tv Nightly Business Report PBS January 20, 2016 1:00am-1:31am PST
this is "nightly business report" with tyler mathisen and sue herara. >> in transition, growth in china the world's second largest economy, may be slowing now, but does the pause pave the way for future expansion? >> silver lining. why it's the best time in a long time to be in an american consumer. >> and don't get duped. the irs warns of an age old tax scheme finding new victims. all that and more tonight on "nightly business report" for tuesday, january 19th. good evening, everyone. i'm sharon epperson in tonight for sue herara. >> and good evening from me. i'm tyler mathison. it was the rally that wasn't. just when it looked like the market might have a chance for a triple digit gain, things reversed. the reason? oil prices.
and just like that, the air came out of stocks. after being up more than 180 points, the dow jones average closed with a modest 28 point rise to finish at 16,016. the nasdaq fell 11 and the s&p 500 gained a single point. as for oil, domestic crude settled down more than 3% today to 28.46. bob pisani has more on today's vanishing rally. >> reporter: it was another up and down day but overall, it was disappointing for the market. on the surface, it's simple. there's no peace in the stock market without oil coming down. oil broke down twice ood today right after the open and in the middle of the afternoon. both times, the stock market followed down. today was a little more important for technical reasons, as well. the minute the s&p 500 broke through 1880 in the afternoon was the closing low on friday. the market took a leg lower on heavier volume. the market took another leg
lower when it broke through 1867. that was the low for the s&p 500 in august of last year. stocks rose after i'll stabilized late in the day but not after a lot of damage was done. big oil names like conoco phillips down 7%. hes down. exxon was only down 1.5%. it seems almost the news from the big drops its fellow oil companies have been seeing. you may be wondering were why are the technicals so important? when afraiders don't understand what the fundamentals doing and they're confused right now, they turn to technicals because it gives them some signal what to do. traders after all trade for a living. for "nightly business report," i'm bob pisani. >> as bob just reported, stocks followed oil prices lower, pressured in part by a report from the international energy agency. that said the market could "drown there oversupply." and as jacquie deangel lis reports, supply is only expected
to grow now that sanctions on iran are being lifted. >> reporter: after a 40% drop in oil prices over the last 12 months, investors were starting to think that a bottom was in sight. but opinions have changed after it was announced that sanctions against iran would be lifted and that iranian oil would come to bharkt. consensus estimates are calling for the iranians to add about 500,000 barrels of capacity per day soon in an development where opec is producing at record highs. >> there's too much oil out in the world as it is. the iranian supply will add to the price pressure. >> the world can't absorb it. it's that simple. unless the u.s. production drops by the same amount the iranian production is increasing, then we will see prices pressured. >> it's not just about the capacity. it's about market share. remember, saudi arabia's strategy has been to keep producing oil and roll with falling prices, even discounting their oil in the past as part of their strategy.
today reports that iran will discount, as well triggering fears of a price war. >> i can see a price war between the saudis and iranians because the iranians by having their oil off the markets have lost a lot of market share and need to regain that back. the way they canning is by reducing prices. they're going to do na. the saudis have plenty of oil they're producing they can't get rid of. they're going to reduce prices. we know some grades or blends in the u.s. are trading. >> the supplyside of the story continues to be one of a global oil glut. now there are concerns about the demand side, as well. the international energy agency saying today it's keeping its demand forecast flat couple that with volatility and concerns about what's happening in china and the demand picture is bleak. supply and demand continue to diverge. what will happen to oil short term? if it holds under 30, it could skid to 27 pretty fast.
i'm jacquie deangel lis. >> the chinese economy grew at its slowest pace in a quarter century. though the at a rate many countries would envoy. they reported gdp of it 6.9% growth last year just below the government's target of 7%, down from a year earlier. but the report also revealed something new. for the first time, services accounted for more than half of china's economy while manufacturing's share fell. as eunice yoon reports from beijing, the consumer based shift could lead to greater growth in the future. >> reporter: this is a new face in china's new economy. the 22-year-old used to wk at a factory. today at the beijing head quarters of this internet company, he waits to the deliver food for customers who place orders through an app on their mobile phone. >> translator: i worked in a factor for many years. it was so boring, he says. i found i really like this.
