tv Nightly Business Report PBS December 21, 2018 5:00pm-5:31pm PST
>> announcer: this is nightly business repor with sue herera and bill griffeth. what a week.k stocks t again. the dow and nasdaq have their worst week since the financial crisis. now the question becomes, could a falling stock market sink the economy? >> hanging in. as the housing market begins to sften investors remain focused on one area that'll surprisingly strong, apartments. and portfolio. pic this week's market monitor has three names he says will continue to gain market share even if the economy slows down. all that and much more tonight on "nightly business report." it's friday, decemr the 21st. good evening, everyone. welcome. the first day of winter brought a big chill to wall street. stocks capped off a brutal week
by plunging. the nasdaq right into bear market territory. and that may be the good new b thatause the broader s&p 500 is moving towards it as well. and as for the dow and nasdaq, it was the worst week since the financial crisis. the dowown nearly 7% this week. since gest weekly drop october of 2008. the nasdaq lost more than its worst since november about a decade ago. and the s&p fell 7%. its most since august of 2011. as for today, the dow fell 414 points to 22445. the nasdaq dropped3% or 195 points. and the s&p gave back 50. bob pisani has more. it was another wild session on wall street. th dow closed down more than 400 points after the50oint swing through the day. the s&p capped off the worst week in seven years. the dow worst in decade.
thetr fiving days left in december still on pace tbe the worst for both indices since 1931. today a heavy vume day as futures expire a all at once. a cued ruple switch. the big headlines worth noteding np new york federal reserve john williams took on a friendlier flexible tone than the markets heard from jay powell and stocked rally almo 40 oh points from the comments. but the rally fizzled out. all rallies have donehat recently because they've been more apt to sell on the rallies than buy on duchs. add that the resignation of jim mattis and contentious comments from peter navarro and the fed and china and all that didn't helpen stiment. and stocks took on a defensive tone. utilities led the charge while tech and communications services like facebook, netflix and twitter all led tohe downside.
for nightly business report, bob pisani at the new york stock exchange. >> now the market declines in december led to concerns that wall street gloom could be main streetoom. falling stocks could create a economic slowdown. the reason, the wealth robert frank explains. >> the welt effect is a theory that when people's welt goes up they feel more confident andd sp more. economists figure that for every dollar a household adds in wealth from from stocks or home they spend additional 2 or 3 cents. it works in reverse and stronger on the way down. when you lose a dollar in wealth u are likely to reduce spending by up to 5 cents. now the stock market lost over $2 trillion inarket cap just in december. that could reduce spending by over $100 billion.nd mark of moody analytic says if the december lossesd h
the negative wealth effect could cut a half percent from gdp in 2019. he says the effects arey greate tohan in the past because retiring baby boomers have so much intos. one big caveat, real estate which makes up the bulk of welt for mostns per has not fallen as much as stocks. that could helpny offs impact. now there are three sectors that would most likely be hardest hit. airlines, home improvement, building and hardware, and hotels. it turns outhe first thing people do when their investments are down is reduce their vacations. for "nightly businem report" robert frank. and joining us to talk more about the wealth effect is anthony chan chief economist at jp morgan chase. good to see you. thanks for joining us. >> great to be here. >> robertentionedhousing. you are watching housing closely for this wealth effect. >> certainly when youook at lot of studies.
