revision down from where we thought prices were going to go a couple of months ago. >> reporter: to add insult to injury, shell may boost liquidity. analysts say other companies have to follow suit to strengthen their balance sheets. this tells producers that small markets are worried. capital spending budgets for 2015, investment and drilling and exploration projects don't seem to make sense in this environment. while cheap oil helps companies and consumers keep their costs low, it's going to hit the oil patch where it hurts. for "nightly business report," i'm jackie deangeles. the stock market again proved very sensitive to two issues. the decline in oil and slower global growth concerns. there were no 52 week lows all over the energy space today including big names like chevron, the drillers like transocean, exploration production names like noble, all
down about 3% or 4%. there is plenty of collateral damage from lower oil. both with energy plays world down 50%. commodity countries with hit on the lower growth concerns. exchange traded funds with south africa and canada down 2% or 3%. not surprisingly, other commodity stoblgs also appear on the 52 week low list like bhp bill ton and bala with freeport. slower growth in china and higher in mccow dropped las vegas and wynn in the chinese gaming market to new lows as well. will these clients continue? oil is lower on supply, not demand. slower growth is an issue but many stock markets outside of the u.s. already reflect that slower growth. now, with all these concerns, it's hard to argue that lower
oil is bad for stocks or the u.s. economy. the s&p remains close to its historic highs with energy sector down 15% and even while oil is down 40% this year. for "nightly business report," i'm bob pisani at the new york stock exchange. >> let's turn to oil exexperts. costrich at black rock and eric wiigan for private reserve. russ, let's begin with you. how much do you think this selloff might have to go? >> i think we can certainly see more volatility, primarily because we've had such a big move over the last six weeks. you think about the move in the s&p 500, or about 14%, we were up 14% up until the last couple of days. it's a very big move in a short time. the index got back down to about 11. there was a lot of complacency.
i don't think it's all about oil. we see more issues in europe rather than slower growth, it's completely possible there's more selling to be done. generally, i think the fundamentals of the market are for the most part sound. >> eric, let me ask you about oil prices. why should lower oil prices be bad, presumably if you have less energy costs, this should be good for company stocks going forward and their earnings. what do you think? >> we would agree particularly with regard to costs coming in and a benefit to the consumer. however, the concern does turn to capital expenditures, particularly throughout the oil patch and more importantly, getting a grasp on what the overall growth outlook is for global markets. >> russ, let me turn back to you and let's talk about the global economy, if we might. i was speaking earlier today with an investor and skilled
market watcher who pointed out if we paid nearly as much attention to what's happening in commodities including but not limited to oil, like copper, like iron ore, we would be in really kind of a silent crash. does that tell you that we're sort of, here in the united states, whistling past the graveyard as the rest of the world slows very dramatically? >> this has been a trend we've seen throughout the year. i think it's likely to continue in 2015. now, you raise an important question. can the u.s. continue to grow if the rest of the world is slowing down or even contracting? i think for the time being, the answer is yes because in the u.s., you have a very strong domestic economy. it makes about 70% of overall economic activity. the consumers we mentioned will benefit from cheaper oil. we're seeing further improvements in the u.s. labor market, but it doesn't mean the u.s. world won't affect u.s. markets. it is to the extent that slow growth in the rest of the world,
low bond yields in europe and japan, are one of the reasons that the u.s. tenure treasury is at 220 following the best two economic quarters since 2003. i don't think it pulls down the u.s. economy to a recession, but it does affect our financial markets. >> is it a gamble to get into energy stocks now? the prices have come way down. if you say it's okay, can you give us some kind of inkling about what areas to invest in? >> we certainly believe that the volatility is likely to remain until some of these issues are addressed. number one, that has to be addressed is resetting of expectations. we see analysts taking down their earnings estimates. that needs to come down more, perhaps. and also resetting of expectations as far as base growth, removing some of that capacity, particularly some of the levered players from the space. we do think that we are approaching a more appropriate opportunity for investors to
consider entry here but we've maintained the position of being underweight the space position in regard to the s&p. >> when the time comes to go overweight to space, is the best way for individual investors to play it through an etf and if so, what kind of etf in energy? they're differentiatable. >> there's a lot of differentiation between the expiration production folks and the service item. we expect to see a rather meaningful shakeout between the quality and the group. i think investors really have to come back and reassess what their investment objective is, their risk intolerance and their horizon. >> there's 14 trading days left to this year. give us a real short-term forecast. what happens to stocks between now and then? >> i think we'll see more
volatility. it doesn't mean the s&p won't put on points between now and then but i think it's a precursor to 2015. we're ending this period of unusually low volatility. closer to the point where the fed hikes rates. part of this is normal. we go back into a regime of volatility but a bumpier ride for the rest of the year. >> i hope s&p puts on more points than i do pounds the end of the year. eric wergan. bp is prompted to slash thousands of jobs by the end of next year in a 1 billion dollar restructuring plan. coming from all segments, exportation, fining. it's to save money. >> tumbling oil prices mean prices at the pump are down. aaa reports a gallon of regular gas, $2.64 on average
nationwide. 11 cents lower than just a week ago. the energy department said gas could fall further to average of $2.60 a gallon by 2015. airlines are seeing their profits soar thanks to the drop in energy prices with more ticket buyers and more and higher fees and greater efficiency. the international air transfer association which represents 240 carriers around the globe is predicting a record profit of $20 billion for the airlines this year and up to $25 billion in 2015. the ride sharing company uber is hitting road block all across the globe.
