tv Nightly Business Report PBS January 31, 2019 5:00pm-5:31pm PST
>> announcer: this is "nightly business report" with sue herera and bill g heating up. it may beold outside, but wall street's january was hot. so hot it was t best month for stocks in 30 years. record profit. amazon earns $3 billion and posts a double-digit rise in revenue. enough? it money 101. are you smarter than a sixthgr er when it comes to personal finance? those stories and more tonit for thursday, january 31st. good ,ening, everyo and welcome. the first month of 2019 is in the it was the best january for the s&p 500 since 1987. the snapback is a remarkable
reversal from the big december sell-off. strong earnings and a shift in the fed's thinking helped prope the market. on this last day of trading in january,on the dow industrial average fell 15 points to 24,999. the nasdaq was up 98 and the s&p 500 rose 23. for the month, all of the major averages were up 7% or more. and it wasn't just stocks. oil had its best january on record, rising 18.5%. now, you may be familiar with the oldda as goes january, so goes the year. but will that be the case this time around? mike santoli takes a look. >> january was a dream for stock investors that almost fully reversed december's nightmare on wall street.af r december's brutal 9% drop, the s&p 500 logged the best january since 1987. in fact part of the explanation start powerful rally to 2019 is the extreme weakness
late last year. e fourth quartermeltdown in the market depressed stock valuations and drove growth expectations so low that even the earnings progress the last few weeks has been enough to assure investors. fed chairman jerome powell in december spooked wall street by sticking to the expectation of further rate increases in 2019 but in january he has radically shifted toward emphasizing patience i considering further moves. a strong january tends to predict a strong move for stocks. an up january was followed by further gains the rest of the year about two-thirds of the time since the 1950s. but over t past 15 years, the so-called january barometer worked six times and failed the other nine. most recently yorear ago when the s&p was up 6% in january but endedhe year with a loss. the path ahead for stocks seems more tied to whetherte corpo earnings growth slows to 5%, as
is now expected, rather than falling ht. the market has now recovered more than half the 20% drop from september to late december. it increasingly seems that december w an overblown panic over imminent recession risks, but has the january rebound been too much too fa for "nightly business report," i'm mike santoli. >> so what do we expect from the market next month? joinin us is rob sharp, chief investment officeror t. rowe price. thanks for joining us tonit. what do yothink, does the strong january continue into february? >> i don't think so. the main catalyst for the strong january was a change in fed messaging, so that's a catalyst unlikely to repeat itself. i think we probably ending the yearr from here but the gains won't be in a straight line. so my expectati will be we'll consolidate these gains or retrace them in february. >> what about the data we've been getting recently that shows that the economy is with the
exception of p and a couple of other sectors, we're doing okay. that doesn't encourage you in terms of continued stock performance to the >> yeah, i think the economy is doing okay, but it's clearly slowing. we're basicallyoing fro double-digit year-over-year earnings growth to low to mid-single digits as we work our way into the middle of 2019.'v got slowing growth and rising interest rates, tends to make a pretty environment for stocks. >> now, with the expecfotion yesterday that the fed was going to be raising rates a couple times this year, there were plenty of money managers out there whoanereng their hat on the financials feeling that they would benefit from higher rates and it would hurt the housing market, just to name two industries. now that th s fedms to be on hold for the foreseeable future, do you reverse tha strategy? what do you think? being , i think the fed on hold is good for stocks. i think it reduces the risk of a policy mistake leading to
recession. so i think at the margin, sectors that do have a little bit more economic cyclicalery probably oetter risk/rard than they would in an environment where the fed was persisting with rate >>increase see you like things outside of the united states, specifically you like brazil and emerging markets over developed markets, correc >> our view is that emerging markets' valuations are more compelling than developed markets, particularly those in the united states. and many of the things thabe woulood for the market overall will be particularly good for emerging markets. the fed being on pause should lead to a weaker dollar, wch historically has been good for emerging markets. the resolution of tradear and avoiding an escalation in tariffs would be good for emerging markets broadly but specifically for china. >> there's been lot of hope placed on the emerging markets the last few years. we'll s if maybe this is their year they'll resurge. rob, thanks again fors joining tonight. >> thank you. and trade remains a hurdle fothe market, but today there
