tv Nightly Business Report PBS January 10, 2019 5:00pm-5:30pm PST
>> annouer: this is "nightly business griffeth and sue herera. retail gloom. low unemployment and strong consumer confidence was supposed to get consumers into the stores, but not every retailer got their holiday wish. profit warning.rl the s largest airline says profits will not be as strong as expected, raising f the stakes corporate america's upcoming earnings season. shifting gears.ew theord explorer is sleeker and high tech. but can t iconic suv generate big sales for t automaker under pressure? h more tories and m tonight on "nightly business report" for thursday, january 10th. and we do bid you good evening, everybody, and welcome. well, it was another positive day on wall street today. in fact the s&p 500 posted its
first five-day win streak since september. we'll have more on that in a moment. butwi we begin tonigh retail, which was not positive. in fact it was more like a retail wreck. expectations were very high for a good holiday shoppingeason and in fact we learned today that it was. t it turns out not all retailers benefited from rising consumer confidence and strong spending. that was the case withma 's, which surprised investors today with downbeat holidayresults. the lackluster performance prompted the company to cut its outlook for profits, sales and gross margins and that knocked f the wind oute stock sending it down 17% today, its worth one-day performance ever. courtney reagan starts us off tonight from indianapolis. >> adisappointing holiday sales report for macy's is the grinch that stole christmas from other retailers today. macy's sales in november and
december grew more than 1% with a double-digit sales increase online. but that was below what the department store pected. macy's ceo said the black friday weekend was strong. sales weakened in mid-december and didn't return to expected patterns until the week of ma chri sales were weak in women's sportswear, cosmetics, fashion jewelry and watches. there was a fire at a distribution center and a sales event didn't go as as a result, the retailer lowered its earnings sales ando marginast for the year. while macy's has reported four straight quarters of same-store sales growth, investors are starting to wonder if that trend is at risk. today the stock isun ng, marking its worst day ever. macy's shares had grown 80% from thanksgiving 2017 to thanksgiving 2018. >> macy's being on mall, macy's being an appelretailer, those are tough structural places to be. that is a little bit different from the kohl'sstory, whi has done a great job in active and
target, which has done great with toys, home, baby. >> like macy's, kohl's holiday sales improved more than 1% with double-digit growth online. unlike macy's, kohl's the lower ending of its earnings forecast. targ so far reporting the strongest holid results, with comp sales up almost 6%, thanks to strong shopper traffic. toys, babyif and seasonal gts were target's strongest categories during the holidays. target i holding its previous earnings forecast studies. the good news is analystsay the u.s. consumer is healthy. >> the consumer is fine. they'r all working, their wages are going up, they're fine. the problem is the cost structure in retailing is dramatically going up. >> e-commerce businesses are currentl more expensive t run for retailers that began as physical stores, making online sales less profitable than sales in brick and mortar locations. >> it's a higher cost of doing business today than what it was in the past for every one of these companies. margin flow-through will be the
theme of 2019 in the face of what continues to beg a str consumer. >> while mastercard said holiday sales grew 5% overall,he strongest in six years, not evley retai had the jolliest holiday. for "nightly business report," i'm courtney reagan in indianapolis, indiana. americ airlines caused some turbulence in that sector today. e world's largest airline trimmed its profit guidance for 2018 and said that revenue didn't rise as much as expected at the end of last that sent the stock down 4% in today's session. the warningpl r through to other carriers on concerns that they may report similar lackluster results, threatening a record stretch of industry.lity for that so with the fresh rounding of profit warnings, american airlines, what can we expect as fourth quarter earnings season gets under way next woke? joining ustonight, lindsay bell, investment strategt at cfra research. lindsay, always good to see you. happy new year.