big setback. the u.s. prosecutors in new york looking to clean up wall street. federal appeals court overturned the convictions of two former hedge fund managers on inside trading charge. the two traders who worked for connecticut based firms found guilty in 2012 of trading and benefitting from inside information about tech firms del and inn video. a higher appeals court said both convictions should be vacated because the government failed to present sufficient evidence of insider trading or showed that they conspired to break the law>law. some good news for washington bean counters. narrowed more than expected in november. the government still spent nearly $57 billion more than it took in last month but that was $15 billion less than forecasted. higher tax revenues this year
getting a lot of credit. in the nation's capital, congress did approve a massive $1 trillion funding bill keeping past tomorrow's deadline but it is not a done deal just yet. despite what you might have read this morning. john harwood joining us from washington. there's been complaining about provisions in the massive deal. what are the complaints about? >> reporter: there's several provisions that have become controversial very late in the process, tyler. one of them has to do with green lighting certain cuts to multiemployer pension plans, divided liberal democrats, union. some are for it, some aren't. a finance provision that allows large donors to donate more money to political parties for the purpose of putting on their conventions and finally, a challenge to the dodd frank wall street regulation law and a provision negotiated by democrats and republicans. it's not all or nothing on both sides here but a provision that
would allow banks to shield more of their -- some of the allegedly controversial trades, swaps in the insured side of the business by the fdic. all controversial. elizabeth warren on the left come out against the plan. you've got democrats in the house raising objections, not clear how serious those objections will ultimately prove. >> this is so frustrating because the deal was negotiated between a republican house, a democratic senate. why these last minute controversies? >> reporter: in addition to that, susie, negotiated with the assistants of the white house, but what happens is when you got people, staff, and members of congress, white house staff behind closed doors a deal they think they can hold together, sometimes in the light of day, you get members, especially more ied logical members on left or right saying, hey, i can't live with that and then a crisis. that's the classic way that
washington gets itself in a ditch and i think we will still avoid a government shutdown but it's unclear for tomorrow. >> we avoid government shutdown quickly. do we get a bill to carry through the rest of the fiscal year or a stopgap measure? >> reporter: there could be a stopgap to give more time to work it out. if the house passes it, the senate will pass promptly and the question is whether votes from democrats and republicans are in the house. >> john harwood from washington, thank you. back to the markets. home builder stocks got little help from two big name companies after reporting solid mostly inline quarterly earnings. toll brothers, 8% reflecting how most of the big builders today. ceos having less than complimentary comments about their business this past year.
dianna olic has more. >> reporter: nation's home builders not raving about the year that was in housing. uneven, choppy, disappointing, slow. just some of the words the ceos of toll brothers and havnavy with earnings calls today. if tight credit still a culprit, replied undoubtedly. >> the mortgage industry in our own mortgage company is tougher in underwriting. they've been overly caution. >> that may be why so much of the sales activity now is on the high end among wealthier buyers. >> i like to think we raised home prices but the average increase primarily due to geographic and product changes. >> reporter: luxury home brothers missed slightly but average home price rose not
because the builder rate prices but because it sold more expensive homes. ceo doug yearly does not expect that to change anytime soon. >> the house we sell today is going to struggle to be marginal ly because of the pricing power of the margin. >> reporter: builders agree on something else. while 2014 sales flat from last year, should be more growth next year. that is based on real fundamentals. >> six months ago, we looked at dislocation in the job market. we've had really robust job growth and interest rates very attractive from a borrower's perspective. we expect to see a lot of momentum going into 2015. >> reporter: what was a toxic cocktail of higher home prices, weak employment and tight credit in 2014 is now changing to a smoother mix of easing home prices, low interest rates and loosening credit. the one wild card in this drink,
as always, demand. for "nightly business report," i'm diana olic in washington. mcdonald's is slimming down the menu. that's where we begin the focus. burger chain is cutting offerings to increase sales and considered getting rid of ingredients they use to change perceptions about its food. this comes as the company struggled recently to turn around performance because of, in part, increased competition. shares off 1.5% to $90. costco increased promotions to help deal with fierce competition. the wholesale revenue was in line, same store sales higher. still, shares off about 2%. 140 1/4 at the close. also, a new version oflt company's hpv vaccine, gard sill, approved by the food and