and of course robert chiller who won a nobel prize and others have done studiesd that f the housing wealth effect is twice as strong as the wealth effect from stocks. and we no that housing prices are up. on a year over year basis case shows the way to measure hsing price are up 5%. the snpd fiefd is down 10% process. but if the wealth effect is stronger for housing these things wash out. let's mot lose sight of the fact that energy prices are down quite significantly and in fact allhe around world will add almost $650well e ofra purchasing power to consumers around the world. to the extent that the u.s. consumers -- the.s. 25% of world gdp, that meansto u $$160 billion with the extra purchasing power on consumers. all of this should offset and even mark zandy has done studies
that actually find that wealth effect for housing is much, much stronger for housing than it is for stocks. and then finally, if you look at household net worth it's up significantly. don't forget in 1987 in one single day the stock market dropped by 22.6% on the dow. yet we wait throe more years before a recessio >> howeve looking back on robert's report he points out that babyoors. thinks have changed a bit since 1987 in terms of demographics. we have more baby boomers close to if not in retiremen at this int. and they have an awful lot of their money in the stock market. so isn't there a disproportionate affect for them in terms of what the wealth t effect from stock market would do to them as the market goes lower? >> ioh, the no question that it's going to have a di roportionate effect on those individuals. but remember that if you look at
household net worth all the way back to when this economi expansion began, we're talking about a $49 trillion increase. we're now at $$109 trillion. we're talking about a $2.5 trillion red in market cap in the equity market. and of course that's not all u.s.consumers. we have foreigners, institutions. when you look at the numbers and the great are context of how much wealth has been created since thisull market began or since in economic expansion began, it is not all that significant. and finally, look at what happened to consumer confidence today. it looks like consumers he not gotten the memo that the stock market is coming down. >> true. >> because the university s michigan pretty strong. >> anthony chan. thanks so much. >> aloha. >> and happy holidaysll at once. anthony with jp m>gan chase. he other thing the market watches is the funding fight in washington over the border wall. if a deal cannot be struck by midnight parts of the federal
government will shut down. john harwood joim us f d.c. this evening. at least they have been talking late in thee day. who we stand right now, john? >> i think, bill,ik it'sy the government is going to shutdown. that's the 25% of the govn'nment that h been funded already. but talks are ongoing.ob andy is ruling out democratic senate, white house, nobody is ruling out the possibility of some sort of deal tonight. it's just we don't have one yet. talks still going on on the see.te floor over in the ho and of course with the president, vice presidnce and oerthers in the administration. john, is ap it for me, there a chance the president gets some funding for the border wall or n? well, i think the president has a chance of getting some funding for border as of now provisions in homeland securi spending legislati have barred money to go for a concrete wall.
now, the president has instead been suggesting it will be steel slats can you see rough, something different than he talked about in the campaign. it's possible there is w igle ro terms of what you call what the money is going for. that's where a compromise will lay if there is one that's achieved. >> but f2 there is no compromise or a path to progress as they've been trying to work on what happens tonight. >> not all that much, because of course we go intohe weekend. that reduces the stakes of a shutdown. and 75% of the government is funded. however, if nothing is reached over the weekend, the house is out until at least noon if no deal is reached over the weekend then this has the way toal to trag all t early january when we come back with the new congress and the standoff resumes then. >> all right. john harwood on the case. thanks, john. see you later.
stocks actually got a lift in the morning after new york fed president john williams said the central bank is open to on inking its stance interest rates. he sat down with our steve liesman. >> reporter: for a few moments today it appeared as if john williams would play the role of santa clause, igniting that santa rally which often happens ear end. and markets rallied strongly while he sat for the c ac intervie saying the fed is listening to the negative outlook from marts and that the central bank is not locked into a path ofy tighter monet policy. >> we are listening carefully to what's happening in markets for two reasons. one is two reasons. financial conditions have an impoant influence on the economic outlook. we take that into account and think seriously about that. secondly we are hearing something important from markets something around risks to the economy and potenti slowdown than we expect in the base case. >> markets p close attention
as williams is one of the most important members of the fed. he serves as the chairman of the fed openttarket com. adding to the gift saying there is flexibility in the controversial plans to reduce the balance sheet next year by $600 billion. >> we do vie the movements in the federal fun rate as a praerp the instrument to adjust monetary policy in the sfas line outlack.er if there is ml deterioration in the economic outlook we would reconsider the path for the short-termnterest rate and would adjust policy to the best achieve goals. reconsider we would the balance sheet normalization and may even end that pross. the fed had purchased trillions of dollars of treasury and mortgage securities toug th the financial crisis to drive down interest rates. it's lettingit the secs roll off as they expire. shrinking the balance sheet.ar butts are concerned this adds pressure to the selloff and the economy. at his press conference wednesday, the fed chairman said the balance sheet about a plan
was on autopilot. but markets rallied strongly during the williamsvi int briefly. leaders are selling off as other concerns of the government utdown take over. the conclusion may be soothing words alone from the fed will not be enough to divert santa's eigh and ensure jolly st. nick stops this year on wall street. for nightly business report steve liesman. time to look at upgrades and dunne grades. >> altria was downgraded at sit toy sell. the analyst saying the $13 billion stake in e cigaretteuu maker effectively signals altria has doubts about the fuorre of its c business. the priceart now $45 a share. shares closed at.0 $ down more than 2.5% in the trade. and jp raising the rate on nike following the earnings call