he has joined a part of the economy that the government hopes will drive china's growth services like traffic agencies, retail shops, restaurants, hotels and i.t. as chinese people become wealthier, they don't have the time to do everything they might have on their own, cook food, for example. that spawned a massive need for services like 2350d delivery. this is an online booking site offering group discounts like groupon in the u.s. and food delivery. this manager expects that by 2020, chinese consumers will place 30 million orders for meals a day, via companies like his. almost four times what they do today. delivery services in the u.s. started from a phone call. in china, it's begun with an app. mobile apps are a relatively new area so there's room to grow, he says. wong says history is attracting
heavy investment and hiring fast. services now account for a larger part of china's growth. 48.28% compared to 42.6% in 2014 from traditional drivers like manufacturing and construction. but about the question is whether these new types of businesses canning develop fast enough to drives the economy forward as old industries fadeaway. he isn't concerned. this business is going very well, he says. i think delivery services have a bright future. he is right -- so could china. for "nightlbusiness report," i'm eunice yoon in beijing. well, cume consumers here at home have a number of things working in their favor. gas prices are oil, job market is strong and home values are rising. steve liesman has more on the silver lining in main street's economy. >> the international monetary fund marked down the global economy tuesday mostly a result
of lower oil prices. what it didn't do was mark up the advanced economies or growth among consumers of those cheaper commodities. for the u.s. consumer, cheaper oil prices have meant lower inflation and increased buyer power. data to be released tomorrow should show that real or inflation adjusted wages for average workers in 2015 had their best year since the recession ended. the consumers also benefited from strong job growth and decent home price appreciation, leading to brighter views on the economy among the public. while the imf slashed its 2016 of forecast for oil soaked economies it also downgraded the u.s. to 2.6% from 2.8%. the imf chief economist said he thinks markets are overlooking the silver lining from the decline in oil prices. >> there are still positive effects on consumers and on companies that rely on energy for their production processes and are benefitting from lower
production costs. >> reporter: market pros caution against mixing up the u.s. economy and u.s. financial markets. they're separate, they say. >> the u.s. economy in a global setting is unique. it's the most closed economy meaning it's the least dependent on the rest of the world. the rest of the world means less for the u.s. economy than the u.s. economy means for the rest of the world. but when it comes to financial markets the financial market lynch ands are greater. the u.s. financial market sensitivity to external events. >> worries about china and oil prices can and probably should bring down u.s. stock prices and they have. but it's not entirely clear that should be in a markdown in u.s. growth or worries about recession. since the great recession, these are some of the best times for the u.s. consumer. for "nightly business report," i'm steve liesman. as the obama era comes to an end, there may if reasons to cheer the u.s. economy, after all, it is by most measures in a better place now than it was when the president took office. just how much better or whether
it's better at all often depends on one's politics. john harwood joins us from washington. if you listen to the candidates on the right, you would think the economy was in horrible or trump's favorite word terrible shape. if you listen to some people on the far left, you would think it was failing too or at least failing big segments of the population but for different reasons. does anyone speak for a moderate mainstream? >> well, the problem, tyler is we've got two the different economies. we've got an economy pretty good at delivering rising stock prices. corporate profits. but people in the middle of the income spectrum have not been moving ahead. a lot of people you see complaining on the extreme right and extreme left are looking at those results rather than what's happening in boardrooms or on wall street. >> john, is this different than the way we thought about economy in. the past? is the partisan view changed either for republicans or democrats when it comes to their
views of the economy? >> it is different now. here's the reason. our politics have gotten terrifically polarized now between left and right, republican and democrat. and what happens is when you ask people in polls to assess the economy, that's a bit of a proxy for how they feel about how the country is going. and if their side is leading or is in control of the congress or the presidency, that may color their response. if you're a democrat and barack obama's in the white house, you think the country's going pretty good and you'll say that even about the economy. the reverse for republicans and this is something we've seen over and over and it's one of the reasons why pollsters tend to discount somewhat people's assessments of the economy itself because it's simply another way of asking about your partisanship. >> john, thank you very much. john hardwood with analysis from washington. so how do you feel about your economy? we took our cameras out to see what you had to say. >> gas is cheaper. we're able to go further on the
