tv Nightly Business Report PBS April 12, 2018 5:00pm-5:31pm PDT
announcer: this is "nightly business report" with bill griffith and sue herera. >> here come the earninr. stocks shead of profit reporting season and it could be result fm the big banks that push the markets even higher. return of subprime? those alones disappeared after the financial crisis but now they're back with a new name and soaring depended. let's go shopping. nordstrom's opening stores while other retailers are closing them and the company needs this strategy to succeed. those stories and me on "nightly business report" for thursday, april 12th. a we do bid you a good evening. another day, another triple digit move in thedow. this time to the upside as tensions between the states and syria ease. the cooling off today of
geopolitical tensions allowed investors to focus back on market fundamentals and the o beginningf earning season which gets under way tomorrow. day, the dow rose by 293 points back above 24,000.th nasdaq added 71. the s&p was up 21 today. >> the financial sector helped list the broader market and that's key because some of the biggest names in the industry report their quarterly earnings tomorrow and expectationsre high. bob pisani reports from the new york stock exchange. >> reporter: stocks were in rally mode more than erasing yesterday's losses after president donald trump tweeted that a missile attack on syria may not be imminent after all. a trade war fears and geo politics brushed aside, at least for the moment, investors are eager to move on and shift their focus back to earnings. analysts are expecting a fantastic ings. that would mark the best growth for the s&p 500 in seven years.
now we're waiting on the bang to kick things off tomorrow starti with jpmorgan. financials are expected to be utors the biggest contr to earnings growth. about 15% of the total market on capitalizati the s&p 500, that's the second bi group after technology. so thy're fairly hig expectations for banks due to a combination of positive factors. we have higher interest rate. th's a big help for banks. lower taxes, higher volatility l that should r in more trading posts at the biggest bang and we've got less regulation. for "nightly business report," i'm bob pisani at the new york stock exchange. >> the first quarter earnings get uer way, he chief investment officer at whittier trust. ank you for joining us tonight. >> glad to be here. >> we talk about how high expectations are. is it warranted this time aroun do ythink? >> i think so. look, we were in the middle of an earnings recession not too
long ago. om we have out of that very nicely. we haveba synchronized g kroej, corporate profits are rising. s not agle quarter this year is expected to produce earnings growth less than 16 or 18%. looking ahe to the rest of the year. we couldtake a look if at who are going to be the winners in terms of sectors and ho might be the losers. thewinners. >> look, let be careful about paying too much attention to single quarter, but as it stands right now consensus expectations call for the very energy and materials sectors to be the winner. these experiencero earningsh of at significant levels, 70%, 40%. tkeep in mindy're coming off depressed levels. rounding out the list of winners some more cyclical sectors, technology,, financia industrials. and i'm afraid the lgards are
your more defensive sectors, utility people are likely t produce less stellar growth in this first quarter. >> and consumer discretionary and health care, but retail has done pretty well here lately. why do you think the consumer here?ag a bit >> yeah. so this is where the vaguery of a single quarter data point comes into play. this is simply a comparison from earnings from a year ago. fothe full year consumer discretionary stocks that whole sector is expected to have earnings growth at a healthy 15% or 16% very close to the market expectation. i would just point tt out. wages are going up. remeer the inspector of inflation but disposal incomes are going upha and should help consumer spending. >> you tend to be a worrier, so what i worry about is that we've en hearing that these earnings are going to be very good this time around, butow much of that is already in some of those
sectors and some of those specific names? >> sue, relook, w right on the cusp of the reporting season and the market's job is to anticipate these good six or 12 months ahead in advance, so a lot of the market rally in late 2017 was piesing in these expectatio t. the onlyng missing from these expectations are the unexpected, the so-called surprisesng we will see but g beyond the first quarter, a lot f good news might have been priced in for 2018. i'm not sure if the market has started to focus on 2019. there is so much worry that this is as good it gets, that we earnings peak of the cycle suggesting that earnings will now begin to go down and i don't think that is the case. >> let's take a moment and focus the big group tomorrow, of course, that may be the most anticipated of the bank's
financials that wall street watches here should sue be worried abouthem as well? >> i think the banks will do fine. look, we havereed and worried about the higher level of will volatity. it creat an opportunity for the banks to register higher revenues from trading activity at some point of a yield curve, the difference between long-term and short-term interest rates no alize. it has been depressed by low, non-u.s. interest rates. that evolution wil help bank earnings. so financials are actually one of the most attractive sectors in the market that we see for the next 12, 18, 24 months. >> all right. good to see you. thanks for joining us tonight. >> pleasure. > general electric is reportedly considering a public ofring or a spin-off of its transportation business according to the "the wall street journal," ge has been siamining different scenarios for the di.