last night. the analyst cited the valuation of shares as attractive following the pullback in the stock since september. the pris target now $85. and nike a closed $72.37, up 7%, very strong. following the u.s. dieting a pair of chinese nationals for hacking american businesses, and engaging in economic espionage, china has fired back. strongly. eunice yoon has the reaction out of beijing. >> reporter: beijing came out rainging to fight the u.s. charges of cor espionage. the foreign ministry issued a statement saying the u.s. has made up facts and createdoise. and argued the cheyennes government has never participat or supported anyone in any way in corporate bertheft. the ministry counteredered the u.s. s largele cyberspying is open secret and china would never accept theat accusions. beijing sharper view comes after the u.s. justice department alleged that two chinese nationals conducted a global
campaign o cybertheft against the u.s. and its allies. u.s.he prosecutors say t two are linked to the chinese government targeting 45 american t h companies, the u.s. military and agencies like nasa. sources told reuters the hackers used ibm and hp enterprise services to reach clients. they said the kmer stewart security woos a priority. the u australia and new zealand joined the u.s. criticizing beijing, china slammed their remarks too call them slanderous. the state media here has also been critical blaming the u.s. of quoteulral arrogance. the argument is that ameca's elite can't fathom the idea that china can rice without stealno tegy. they say this will make the climate difficult for trade talks. up next, the slowdown in-housing is causing unexpected
strength? apar aents. a lac how investors are taking antage.a the recent weakness in home sales has investors kind of surprised about strength in ner housing sector. diana olick has more from washington. >> reporter: barely a year ago anas construction contempus swarmed over u.s. cities investors and analysts worried th rental apartment market was overheated and overbuilt. a yeay later te surprised at how strong the market still is. >> the demand has been better than expected. it's been a stickier tenant base and pricing power at the tenant base in the of elevated supply has simply surprised us. >> new apartment units being
rented out quickly at thent fastest eviass pace in three years according to the u.s. census. apartment construction took off in 2012 and reached a 20-year it remained elevated this year despite warnings that demand would slow as more millennials aged into their home buying years. d but whileand for house something high so are home prices and mortgage rates jumped making home buying less that will likely make more renters stay renters longer than they might have anticipated in order to saveor a larger downpayment. and it could also present investor was a relatively safety bet in a volatile stock market, namely the multifamily reit which also offer dividends. we have a overweight call on the reit sectors. single family rental and manufactured house sfloo one downside risk. mortgage rates coming back down. still higher than a year ago. but if they fall furthermore
renters could become buyers. for nightly business report, diana olick in washington. drug maker parago faced an unexcted $2 billion t bill. that's where we begin the market focus tonights. the irish drug maker said it was notified by infants government that it os just unde$2 billion in back taxes related to an acquisition it made back in13 now parago says it does not plan to shell outun the a any time soon because it says the case is without merit and incorrect. however, investors nonetheless were concerned. they sent the shares lower by more than 29% today to 37.03. car max said the stronger nanoseco in the wholesale unit helped offset a decline in same storeed sales. ca by weaker foot traffic. both profits and sales skrmted more than analysts expected as you might imagine shares rose today up nearly 4% to 58.9 chinese officials say that they will start to review gaming
titles for approval following a more t 6-month long restructuring freeze. good news for the chinese game dwellive net ease investors like the prospect sendihe shares higher by 3% to 244.43. and sprint will pay more than charges ion to settle that it intentionally failed to collect state and local taxes on its wireless plans that were isold new york. officials said it's the largest ever recovery by aingle state in an actionnd filed a false claims act. sprint shares fell$5 3% to pft 79. is> this week's market monitor bets that three stock picks tonight will continue to gain market share even if the economy begins to slow. that's bause he says they have strong management, pricing power d they're at the forefront of technological innovation. this is his first time on "nightly busess report" we welcome steven lee founding principal at logan capital management.
good to see you thank joining us tonight. >> thanks for having me this evening. resting day. >> to say the least. we begin with masamo, a medical technology company you like the demographics here but you could say that for a lot of medical doming companies. why this one it? >> well steeping back on the way in my team and i have beenet working tr since the early 90s so wechb threw challenging markets one of the lesso we take away is when times get toughou the get going. we want imifable and experienced management teams. a unique products which they have and the financial ability to execute. and in all three cases they have that. they make non-invasive sensors. the little things that go on the finger in thel. hospi that tell a patient's medical team what they do. giving the data they need to make better -- improve care and do it efficiently squloo you also like nike. it had a good earnings report this week. but you also point out the fact
that their customer contact e initiatives h helped it perform well. >> yeah. an nik fits the general theme. that management team has been rely aggressive on addressing the challenges of are retail. using technology throughout the business to find customers. understa and reredesign products and gone through and looked at partnerships for differentiated retailers. i think it's worthha noting their sales in china were up i think a little over 30% despite concerns we hear about the china economic growth. >> your third is apple. i have to say you are not alen. there have been so many money managers on our program talking about apple, even t with huge decline we have seen in the stock. the bulls like it because ty see the services business side of the business doing well. but the bears are afraid of the slowdown in the s hand market worldwide. i take it you like services. or is that why you like it? >> you know we like service and the wearables and the history of the company.