weekends. and buying my lunch as i always do. >> i'm an uber driver as well as a regular 9 to 579 worker. it kind of makes it easier, more people are catching, you know, ubers. more people you know are out there. so therefore, i can, you know, drive around more people. gas prices are lower so therefore, i can drive around longer. >> we bought a new house or condo four years ago. i think that the lower house -- the low interest rates and the lower housing prices helped us a ton. >> i think they bought a new igloo. >> there are many different views on the state of the economy from wall street to washington to main street. everybody has an opinion. who's got it right in the krig dismusic from vining parks, an investment firm in memphis. good to have you with us. welcome to "nightly business report." how do you think the economy is doing and how do you think the average guy or woman is doing? >> i think you can look at it from either side. obviously from a political
perspective, it's spun in different ways. when you look at the economy just at the numbers, i think it's an underperforming economy. we're growing at a rate of 2% and it's not what it's been historically. but at the same time, we have certainly made a lot of progress since be 2008 when we were in the middle of the financial crisis. >> when you're looking at the job growth that we're seeing, craig, or in some parts of the country the lack of job growth, is it the fact that jobs aren't compelling? we have seen an improvement in the unemployment rate but a lot of folks say that really doesn't apply to me. >> sure. well, the types of jobs that we're creating aren't the types of jobs that are the high paying jobs. you've got two factors in play. we're creating more jobs that are part-time. the number of full-time jobs haven't come back to where they were prior to the recession. and the second issue is that a lot of jobs are being created are in low-paying industries. for example, we're getting jobs in retail and leisure, health care, education. we're not getting jobs in the
higher paying sectors like utilities, finance, i.t., et cetera. so we're creating more part-time jobs rather than full-time jobs and we're yeah, thing jobs in lower paying sectors or industries than high paying industries. >> why, craig, you say the economy is underperforming. why do you think that is the case, and is it reasonable to expect that our bigger more mature economy would still grow at rates like we might have seen in the '50s, '60s, even into the '90s? >> right. so the average rate of growth historically has been between 3 and 3.5%. we're closer to 2% now. i think it's a great point as a mature or economy but more importantly as an aging population, so we have an aging demographic. it's something that economists continue to discount and not factor in. reality is, as the population ainges, that they spend differently. as they spend differently, you're not going to get the type
of consumption or economic growth you've had historically. that's one of the factors. the other is we've come out of a deep recession. the national response to that is to have a big onslaught of new regulations. so the business community is saying, all these new regulations make it harder to do business. that's another thing that's weighing on growth. >> craig dismoouk with vining sparks. thanks very much. >> thanks, tyler. and still ahead, big blue bruised. ibm may have topped expectations but are shareholders questioning the ceo's long-term strategy? ♪
. netflix, the top performing stock in the s&p 500 last year, topped wall street earnings estimates. and added more subscribers than many thought. the video streaming services earned 7 cents a share beating the 2 cent estimate. revenues for the quarter up more than 22% from a year ago. that helped send shares higher initially in after-hours trading. julia boorstin takes a close cloer look at the netflix report. >> reporter: the most important take away from netflix's better than expected earnings report, that the company is growing faster than expected overseas. netflix adding a record $5.59 million new members in the quarter temperpedic coming from international markets. this is the company completes 80s 80s global rollout faster than expected recently expanding its potential subscribers to another 190 million homes with broadband all around the world
it raised expectations for home overseas sub schreyerers it allowed this quart. the company says it still has working to do before it can launch in china. back over to you. >> julia boorstin reportsing. ibm reported better than expected earnings late today. big blue pulled down $4.84 a share beating forecasts by three pennies. revenues fell for the 159th straight quarter despite coming in just above expectations at roughly $22 billion. the stock may just fractional moves initially in extended hours trading but those moves were lower. the big question for long-term shareholders who have seen the stock slide more than 30% over the past three years, what's the ceo's strategy and is it working? josh lipton tells us. >> reporter: ibm's ceo has staked her company's future on fast growing areas such as cloud technology. where she is dedicating a lot of time, resources and money.