were new developments. the two days of trade talks betwn the u.s.nd china are being described as intense, and the whate house says intensity has also led to progress. kayla tausche is following this ory for us from washington tonight. good evening, kayla. >> good evening, sue. the u.s. and china touted tremendous progress in their discussions here in washington this week, edging closer to a deal by a march 1st deadline that would art tariff hikes or potentially remove tariffs on $250 billion of u.s. goods and chinese goods altogether. the president speaking from the nooval office this aft cited that tremendous progress and said he is pleased with what china has delivered. >> it's a very complexnd a very large -- it's the largest transaction ever made action to be perfectly straight. we have to get this put on papem at point if we agree. there are some points that we don't agree to yet, b i think we will agree. i think when president xi and
myself meet, every point will b agreed to. >> reporter: the chinese side lioffered to purchase 5 m tons of u.s. soybeans, but now comes the hard part. in a f statementlowing the talks, the white house put out a statem states is particularly focused on reaching meaningful commitments on strucral issues and deficit reduction. both parties have agreed that anyn resolutio will be fully enforceable. to that ending the treasury secretary, steven mnuchin, and the trade representative,am ssador rob lighthizer, will be traveling to beijing i mid-february to further these talks. trip is still not the ambassador told reporters this evening. after that they will decide whether it is appropriate for president trump to meet with president xi atome later agreed-upon date and location, but lighthizer said the president will make his own on.i sue. >> kayla tausche at the white house. kayla, thank you. osewhere, speaking which, china's economy has taken a hit from the trade war with
the u.s. from a new ed report that showed factoryty acti has actually contracted in the world's second largest economy. eunice yoon is in beijing with thatst y. >> today's data showed that china's s manufacturitor shrank for a second month in a row. the purchasing manager's index ticked up to .5n january from 49.4 in december, better than the forecast of 49.3. however, anythin under 50 indicates a contraction. production and raw materials inventories both edged higher, bu new orders, an important gauge of future activity, ctclined. manuers reported that they cut more jobs. manufacturers are under pressure because of falling profits, decelerati factory inflation tnd uncertainty over tariffs. the lat data is a reminder for chinese negotiators in washington of why the need to end the tariffs boy the march deadline. businesses here re waiting to see if beijing will ramp up
fiscal stimulus at the upcoming parliamentary session in march or earlier. for "nightly business report," i'm eunice yo in beijing. dow component due paunuponts closely monitoring trade negotiations and the pace of economic activity in china. this after thepa c said it is forecasting a slowdown in ales due to tepid economic growth. the company said first quarter revenue will be in the d- ngle digits but did not elaborate. the outlook took investors by a surpri that sent the stock down more than 9%. amazon, which is now the most valuable publiclyraded u.s. company reported its third straight record profit, easilyl beating wreet estimates, but its forecast for the fir quarter sales, that wasn't as strong as hoped for. amazon earned $6.04. expectations were $5.68. revenue rose by 20% to more than $72 billion. the outlook did create volatility for the shares in the initial after-hours trading
tonight. dere bosa has more. >> amazon reporting a strong holiday season on the back of record online sesnd its third record profit in a row. computing and advertising continued their quiace of growth and continued to offset lower margins from amazon's traditional commerce business. losses in the international segment ticked up as it faces competition and regulator challenges in india and slowings onlinees in europe. investors are focusing on its outlook for the current quarter, which fell short of expectations. "nightly business report," deidre bo, san francisco. r.j. joins us now to talk aboutamazon's earnings beat. he is a consumer equity analyst at morningstar. welcome, r.j. good to see you again. >> thank you, sue. >> what did you make of the report? as expected, they did make a pretty goodce advn its cloud business. were you impressed or did you want more? >> yeah, i think the clouds businessne of the highlights here.