>> happy new year. >> you know, what they report for the fourth quarter, i think you agree won't be as important reas what they say the expecting for the first quarter, right? >> it's always about guidance when it's earnings season. theerourth qua is actually probably going to be a really good one. we're going to get another double-digit quarter of earnings growth. of course thatill be a deceleration of three-quarters over 20% growth for the s&p 500, but still very good by historical standards but looking out to the future is where the bistion mark is. you highlighted the two companies that cut guidance today. weeard from companies like apple, fedex s anderal others already warned that earnings are going to be worse than excted. samsung, lg are another two companies. and these cuts weresuretty tantial, by the way. >> so what areas do you have the most concern or worry about? where ar the most vulnerable areas? >> well, i would say i'm mostie
wo about the industrials and the financials, because when i look at those two sectors, they have been leading year to date so far. i know it's only been a couple of days the stocks have been doing reall well, but their earnings numbers have not budged much for the overall s&p 500 earnings rate for 2019 has been reduced to 6.1% from 10% earlier in the year, but these two sectors, ntheirbers haven't moved lower. if you think about what we've heard from fedex and apple, especially on the global front with regards to trade, with regards to the slowdown that we're seeing in china, theal industector will be one that's really at risk. >> so the tariff tiff when it began last year, we had beenay told we won't see an impact on the economy until the first quarter of this year. is that wha we're going to start to hear about? is that what you're expecting? >> yeah, exactly. i think that you started to see some of the china data last couple months come in much weaker than expected.ee
you the government over there trying to add stimulus to the ecomy to smoothings out. but i think you're going to hear companies talk about how they're seeing the impact knnow, you , as the year ended and going into the first quarter. andtou can't for that while we got good news on the trade front earlier this week, the situation still hasn't been resolved. there's that march 1st that can get pushed out potentially. otherwise tariffs could go up at that point in time. there's a lot of uncertainties. if you're in the executive suite, you have a lot of concerns with forecasting going into this first quarter period, so you havve incentive to be conservative. >> so are your thoughts myedicated on the eco continuing with the growth that we saw in 20, or is it predicated on 2019 being a little slower? >> it's predicated on 2019 being a little eslower. we starting to see expectatio economists are expecting growth
to slow in 2019 from 2018 here in the u.s., but also you're already seeing early signs in europe, slowdown g inmany and the brexit issue is hurting the uk. china, emerging markets are seeing aslowdowntoo. so all of thatoupumulated will hurt the u.s. 50% of s&p 500 sales come from t overseas sot has a big impact. >> as always, we appreciate your by.ng thanks for joining us tonight. >> thank you. concerns over earnings were not enough to pressure the broader market today, sending the dow and s&p 500 to their fifth straight day of gains. industrial stos a the real estate sector helped lift the market overall as investors focused on comments from fed chair jerome powell. more on that later in our program. first, the clongnumbers. the dow jones industrial average climbed 122 points to 24,001.
the nasdaq added 28 and the s&p 500 rose 11. as investors question where this m ket isheaded, a top investor who beat the market for years said today in an interview that the bull market could last another decade. >> there'slenty of opportunities today, that's what i'm looking at. you know, in terms of different asset classes doing well, my belief is that we're in a secular bull market. in retrospect i didn't know at the time, it started in 2009. if i had to guess, we're halfway through it, driven by good economic growth and low inflation. ten years in, ten years to go. i don't ow, that's my guess. >> however, as you know, the market is still facing some major obstacles, like trade tariffs and slowing growth, pecially when it comes to china, eunice eun has that part of the story f us from beijing. >> reporter: the commerce ministry was generally positive about the trade talks. thntministry issued a state
saying that the two sides conducted in-depth and detailed exchanges and laid the foundation for resolving mutual concerns. at a regular press briefing, the minister respokesperson said the one-day extension also showed that the talks were serious. in these trade negotiations, a lot of focus has been on how to make beijing make good on its omises. one big complaint here has been that beijing doesn't stick to the spirit of an agreement. the usgr expressed tha in its statement after the talks saying any agreement should provide for complete implementation subject to ongoing verification andct efe enforcement. well, the commerce ministry pushed back on that today saying china thinks a mechanism is important too, and both parties have an obligation to keep their promises. the comment showshat china doesn't particularly trust that the u.s. will hold up to its of the bargain either. amid all this talk, new data out ofho china sd that the economy here is slowing at a faster pace than expected. both cpi and ppi misse
consensus. consumer prices dropped to a six-month low. toducer prices fell their lowest point in two years. they called the pace of the slowdown this is an economy carrying a tremendous amount of debt, and economists are now talking about china entering a deflationary cycle that makes the debt more burdensome than it already. the trump administration already believes that it has the upper hand in these trade negotiations, so this latest data will likely only encourage the policy team that it has more leverage in the tde talk for "nightly business report," epm eunice eun in beijing. there werets that president trump was planning on talking about trade with chinese officials on the o sidelines the world economic forum in switzerland later this month, but today thewe presidented that he won't be going to the gathering of world and business leaders, and he cited the partial government shutdown and his standoff with democvets border wall funding. so far the partial government shutdown has had only a minor mpact on theeconomy, but today economists at bank of
america and merrill that it's starting to sting. they shaved their fourth quarter earnings growth forecast and then said that first quarter growth estimates could also be trimmed if the shutdown continues much longer. right now as ylan mui reports, there is still no end in sight. >> no paycheck, no peace. no paycheck, no peace. >> reporter: federal workers made their frustration with washington crystal clear today. in protests and rallies across the country, they demande end to the government shutdown, as they are set to miss their first paychecks tomorrow. >> how long do you think our ople can afford to come to work? you know, we're required to come to work. you have to pay baby-sitters, you have to payor gas in the car. >> reporter: it could be quite a while before government workers n e moneye bank. shutdown talks are stalled in washington, and democrats say ey no longer trust the president's word. >> the president just keeps upping the ante. he's moving the goal posts so
many tthes they're out o stadium. >> reporter: today president trump took his case for a border wall down to texas amid what he says is a humanitarian crisis of illegal immigration. the trip is fueling speculation thateche president willre a national emergency and build the wall without congressional approval. >> i have the absolute right to declare a national emergency. i haven't done it yet. i may do it. if this dsn't wor out, probably i will do it. i would almost say definitely. reporter: some lawmakers here on capitol hill have been looking for another way out. so far they haven't found one and that means this shutdown could be the longest in our nation's history. for b"nightlyiness report," i'm ylan mui in washington. it is time t take a look at some of today's upgres and downgrades. boeing was upgraded to overweight from equal weight at morg stanley. the analyst says strong airline sales could lift the stock by 30ge the price t is $450.
