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tv   Nightly Business Report  PBS  May 29, 2018 5:00pm-5:30pm PDT

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this is "nightly business report" with bill griffeth and sue herera. stock tumble. political anxiety in italy rocks markets around the world, and now investors are wondering if this will be a summer of stock market discontent. hungry for deals. a little known private equity firm adds another restaurant to its portfolio as it quietly expands its food empire. on a tear. home prices keep going up prompting one industry expert to warn it's not sustainable. those stories and much more tonight on "nightly business report" for tuesday, may 29th. and we bid you a good evening, everybody. welcome back from the long weekend. investors did not exactly receive a warm welcome back from
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the long weekend. stocks sold off hard this weekend and it all started in europe where political turmoil in italy sparked concern that the already fragile european recovery could unravel and cause global growth to slow. and the market certainly didn't like that. the dow had its worse day in over a month today down over 391 points to 24,361. the nasdaq fell by 37. the s&p was down 31. so what's this all about? the selling was the most intense in the financial sector. jpmorgan, goldman sachs and american express were the three worst performing stocks in the dow today. wilfred frost tells us what's happening in italy and why wall street cares. >> reporter: italy looked set last week to form a new government that would have seen an unprecedented coalition between two pop pow loss parties. this had already spooked markets given both party's disregard for fiscal discipline and a past romance with leaving the euro,
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but late last week things got worse. the president blocked the formation of the coalition when their choice for finance minister was too avertly anti-euro. this led italian assets to plummet further. markets bear a further surge for the populus. italy is the third biggest economy in the eurozone. its debt to gdp is 130% and its banks and european and global banks hold a lot of italy's sovereign debt. italy's bull market is the third largest in the world after europe and japan. this has led to banks globally selling off. there's some contagion with other european bond markets like spain, portugal and greece albeit much less than 2010 to 2012. all over this is an italian issue. europe's economies are far stronger than earlier this decade. could markets are overreacting? in the march elections both league and five star said they
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wouldn't rule together and they dialed back their anti-europe rhetoric. given their left/right divide almost like a bernie sanders and a donald trump, will their base really turn out again when a coalition now looks likely? markets today are saying yes. for "nightly business report," i'm wilfred frost. so will the unrest in europe continue to weigh on the u.s. markets? and what should investors keep in mind when they revisit their investment strategies? joining us to talk about that is jack avalon, the chief investment officer at crescent wealth advisors. good to see you again, jack. >> hi, sue. >> one of the things that i was hearing from not only investors but traders in today's session is we've seen this story before. you know, europe has a lot of turmoil about ten years ago greece certainly did, but is it different this time? do we need to worry about what happened in the past? >> yeah, i think we do. certainly it's a good reference point, sue.
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it's a constant reminder that the eurozone collective, this common currency, this common monetary system is still not cohesive when it comes to a fiscal program, budget and spending, taxes, and the like. and so while, for example, we in the u.s. certainly have quite a bit to disagree about, the simple fact is, yes, every state has a common currency and the uned states has a common fiscal program. we have a national budget. once you get into the common eurozone, that doesn't occur and that's really where we start to see these fissures. so we are continually reminded that this is a fragile situation and not subject to a lot of stress. >> we just showed the banks, the biggest losers in the dow today. often they are the ones left holding the bag when there are financial crises like this. we saw that with brexit and so forth.
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do you worry about them or is this the kind of a selloff that you'd buy? >> well, you know, we're looking at buying. i think ultimately this is a contrived crisis. i don't think this is something that italy's just going to walk away, default and, you know, go back to the lira, but i think that it is -- you're absolutely right, bill. once we get into the financials, once we get into the bonds, that's the circulatory system of the financial markets. who knows where this, you know, metastasis ends up. so i think investors in the u.s. will probably, you know, correct and selling first and ask questions later. and you saw the biggest downers in the u.s. financials were those banks and financial companies that could potentially have exposure, maybe not to italy by itself but to another big lender to italy. say, a deutsch bank or someone else in europe. >> jack, thank you so much.
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>> thank you. now when there is a steep selloff like we saw today, investors do tend to take another look at the sectors of the market that have outperformed, like technology. and that's what dominic chu is doing for us tonight. >> reporter: despite the ups and downs of the overall market over the past few months, technology as a sector has managed to hold up relatively well. while the broader s&p 500 is now pretty much flat on the year, tech is up by over 9% and it's just one of three sectors that's holding on to gains in 2018. while a lot of attention is paid to the megacap tech stocks like apple, microsoft, google parent company alphabet and facebook, because they do have an out sized influence on the index like the s&p 500 and nasdaq, they aren't necessarily the best performers so far this year. within technology, other stocks have produced far better returns. video game maker electronic arts, for example, up nearly 25% year to date.