she calls it strategic imperatives. ibm now boasts a more than 107b billion cloud business, other strategic imperatives include security as well as social and mobile technologies. together, ibm says 40% of its overall business will be in these emerging growth areas by 2018. >> if you look at it, the tech landscape is probably changing. customers want to use the products in a different way than they used to, to rent them and have a subscription model versus owning the asset outright and as that tech consumption by the customers is changing, ibm has to have newer ways to sell the solutions to the customers. >> the dilemma is these new areas of growth aren't big enough yet to offset the challenges facing the company's traditional businesses like packaged software, services, and hardware. ibm has is its traditional legacy stuff is
higher margin, versus the new strategic stuff. as they go through the transition, you have headwinds on the eps numbers. >> that's why the incesters have been skeptical. since the cea in 2012, the stock is down. 30% versus a gain of nearly 50% for the overall market. but that is why bulls say ibm is now a buy. they argue it's a contrarian play given how negative wall street is about the company's prospects. only some 30% of analysts are at thing their clients to invest in big blue. bulls also argue that the stock is cheap and that company pays a dividend. in other words, investors are paid to wait. still, skeptics remain on the sidelines. saying they'll get more optimistic about ibm when those strategic imperatives approach 50% of sales or rametti does a
big acquisition that boosts all the new business lines. for "nightly business report," i'm josh lipton in san francisco. the nation's largest health insurer sees a drop in profit but still beats expectations. that's where we begin tonight's market focus. unitedhealth group says earnings in pits pharmacy benefit management unit rose 50% in the quart but the company's operating earnings from its main united health care insurance business were cut nearly in half. shares of united health ended the day up 3% to $112.58. bank of america posted its best full year profit in nearly a decade. thanks in part to a better than expected quarter lit earnings report. the second largest bank in the country was helped by a drop in legal costs. bank of america said that revenue growth remains though challenging. shares of b & a were off about 1.5% to 14.24. and shares of morgan stanley rose after the bank beat analyst
targets. the company said it cut 1200 jobs in its fixed income and commodity you the units last month as part of a plan to reduce a billion dollars in costs by 2017. morgan stanley rose about 1% to 2626. >> and sharon, another activist has taken a stake in macy's. green light captain's david einhorn disclosed a position in the company and said it could be a takeover target and wants the retailer to unlock the value of its real estate. macy's has been under pressure from another firm starboard value to spin off real estate holdings, the stock up to $38.76. tiffany lowered earnings outlook for the year following soft holiday sales. the luxury jeweler says is the strong dollar is eating into strong tourist spending and the company is cutting jobs. shares off 5% to 64.22. the dow component johnson & johnson says it will
cut about 3,000 jobs in its medical devices unit. that amounts to about 2% of its global workforce. and would save roughly a billion dollars in annual costs. shares of j & j up fraks fractionally to 97.50. and delta missed earnings and revenue estimates in if the fourth quarter in part because of the strong dollar but the airline did save more than $5 billion on fuel last year. it expects profit margins to improve in the current quarter. shares 3% higher at 4595. coming up, don't get scammed. the treasury department issues a big warning to taxpayers. ♪
>> here's a look what to watch tomorrow. dow component goldman sachs reports earnings before the opening bell. the consumer price index a key measure of inflation is due out. and we'll have a report from the 45th world economic forum in davos, switzerland where business and political leaders are discussing the global economy. that's what to watch for wednesday. the supreme court has agreed to rule on president obama's new immigration plan. the proposal would shield more than 4 million people from deportation. but it was blocked by lower court rulings in a lawsuit brought by texas and 25 other states. oral arguments are set for this spring. a final decision could come at the end of june. and just before both political parties 2016 conventions. the court also said it will review an insider trading case related to a former citigroup trader. at issue is whether prosecutors must show that the insider
received a concrete benefit in exchange for passing on the information. okay. temper your seesment. today marks the first day of the 2016 tax season. but now before you file, the treasury department has a warning for all taxpayers. beware of scammers. eamon javers reports. >> the irs is calling me? is this for real? >> reporter: fraud is real. >> a new series of public service announcements is warning americans of an age old tax scam taking more and more swlims to the cleans are. in the scam, criminals call american taxpayers pretending to be irs agents and demand phony bax taxes. often the criminals threaten to call the police if the taxpayer hangs up the phone. >> it makes me angry because i feel first of all bad for the victims and then i feel angry that these criminals are using the irs as a means to scare people into paying this em money. >> reporter: the inspector general for the irs says as many as 5,000 victims have paid as
much as $26.5 million to the scam artists who can be located inside the united states or around the world. the scam began by targeting new immigrants to the united states and threatening deportation and other penalties. but the inspector general says it has since mutated and now is targeting every demographic group. >> early in the scam, the callers had some sort of information about you. they may have four digits of your social security number. now they're just randomly making blanket calls. they've also shifted now to also calling cell phones. >> that's why the agency has released five new videos in both english and spanish telling people that the irs will not call you out of the blue and threaten to arrest you. and the government has one piece of advice for anyone getting such a call. >> hang up on fraud. you can't be tricked into giving personal information if you hang up the phone and you certainly can't be tricked into paying them money, ha is raed or intimidated into paying them
something if you just hang up the phone. >> what if the caller was from the u.s. government? the inspector general says not to worry. the irs won't be offended if you hang up on them. for "nightly business report," i'm eamon javers in washington. and it's important to be wary of e-mails, too. make sure. >> they're phishing to find out stuff. >> be very careful. >> and prey on the elderly as often is the case. >> absolutely, absolutely. that is it for "nightly business report" tonight. i'm sharon epperson. thanks for watching. >> thanks from me, as well. i'm tyler mathison. have a great evening everyone. stay warm. we'll see you tomorrow.
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