such a move would be part of a bigger erestructuring at company which has seen its stock fall about 25% this year alone.n in interview with cnbc, the o discussed ge's road ahead and morgan brennan has more. >> reporter: general electric ceo johny flann once again reiterating his strategy. >> we know we have great franchises, we know we can run them better. all this takes cash, capital. there's a nucleus of strength and improvement that we see right in frontf you. i also came in and said -- it's just tooany things atonce. my core responsibility is to make sure those businesses flourish in the future for the employees, for the customers, for investors and in thatex co i'm open to any way i can make that happen. >> reporter: but it's still a rategy without many detail n alsoot exactly ruling out the possibility of a broader breakup. even though ge also does a lot of business in manufacturing in
china, flannery is not worried about a trade war between the u.s. and that untry. >> fundamentally, you know, my belief is over time people are rational about what is in their collective best interest. so when i look at that i say, this sort out over time in a sensible way for both so will there be a lot of m noi anbe drama along the way? probably. >> reporter: ge's chief executive who's been at the helm since august addressed the chalnge of keeping goo people on board even as steep costs cuts have resulted in layoffs. >> any time you're in a situation like thishere's ther stresses, change, pressure, there's an element of that population that really rises up and says, i l in this right now. this is like an amazing opportunity. i can help reshape an iconic company. that is an incredibly motivating force to people. >> reporter: all this as
investors await restated financial results for the past two years thanks to new counting rules and then first quarter earnings which are due out next friday folwed by shareholder meeting at the end of the month. meantime, given all the uncertainty around the company, the stock is down another 25% this year and more than 50%e ovr past 12 months. fortl "nibusiness report," i'm morgan brennan. elsewhere the world trade organization is warning global leader that trade war would damage the worldwide economy in a new report the body says that the current state of trade is the strongest it has been since before the financial crisis, but it could falter if trade tensions escalate further.ir thetor general of the wto said the trade retaliation is the last thing theco worldmy needs right now. in> president trump has instructed top atration officials to explore ngreente the transpacific partnership trade pact. he pulled out of that pact, you t year. call l following a meeting at the white
house republican senator says the trade deal would be theest way tone counteralleged c trade abuses. >> dpef the big headline couing of this meeting is that the president said he was d uty tiesing larry kudlow to look at reentering the tpp negotiations. >> in an interview with cnbc back in january, president trump said he would reconsider the pacific trade deal ifre it quote, substantially better. the threat of terrorists from the u.s. is sending a chill through some of china's ne bues, including high tech ones with global tiams. >> reporter: the inventor of this underwater drone never thought it won in the cross hairs of president trump. chinese start-up makes drones for drivers and companies who might need to film derwater. she had expected to ship her drones to the u.s. in june but
now she's uncertain after the tariffs target high tech goods. >> we can provide good for that with the low price. >> reporter: manufacturing south what's known as the workshop of the world but as the economy here advances the country wants to move away from makis and shoes and into higher tech products like drones. >> to dohat china has an official program called made in china 2025 supporting certain tenologies like drones, electric vehicles and artificial intelligence. the trump administration believes it's an unfair attempt to promote chinese high tech with the hp of the state. thep start-u received around $63,000 from the government which it spentn r & d less than 2% of all the financing it raised. she's unsure if her drones end up on trump's final list but she is sure china will be pursuing its own policy. >> for the whole industrial
investment i think it's aood thing. if we gather more sport from the government, we can have this technology development. >> reporter: exactly what the trump administration fears is harmingerica's competitivenestl for "nighy business report." it is time to take a look at some of today's upgrades and down grades. myelin's rating w outperformed to market perform. the analystheir sites the generic drug model and its ability to grow profit andexales over the several years. the price target is $52. r share to 41 at the time 26. c sitt its price target from $70 to 78 after a meeting wit pfizer's management. it has no interest in acquiring bristol orntering into any other large scale deal. the rating on bristol remains a y. the stock fell 2% to 58.84.