shares rose 5% to $352.61. that same analyst at morgan stanle downgraded lockheed martin to equal weight from overweight. the analyst cited headwinds related to its pension program, which he says will be difficult ththat company to fully offset. price target is $300. the stock was up 2.5% to $277.50. twitter was upgraded to buy at merrill lynch. the analystitedncreased i don't sayage by younger people and morengement by its current users. price target $39. g the sharesned 2% to 33.09. snap was oupgraded market perform from underperform at cowen. they cited the stock'ste valuatn last year's plunge. price target, $6. nonetheless, share fell a fraction today to $6.22. still ahead, fed speak. what the head of the bank said today that left some investors scratching their
a new survey points t a growing risk of recession here in the u.s. according to "the wall street journal" economistsere surveyed pointed to a number of concerns, including the usuals, trade tsions with china and rising interest rates. on average, economists surveyed said that there's a 25% chance of a recession in the next year, which is the higst percentage since 2011. today the chair of the federal reserve h says does not see a recession this year. speaking in washington, he repeated what he told investors last week, that the central bank will be patient when i comes to raising interest rates. but he also said something else that caught our attention.
here's steve liesman. >> in his third public appearance in the past month, fed chairman p jeromell sat down for a chat with private equity mowing al david ease tein and tried t market concern over the outlook. powell suggested the fed is in no hurry to raise interest rates. >> i think we're in a good place. i think where that leaves us, particully with inflation low and under control, is we have the ability to be patient and watc patiently and carefully as we see the economy evolve. >> thereed chairmaated that he sees the u.s. economy as strong and expects momentumrom 2018 to carry over into 2019. his biggest concerns, weaker global growth, trade tensions and an extended government shutdown. but markets sold out of and several ftors were in play including a soft 30-year bond auction and a tweet from president trump announcing he would not be going to davos world economic forum because of the shutdown. some say the balance sheet will be substantially smaller than it is now.
>> we wanted to have the balance normal turn to a mor level, which is no larger than it needs to be to conduct monetary policy. don't know the exact level. that will depend on really the public's appetite for our liabilities. currency.ly to us that's a liability and the public has a large appetite for currency. and also reserves and other liabilities. so it will be substanti smaller than it is now. >> investors are watching what the fed does with its balan sheet because of its potential to raise interest rates. the average market expectation is for the balance sheet to decline to around $3.5 trillion from the current level of $4 trillion. investors will have to wait until the next public appearance or press conference by powelluto find what substantially smaller means. for "nightly business report," i'm steveliesman. meanwhile democratic house leaders and independent senator bernie sanders today unveiled a plan to put prescription drug prices. they proposed legislation that
would open up generic competition to brand name drugs. it wouldllow medicare to negotiate with drug makers and give consumers the ability to import cheaper treatments from canada. already a lobbying group that represents drug makers came out against the bill saying it would wreak havoc. on the u health care system by curbing innovation and making treatments unsa. an activist investor is reportedly making a bet on m. that's where we begin tonight's market focus. according ts, reut starboard value is building a stake in the resort and casino operator. the size of the stake is unclear, but the report says d starbo plans to push for changes at the company. last week mgm announced a cost-cutting strategy. mgm shares rose more than 1% to $28 even. barnes & noble is warning about the future. the book selleraid it could cut earnings guidance as much as 10% due to higher spendingn advertising and promotional activity, but there was some
holiday sales were up 4%. according to the company, that's the best ineval years. nonetheless, the shares plunged nearly 16% to $6.36. new ongo db has competition. this after amazon launched a new cloud-based data software. they say the new service has shortcomings and it plans to raise awareness of its brand. l brands reported a decline in sales joining otherle ret that had a slow holiday season. profit margins at its victoria secret stores were down significantly, but it wasn't all bad the company does expect fourth quarter earnings to be on the higher ending of its earlier forecast. but it wasn't enough to send the stock higher. shares fell 4% to 26.99. investors had their first chance today to react to last night's quarterly results from wd-40. the household products manufacturer delivered earnings
in line with expectlpions, by strong sales of its signature wd-40 spray lubricant. however, the ceo did say there may be future volatility i its sales levels due to the timing of various promotional programs. sales fell nearly 7%oday to 171.04. and black rock reportedlyut plans to about 3% of its workforce in the coming weeks. that would work out to about 500 workers. the world's largest asset manager said thatt's reinvesting in businesses where it sees growth, like technology, retirement andnontraditional alternative investments. black rock shares were d a fraction today to 399.50. the chairman of sears late yesterday submitted a revised takeover bid of more than $5 billion for that retailer. eddie lampert, who is also sears majority sreholder sweetened his offer in order to win approval from a federal bankruptcy court. lampert's hedge fund will take on about $660 million in additional liabilities.