drug administration to provide broader protection against cancers. shares off at $59.98. the store base dwindled but better assortment of merchandise and targeted strategy helped drive a big increase in earnings. even so, focused on the drop of the revenue. shares down more than 7% to $46.95. hepatitis c drug civaldi. it costs less to buy the treatment in other countries. the suit claims the drug maker's pricing is an abuse of its patent monopoly of the drug. stocks are 100% to $100.84. hailing a taxi may be a thing of the past. uber teams up people in search
of a ride with uber approved car owners to drive them for a fee but is uber rapidly grows, the ride sharing service is running into a lot of road blocks. kate rod jers has more. >> reporter: allows users to hail a ride on demand quickly garnered both criticism and praise across the globe since the launch in 2010. users love the ease and convenience it provides them via ride sharing but it's also notoriously clashing with transportation establishment in big cities like new york and london for taking both customers and drivers away from them. the start-up mass evaluation just last week hit eye popping $40 billion has also been a hot topic over the past year as its continued to balloon. facing new challenges from the u.s. to sba. yesterday, the san francisco and los angeles county district attorneys filed consumer protection suits against uber
for making false or misleading statements to consumers and engaging in business practices that violate state law. uber said in a statement, it's met with both offices and will continue to engage in discussion with the district attorneys in the golden state. portland also sued uber to stop operating within the city where it just launched on friday claiming the company isn't following local regulation. over the weekend, an uber drive in india arrested on suspicion of raping a passenger in new deli. since requested state government ban uber and non-registered web-based like it. india is one of the largest markets outside of the u.s. it remains to be seen what it means for the company's evaluation, ivo and investor protection but durand, professor at nyu school of business said the company's message remains
consistent which benefits it greatly. >> uber's story has been this is a big market, it's running efficiently and have a better way of doing it than the existing players do. >> reporter: bad press can be good for a young growing company. >> in a strange way, you can't have bad publicity when you're a company like this because you want your name up front. >> reporter: despite the setbacks, he said the upstart has a lot of potential for growth. for "nightly business report," i'm kate rogers. coming up, youngstown, ohio, a steel powerhouse that came on hard times. can the energy boom revitalize the city's economy? the rough rebound second part of the story is coming up n
good news today for the motor city. detroit is officially emerging out of bankruptcy after detroit's state-appointed emergency manager implemented a two year budget that eliminated $7 million in debt. the biggest ever municipal bankruptcy coming to an end tonight at midnight. detroit's mayor is looking forward to better times but still enormous challenges ahead. from detroit to another formerly down on its luck city as we continue our special series on america's rough belt which is now in the midst of a rebound. we showed you how industries like biotech pick up where old manufacturing companies left off. manufacturing is also making a comeback. the big question, can it last? scott cohn has more from youngstown, ohio. >> reporter: they still call it black monday. >> the youngstown sheathe and
tooth company is moving out of youngstown, ohio. >> reporter: the september day in 1977 when the region's largest employer announced the start of a total shutdown. youngstown has never recovered, but this may be a start. they're making steel pipe here again, lots of it, to supply fracking operations nearby in pennsylvania. french steel has spent a billion dollars to expand the facility of one u.s. subsidiary. >> we suspected earlier on this was going to be a good market so we build this here in youngstown, ohio. >> reporter: not far away, another subsidiary is spending $8 million to build a pipe threading plant. hit high of 12% during the recession is now well below the national average. as youngstown's comeback, a
potential road block. the price of oil is plunging. the economics of fracking changing day by day. that means the economics of this plant are changing too. management is watching closely. >> it's a very sharp decline and this happened in a short period of time. right now, it's too early to tell exactly what's going to happen. >> reporter: ohio's governor is trying to take a long view. >> i don't worry about falling oil prices when it comes to the shell revolution. i mean, things will come a little bit faster or slower, but at the end of the day, you know, there's gold and then our hills. >> reporter: youngstown may be on the comeback trail but only gained back half of the jobs it lost during the recession. the fear is that this rust belt rebound is the latest in a long line of false starts. scott cohn, "nightly business report," youngstown, ohio. >> to read more about youngstown, ohio, and how it's trying to reinvigorate its economy, go to our web site,
cnbc.com. that is "nightly business report" for tonight. thank you so much for joining us. i'm susie gharib. >> i'm tyler mathisen. thank you from me as well. have a great evening and we hope to see you right back here tomorrow night. "nightly business re has been funded in thestreet.com and action alerts plus where jim cramer and fellow portfolio manager stephanie link share their investment strategies, stock picks and market insights. you can learn more at thestreet.com/nbr. explore new worlds and new ideas