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software maker adobe systems has gained around 37% and computer chip maker micron technology has risen by over 50%. that's not to say that those megacap tech stocks aren't loved by the experts according to data from fact set, some 85% of analysts who track microsoft stock recommend buying it. 89% of analysts like alphabet and 93% of analysts say investors should buy facebook. traders will be keeping a close eye, however, on how the chip sector does overall. over the past few years the industry group as a whole has been an outperformer and some traders may be looking towards those semiconductor stocks as a gauge of market sentiment. they help lead on the bull run to record highs so will they also lead if the market decides to head south? for "nightly business report," i'm dominic chu. investors were also concerned today about trade after the trump administration moved ahead with tough measures on china. the white house has renewed its
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threat to place 25% tariffs on $50 billion worth of chinese goods in retaliation for what it calls unfair trade practices. the announcement came ahead of a second announcement of high profile trade talks between the world's two largest economies later this week. oil prices extended last week's route again today. much of that selling is due to the expectation that opec and russia and other producers are going to wind down that deal to cap output during its next meeting, which is next month. as we reported last week, saudi arabia and russia have already signaled that they are willing to exit that production deal to offset declining venezuelan production and also the possible loss of iranian oil due to u.s. sanctions. so domestic crude settled nearly 2% lower today now down to $66.73. consumer confidence and the economy is near 18 year highs. according to the conference board many are pleased with the current state of the economy especially the job market.
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some did express less optimism about the future which economists believe may have to do with rising gasoline prices. >> but when people do feel good about the economy, they tend to make big purchases, like buying a house, and the latest report on that sector shows that home prices are rising at a pretty fast clip. and that has some experts sending out warning calls right now. diana olick has our details tonight. >> reporter: home prices continue to rise faster than inflation and there appears to be no sign of easing so far. prices were up 6.5% nationally in march compared to a year ago. that according to the much watched s&p core logic kate schiller report. the annual gains have been widening now for more than two years. that prompted the chief economist from the national association of realtors to warn the run up in prices is simply not sustainable. and zillo senior economist argued that the current price gains, which are the widest in 12 years, are largely sustainable due to the strong economy and strong demand from
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millennials. he did admit though that deteriorating affordability could begin to give some buyers pause and keep them renting longer. in fact, first-time buyers pulled back at the start of this year according to gen worth mortgage insurance. that hasn't happened in four years and in yet another study trulia found that buyers are finding what they're looking for. the caveat though, that may be because entry-level buyers are dropping out as the number of searches on trulia shifts to higher price here, meaning only those able to afford more are matching up to available supply. for "nightly business report," i'm diana olick in washington. it is time to take a look at some of today's upgrades and downgrades. ford's rating was upgraded to buy from hold at jeffries. the analyst says ford is ahead of its global competitors in rethinking how it allocates capital. the price target is $14. the stock fell a fraction in an overwise down marked to $11.44. phillips 66 ratings was upgraded
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to outperform from market perform at wells fargo. the analyst says new fuel rules could be good for the refiners including phillips 66. the price target is $134. the shares rose 1% to $116.81. quest diagnostics was upgraded to overweight from equal weight at morgan stanley today. the analysts there calls testing labs like quest a relative safe haven in the health care service field. the stock rose fractionally to $106.35 today. morgan stanley raised its waiting on roku. the analyst cites solid user growth and says that roku is growing into its valuation now. price target $38. that stock was up slightly to $38.60. still ahead, saving for college. there are some simple plans to help finance education so why aren't more people using them?