in an effort to strengthen itsa propefore a monday bankruptcy auction. the hedge fund said that the plan will, quote,rovide more value to stakeholders than any other option, in particula a liquidation. coming up, one of the mos popular vehicles on the road is getting a makeov. >> it the first all-new redesign of the ford explorer in eight years. but is it enough to hold off the competition? i'm phil lebeau. that story coming up on "nightly business report." some positive ns for the housing market. mortgage rates have fallen to a nine-month low. according to freddie mac, the benchmark dropped to 4.45% last
week. that was the sixth straight week of declines, but it is also still higherompared to last year. the drop has prompted a rise in imortgage applications a refinancings, but asee we've reporting, the partial government shutdown could keep some of those applications from closing. fiat chrysler will pay about $800 million in finesnd costs to settle allegations that it used what's called a defeat p device tos emissions tests. the justice department sued the automaker in 2017, claiming illegaltware was installed on cherokees and ram pickups to ade pollution controls. fiat chrysler says the resolution willp h maintain customer trust. tesla said today it's going to stop selling the least expensive versions of its model s and mod x vehicles. orders will end on monday for bo of those. customers will still be able to purchase the higher-end versions which come at a hceher pri point, upwards of $90,000.
tesla did not say why the lower priced models are being discontinuedut experts are guessing it may help the company control costs or reallocate mateals and labor. britain's biggest car maker is cutting a lot of jobs. erjaguar land r will reduce 4,500 asal workforce by part of a plan to control costs. that is in addition to the 1,500 that left the automaker last year. the company has been under pressure in markets like china, where sales were oft for the first time in 20 years. jaguar land roveras also suffered from the uncertainty surrounding brexit. ford is cutting thousands o jobs as well as it moves to overhaul its global business. the automaker said today it's going to close plants in europe and end production of some low-profit models. ford says that the restructuring will cost about $11 billion and it will take between three and five years to reshape its over seas business. and ford also sells america's top midsize suv.
now the ford explorer ing get a makeover. the automaker is rolling out the firstw all- model in eight years, as fd pushes to rebuild sales that ve been under pressure. phil lebeau has the story from detroit. >> on a big stage taking up a ford of a football field, rolled out an all-new version ot s biggest selling suv, the explorer. sleeker and packed with the latest technology, the new explorer hits showrms during the busy summer sales season. >> this is a pace car for a wholew utility lineup, phil. i so this really important not only for our brand but for our business. >> ford's business is under pressure. it's downsizing ineu rope, rebuilding in ina, and investing heavily in autonomous off les that may not pay for years. all reasons ford needs a new explorer to generate strongs. sa the explorer may be the best-selling midsize suvn the
u.s. but competition is becoming more intense. with a wave of new modelso rolling i showrooms the next three years. >> you've got another six models or so coming i the model this year and into next year it's going to be tougher for each of those models, including the explorer, to maintain their volume and growth. >> with gas prices relatively low and job growth strong, ford ales should hold up early this year until the automaker's redesigned explorer and an all-anw rger pickup roll into showrooms and bring with them an expected surge in business. >> this is when the car business is great. models.e new customers are coming in shopping the bran's going to be a lot of fun fo ford. >> an iconic model capable going off road, trying to smooth out a bumpy period for america's stsecond large automaker. phil lebeau, "nightly business report," detroit. finally, oracle has entered into a new deal that will deliver a home run. the company has would be the naming rights to s francisco ants waterfront ballpark, which will now be called oracle
park. during anto interview y, oracle's ceo and the head of the giants called it a perfect partnership. >> it's a 20-year partnership with oracle. i mean t w way look at it is, look, we are in silicon valley, within a 30, 40-minute drive from here their company is changing the world. one of those companies is oracle. we're partnering with them for r theeeable future. >> it is estimated the deal is worth somewhere between $thr300d $350 million. that does it for us tonight. thank you for joining us.