bed, bath & beyond saw its price target cut by at least eight firms following that disa wointing earnings repor told you about last night. one of those firms is keybank which now has a price target of $16 on the stock, one of the nawest on the street. thests there says increased competition will lead to even more pain f the retailer. shares declined nearly 20% today to $17.21. and puma biotech saw its waiting cut. the analyst says the budget tivt that stock is cut in. despite the downgrade shares rose by 1% to $67.10. still ead, remember subprime loans? they helped fuel the financial isis, so why are high risk mortgages making a return?
theumber o american's filing new claims for unemployment has now been at a record low for a record amount of time that is. joess claims decreased by 9,000 to a seasonally adjusted 233,000 in the most recent week. claims haveow beenelow the 300,000 markor62 consecutive weeks, the longest stretch on record. mortgage rates were undeterred by some of the recent movesth i bond market according to freddie mac the average 30-year fixed rate rose just slightly. that gives buyers a little bit of breathing room durin what's expected to be a competitive spring selling>season. so you remember subprime mortgages? they were those faulty loans de to borrows with low credit and high debt and they in part brought down the housing and
financial markets a decade ago and now they're back and as diana olick reports for us, there's high demand from both brorz andinvestors. >> reporter: subprime, just the word cons up these images. they disappeared following the financial crisis but now lenders are dipping back in, just don't call them subprime, call them nonprime. >> not going back to the bad old ays of ninja lending when people with nojobs, no income and no assets were getting loans. that was just czy and it was risk. g risk upon >> reporter: now carington mortgage is expanding into thepa nonprime focusing on the estimated 20% of americans who have fico credit scores below 600. borrows withept credit scores at low as 500. today's average is in the mid-7 hundreds. recent credit events like foreclosure and bankruptcy are
okay. loans up to a $1.5 million cash out up to half a million dollars. selfmployed borrows can use bank statements to verify income stead of tax documents. carington said there is big demand from both borrowers and investors. >> we'll keep some of the loans on our books. we belie there's actually a market today in the secondary market for people who want to buy nonprime loans that have been properly underwritten. reporter: properly underwritten? that's the key to watch. carington claims it ll manually underwrite each alone to account for individual riskou so ife higher risk you might have to have a higher down payment or more cash reserve. your interest re will be higher but is that enough? >> if we see regulators ease up loosen the rules as actually we've been seeing since this administration came in and if folks in the mket haven't learned the lessons from the could be s, then that
an issue. >> reporter: and if lenders and borrowers alike look at today's fast rising home prices andfo et that prices can fall too, that could be a costly iues well. for "nightly business report" i'm diana olick in washington. and to read more about these nonprime mortgages, you can go to our website at the nbr.com. an influx of investor cash help the resulr at black rock and that's where we begin the market focus. ldring an increased of market volatility the w largest money manager as total assets saw an up tick t more than $6 trillion. a new lower tax rate helped results as well as did a scramble by investors to rebalance their portfolios. >> you saw huge infloes and outflows. we had one client who sold a big pool of money for an mna transaction. ey were selling assets for
more capex. it was a combination of everything butevtheless we did see consistent interest. we're seeing more and more interest in global investing. >> shares of black rock climbou 1.5% to $533.01. delta airlines reported higher than expected earnings even as higher fuel and labor costs impacted its results. the airline ceo was pleased with the wrformance. had a great first quarter in terms of demand. record revenues for delta up 8% driv interestingly not just on the domestic system but for the first time ineveral years internationally. ournternational revenues outpaced our domestic revenues in terms of growth. areally strong quarter it gives us good momentum going into the second quarter. delta shares finished higher by nearly 3% to 52.98. rite-aid's resul were in line with wall street's estimates but itspbeat recast is what investors held on to. its merger with walgreens help
increase earnings and sales for the year. shares of rite-ai were off a fraction to $1.63. go proe has caught the eye of a chinese company that may be interested in making an acquisition offer. a report fro the information said that electronic's maker is based in ina. it has considered buying the camera maker but it doesn't want to over pay. go pro ceo has said he is open to the deal. shar were up 7% of the news to $5.22. shareholder berkshire hathaway says it plans to vote against the new board no, 'amny as it pushes usg to reconsider that $6 billion takeover offer from germany's canals. it has a stake in the construction companyas asked shareholders to vote against it as part of a tactic to accept its offer. it rows by 2% to 40.77. after the bell tonight,