when we started buying in the mid-twous ipod was theje p. this has successfully obsoleted its own products and dealt wh change. as cellular networks getaster with 5 g coming the devices change opinion. and the wearable business is only about 4% but the watch connected to a cellular signal we think is an example of maybe how we do things in the future. >> in general, you feel as though all of c thesepanies and the management specifically are nimble enough to handle the type of market volatility and perhaps economicolatility tha is to come, correct? >> yes, certainly. have is they have -- they have products their customers really value and willing to pay a premium for. if we see inflation -- let's say the economy improves as opposed to go over theyriushng increases through. and still addressing needs that the customers havewh regardless her times or good or bad. >> right. >> and well seasoned. >> very good.ee steven with logan capital
management thanks for joining us tonight. apprecmute it very . >> thanks for having me. >> and to read more about steven's picks head t our website at nbr.com. coming up for those of you who haven't even started your holiday shopping. >> oops. >>ti -tock. i'm courtney raying 199elmhurst, new york if you haven't finished holiday shopping you are not alone. i have the expectations for supersaturday coming up on "nightly business report" . here a look at some of the economic numbers out today.w the economy g at a solid irdual rate of 3.4% in the quarter. that though is down slightly from an earlier estimate of 3.5%
as consumer spending and exports were both revised lower. goodsl demand for durable produced in the u.s. rebounded last month thanks to a ramp up in aircraft orders. but the gain was only about half what economists ad been expecting. and if you strip out transportion orders fell by 0.3%. in consumers opened wallets november as personal spending rose nearly half a percent. personal income rose slightly last month as well. consumer sentiment also rosh this m thanks though a strong job market and retailers arethoping that translates to this holiday shopping season. and the retailers are gearing up for the last minute shoppers who are racing against the clock for the holidays. kourtney reagan in elmhurst, new york. d> tomorrow could be the second busiest shopping of the year behind black friday. the saturday before christmas is it often called supersaturday.
a critical day for retailers to urchases he final before christmas. punctuate eighting the e of what most experts t nk will be a strong holiday season, despite the recent stock market selloff. >> if you look at the master card spending data up until day ago we were seeing 5% growth overall for theonsumer compares to two years ago at 3% and a year ago at 4%. we are having aer v healthy consumer season. the next five days are make or break for the retail z even though the holiday season was as long as it could be with the earlyan giving, the national retail federatioa says uarter of americans still have shopping left. 134illion consumers are expected to shop tomorrow. that's up from m 1lion last supersaturday. >> yes, i'm done. i started last week. >> we are going to be done today. >> do it all in one day. >> i definitely hope to be done by christmas eve. a>> i got get of couple things
like shoes clothes, definitely all that have jewelry. >> welry, healthy and books books and accessories and gift cards are the most popular last minute gifts on remail me not.com. a number of of retailers are extendin f hours procast naturers. kohl a's staying open for 83ur most macies stay open until midnight through the weekend. brian cornell expects will be the busiest day. target shoppers canlace orders as late as 6:00 p.m. christmas eve. a long season and a year ofan ng is almost over for tretail. andhe last chance to wrap it up with a bow. for nightly business report, i'm courtney reagan in elmhurst, new york. before we go let's take a look at the day on wall htreet. yes, ipened again. the dow down more than 400 points. noow 23,000. the nasdaq dropped by 3% or 195
po and the s&p 500 gave back about 50. now all three indexes lost at ek.st 7% just this the dow and nasdaq's worst week since the financial crisis of ten years ago. it was the s&p's worst week since 2011. my suggestion, don't bother looking at your 401(k) this en we >> not this weekend. >> just focus on the holidays and be happy. >> spend time with friends and family. >> christmas to you. >> and to you too, my dear. >>hat is nightly business report for tonight. i'm bill griffeth. thanks for watching. >> i'm sue herera. have a great evening, everyone, and a great weekend.