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a private equity firm that you likely have never heard of is quietly amassing a global food empire, and it grew a bit more today. jab holdings has now agreed to buy predemonger. that has been rapidly expanding here. j.a.b.'s portfolio is full of familiar names, but its own name is virtually unknown and it isn't exactly your typical private equity firm either. >> predemonger, which is french for ready to eat, is a british sandwich and salad specialist with 500 stores in nine countries. fewer than 100 of them are here
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in the united states. the deal reportedly worth almost $2 billion adds to j.a.b.'s rapidly growing portfolio of fast casual restaurants, which also includes au bon pan and panera which it bought for $7 million. j.a.b. has a portfolio of beverage companies. it owns a number of coffee brands, for example, including pete's, caribou and stump town. it bought keurig green mountain coffee for 13 point be point $9 billion and just this past january it bought dr. pepper snapple for almost $19 billion. j.a.b. is also big on breakfast. it owns crispy cream donuts and einstein brother bagels. j.a.b. holdings is based in luxembourg. it's owned by the reiman family of germany. unlike many private equity firms which swoop in and buy companies
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and immediately start cutting costs, j.a.b. is known for holding on to and growing its assets. as for predemonger, 2017 marked the tenth straight year of growth so it's clearly on solid footing, but with inflation creep beginning to change the economic environment, questions are being asked about the short-term future of fast casual restaurants. >> and in case you weren't keeping score just now, since 2015 j.a.b. has spent more than $40 billion on food and beverage acquisition. the investment firm kkr makes another bet on enterprise software. that's where we begin tonight's market focus. kkr said it was adding to a series of investments in the tech sector with its latest deal to buy the information tech company bmc software from bain capital and golden gate capital. while the financial terms of that deal were not disclosed, "the new york post" citing one source recently said bmc could be worth about $10 billion. kkr shares fell nearly 2.5% to
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$21.91. shares of universal display got a lift after it was reported that apple will make several iphone models with oled screens. they currently use lcd screens. universal display specializes in oled display technology. it rose to $103.16. alibaba said it is part of a group of investors who plan to take a 10% stake in zto express for just under $1.5 billion. zto said the investment will help streamline investments and cut costs. shares of alibaba were off to 198 even. shares of zto popped 8% to $20.82. elsewhere, petroleum and natural gas producer sand ridge energy is urging shareholders to vote for two of the four shareholders that billionaire investor carl icahn has
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recommended. icahn who is the company's largest investor is attempting to gain control of sand ridge without paying an appropriate premium. shares were off a fraction to $14.05. after the bell tonight h.p. said that stronger demand for its laptops and desk tops help sales top expectations. the computer maker also raised its revenue outlook for the full year. shares were initily higher i after hours. they ended the regular session down about 3% to $21.30. also after the bell tonight cloud software company sales force reported stronger than expected earnings thanks in part to a rise in subscription revenues. the company also gave upbeat sales guidance for the current quarter and it raised its full year forecast as well and shares initially traded higher in the extended session. ended the regular day down a fraction at $126.88. well, saving for college is a priority for many parents, and one way to save is by using a
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529 savings plan but many aren't even sure what a 529 is. >> no, i don't know what it is. >> i have zero idea. >> i don't know what that is. >> i believe a 529 plan is a plan where you put money away for your -- you start young for your children. >> close. and given that today is may 29th, otherwise known as national 529 college savings plan day, we figured it was a perfect time to talk to senior personal finance correspondent sharon epperson. and for people who don't know, sharon, what exactly -- she was very close. >> she was very close. a 529 is education savings tool that parents or anyone, actually, can use to save for qualifying higher education expenses like tuition, room and board, books, internet access, computer supplies. it is anyone who can set it up, which is a lot of people don't realize, and the beneficiary can be anyone. there are no income limits and the beneficiary can be your
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child, can be yourself if you decide to go back to school, grandchild, niece, and the other great thing is that it invests broadly. it invests in many different types of funds, probably not as many as you may like, but there are options there. you have to look at fees. and you can invest in any state's plan. you don't have to invest in one just because it's set up by your state. >> do you do it based on where the child is going to go to school? >> you don't have to do that either. depending what kind of break you're going to get. if you do it in your state you have a better chance of getting a tax break. >> when you're prioritizing at a certain point you should save for your retirement ahead of your child's college education plan. how does this factor into all of that? >> you have to do both. that's the hard part. you actually have to do both and you can't do either/or. what you should do is get the free money first. if you have a 401 k plan at your job, you want to contribute that, at least enough to get the matching contribution and get that free money but then you
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have to think about how you're going to save for your child's education. just $100 a month. if you start with a child that's born for 18 years, you'll have $21,600 saved and that money grows at 5%, you could easily have $35,000 saved for at least one year of college, maybe a little bit more. >> right. what about financial aid? a lot of kids want to get student loans or qualify for financial aid. does what you have saved impact that? >> you have to include that on the fasfa form, it does. it will count if it's in the parents' name as the parents' asset. so that does not impact you as negatively as if it was the student's asset. that's something to remember. a lot of grandparents want to open a 529 plan. that doesn't count on the fasfa plan at all. when they take it out that counts as the student's income. >> you're done. >> i don't have to worry about
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that. thanks, sharon. sharon epperson. >> some day i'll worry about the grand parent thing. why solo failed to find the force and why disney may have to rethink its "star wars" strategy. abc has canceled its top rated program, "rosean" following a series of offensive tweets by roseanne bar. abc said, we quote, her twitter feed is abhorrent and not with our values. we have decided to cancel the show. barr apologized for her tweet that targeted valerie jarrett that was a former adviser to
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president obama. starbucks closed more than 8,000 stores for racial bias training. as we reported, the training comes more than a month after a starbucks manager called police on two black men who had been waiting in the store for a friend before buying something. analysts say the store closures could cost starbucks $12 million in lost sales. now starbucks chose to conduct this racial bias training in a very public way, and as sue just mentioned, at a financial cost as well to the company. other companies do similar training but they do tend to not draw attention to it. so is this a good strategy, not just for starbucks but for other brands as well? joining us tonight, dean crutchfield is a brand expert. good to see you. >> good to see you guys. >> are there risks to this kind of public display of teaching your employees racial bias? >> it's a question of delivering it. purpose builds profits or at least that's the strategy.