broadcom said it was launching a $12 billion share buyback program. shares in the after-hours inially took off on the announcement. they finished the regular session down a fraction at 239.43. the new tax law passed late lastwas expected to hit many in high tax states hard and now it appears many in those same states are looking for loopholes to limit their new tax burden. robert fra has the details. >> reporter: they're calling it the great conversion, taxpayerse turning thems into limited liability companies and s corps in order to lower their tax bill under the new tax law. the tax law that took effect january 1st allows llc and partnerships to have a much lower rate than individual taxpayers and corpos get the lowest rate of all. the question of how many would exploit the new loophole and the answer appears to be a lot. data from high tax states such at new york, new jersey and connecticut shows a huge increase in the number of llcs,
partnerships and c corps. in new york there were 27,0 new llcs created between the end of last year and this march. a 15% jump. that's much faster than the growth rate of previous year n no businesses in connecticut was up 15% and california saw a 12% bump. we don't know how much of the increa was individuals asking for better taxes or just theno stronger e but the tax law does have some guard rails design to prevent it's harder for instance, to lawyers, doctors and accountants to use the passthrough rate and there is an income cap but the details and rules have yet to be clarified and until tn a tax law design today make taxes simpler has made it a lot more complicated and perhaps more costly for the government. for "nightly business report," i'm robert frank. and coming up, bucking the trend, why nordstromngs pou a lot of money into a a bri mortar store while others are closing? h
>>e's a look at what we are watching for tomorrow as we told you earlier earnings season kicks off including jpmorgan, wells fargo and citigroup. a number of fed officials will be speaking on the outlook for the economy and the latest consumer sentiment report show us just how the average american is feeling about their finances and the economy and that's wha we're watching for on friday. pension funding has hit a record srt fall. the annual report from the charitable trustaid the funding gap hit $1.5 trillion in 16. pugh sai less money is being allocate today core government servicesuch as education and public safety as states try to
prop up their funds. theunderfunding comes despite a nine year bull run for the stock market. > sears is closing several stores and they'll be selling 16 others in an online auction. the troubled retailer is shutting locations in north carolina, ohio and massachusetts. those stores were not previously announced. it effects 166 locations in a. othe properties are being auctioned off with the help of kushmannd kefield. 200 investor groups have already expressed interest. and during a time when retailers a scaling back their brick and mortar operations, hat trend.is bucking today the retailer opened its first department store in new york city, a risky move that the company hopes pay off. ericchemi i there for us. >> reporter: today marks a rare first in manhattan, the opening of a brand-new, high end retail brick and mortar store.
nordstrom today open i first full line department store anywhere in new york city. it's also the company's first men's store anywhere in the country. it's a 47,000 square foot facility and next year right across the stree they're opening an even bigger store in an environment where traditional retailers are going nkrupt, shutting stores and pivoting to online, nordstrom is bucking the trend by investing hundreds of millions to open an actual store. >> we spent a lot on it. we got to da lot of business here, but we think if we execute well and serve the manhattan customer the way they expectero bed we'll do a lot of business here. >> reporter: the family run retailer nds this succeed. the stock is half what it was just a couple years ago. an online commerce giants are stealing shares. in the meantime the company's betting on the continued growth of men's high end fashion and that therell be demand for people to come into a store.
>> i shop online,veryone shops online but i think when you want to come in and actually touch e d feel and maybe h something that's more of an experience, i think this will be a great place to do. i prefer to be in a brick and mortar. i prefer to touch the clothes, see the material, try it on versus having to go to the post fice to return it. >> reporter: this is no ordinary thore the couple is merging the two world, online convenience and in store availability. it will be open for 24/, same day deliver in manhattan andew high tech customization tools. even cafes and a men's .rbershop on site if other competitors start doing the same thing. or will ts be a budget busting experiment the company never repeats again. fort, "nightly business rep i'm eric chemi in new york. and it's about time is all i can saee >> i a with you. before we go, here's another look at the bounceback on wall street ahead of the earning season that starts tomorrow
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