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really it's a question of can you actually deliver it? that's what we're questioning with starbucks today. they're under pressure to show their leadership and their impact on these very sensitive issues of gender and race and it really is a question of, you know, what they deliver once they actually do this. the most important thing is they are saying they're prepared to take a hit in their business to actually do something right, so in a sense that shows the goodwill of their intent. >> does it match up with their pledge of social responsibility? it seems as though it does. >> it really aligns very well, actually, with the core strategy at starbucks. in fact, part of their vision statement wraps around inspiring and nurturing the human spirit. so i can't think of two better subjects than gender and race to actually answer that as a strategy and show that it really delivers what it means. so it's not so much your ability as a business, it's more about the choices you make that define who you a andtarbucks is making a very deliberate choice here in terms of their strategy to train away implicit bias. i think to your point, this has
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been going on for decades. many companies, police departments have all been trying to train away implicit bias. >> right. >> really the question is, does it work? i think that's a big question here. >> and because it was so public, the closing of the stores and everything, obviously they're trying to spur the national conversation in that regard. do you see other companies then maybe following their lead in this? >> i think a leader has to lead. i think that's what starbucks is doing. there's massive disruption happening in the market out there. customers want to know about the brand value. they want to know if those values align with them. they want to know where you stand on race, gender, environment. they want to know what your leadership is and what your impact is on those issues. it's very different from what it was before. i think what we're seeing here is starbucks leading the charge of something we'll be seeing more and more, which is about purpose driven brand. >> dean, always good to see you. thank you for your thoughts tonight. dean crutchfield with crutchfield and partners. expectations were high for a big weekend at the box office but that's not what happened.
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even with the debut of the latest "star wars" movie and that raises questions for disney which saw shares fall today about one of its most lucrative franchises. julia boorstin has the details. >> reporter: it was a perfect storm of timing, competition and perhaps "star wars" fatigue. solo bringing in $103 million at the domestic box office over the four-day holiday weekend. under already lowered expectations. and internationally the film brought in just $65 million. "solo's" global take just half of the move vees. perhaps the biggest factor it's been five months since the last "star wars" film whereas disney's last three releases were three years apart. it's the first in the crowded summer season. >> with "the last jedi" in the minds of the movie goers and so
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much competition with "dead pool 2" and "avengers" this made it difficult for "solo" to break out and exceed expectations. >> they were projecting that "solo" will be close to break even versus the $400 million we had assumed. about a 2% headwind to disney's estimates this year. now the negative impact to disney all hinges on how the movie performs in the coming weeks when it's up against less competition but faces less than stellar audience reviews. >> i think what disney is going to do is take this as a lesson and apply it going forward. the "star wars" brand is massive. it's going to be playing out for decades to come so for disney, this being a long-term play, and with a lot of projects in the works right now, episode 9 set for december 20 of 2019, "star wars" has nowhere to go but up. >> and it's worth noting that the next "star wars" film, which
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had been scheduled to premiere next may, disney moved back to the traditional christmas window when the force won't face this kind of competition from super heroes. and before we go, another look at the day on wall street in this selloff. the italian election results over the weekend had the european markets lower. ours down as well, the dow down 391. nasdaq fell by 37. s&p 500 down 31. what a way to start the week, right? >> yes. >> well, that does it for us tonight. i'm sue herera. thanks for joining us. >> i'm bill griffeth. have a great evening. see you tomorr
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