not only the growth numbers which remain quite strong, but also the profitability there. 29% operating margins for that seeeent. there's a narrative going around that this business while it continues to grow will have price cuts to compete with the likes of azure. i think there's more that doesedt get enough . there's a lot of margin of be theve services that m market doesn't focus on. i think that was clearly one of the high points of the fourth ter results. >> what about their core retail sales? last year overal up 18%. gain.ear before, 42% international sales a gain of 15% when the previous year they did 29%. do you think we'll see thisue cont slowdown? >> i think we will. i think investo also haveo be aware there's other things going on. one of the big things is the company shiwaing from being a first-party marketplace to a third-party marketpla which is a hoour higher margin transact cn. instead olecting the revenue of the sale, it just takes a commission on pe sale
t of that is the shift of being a third-party marketplace. i do think we're seeing a slowdown on a couple of international market. india is an area that we're seeing that, potentially europe as well. i think if you look at the long-term picture here, t ancillary services an other things the company is moving into, thathould givehe company a chance to reaccelerate at some point. i think the mmpetant point is these are higher margin getting inthey're i think that's the attractive part of this. 20 ape was a transitional year where they moved awayrom a growth story to a profitable growth story. just a few years ago putting up operatingou margins be a pipe dream but we're looking at high single digits over the future. >> we see -oyer-year performance from whole foods and that's a slower growing business and fickle business at that. what did you make o their numbers? >> whole foods is something i think they're still figury g out
what tve with that asset. i think the integration process has probably been a little slower they would have hoped there. online grocery has still been a ffficult thing u.s. consumers to buy into because it's expensive, sometimes inconvient and frankly a lot of u.s. consumers just like to shop in store forin those . i think it's something that they're still developing a game plan for. i think we'll continue to see it, but it's an elving process, the whole foods. >> on that note, r.j., thanks so much. >> thank you. time to take a look at some of toady's up and downgrades. we begin with dow component pfizer that was upgred to buy from hold at argus. the analyst cited the potential for some promising drug papprovals. thce target is $55. stock rose about 3% to $42.45. ralph lauren was upgraded to outperform from market perform. thenalyst cited improving sales and margin expansion for the compy. price target, $155. the shares fell a fraction to
$116.14 today. and h & r block was eldowngraded to from neutral at goldman sachs. the analyst cited the new tax law and the doubling of the standard deduction, which should reduce the number of filers who itemn their returns, which is what h & r block usually ds for people. the price target, $22. the stock fell 5% to $23.59. up next, ge shows some signs of life. so has t former bellwether finally turned a corner? we will take a look.
the trump ainistration is proposing a plan that would end so-called back door rebes as a way to lower drug prices. the white house says this would encourage insurers to pass thes savi directly back to patients instead of the pharmacy benefit managers.ph macy benefit managers are the middle men who negotiate the drug prices and receives, reba but they don't necessarily pass those savings along. cvs, which owns one of those middle men was the hardest hit in initial after-hours trading. well, general electric's turn-around is making at least that's according to the new ceo, after the company reported better-than-expected quarterly revenue this morning, strong results from its aviation division overshadow problems at ge capital and its still struggling power but it was all enough to send the stock up more than 11% today. itt traded $10.16.
we're joined tonight by scott davis, theceo of millius research. for you, at big p the ge story right now is the credibility of larry culp, right? >> t at least half of the story. h e previous management team lost credibility we street. they cut the dividend to basicallynd zero then disappeared, fired, and these new guys came in and are buildii credibility. ink larry is great. larry is a very proven ceo and is a highgu integrity >> and you say in your note, ge, good is the new great. but to a certain extt that really rings true because the company still has a couple of oblems, do they not? is larry culp the guy to solve that? >> three monthsago it was a $6 stock. at that point we were talking about pential bankruptcy. going out and having to issue equity, all kinds of really bad rumors out there. what larry did today, he came out and calmene ever nerves and said we have the balance sheet under control.
we're starting to generate cash. we're starting to turn thi around. quite frankly, they didn't have to sell anything at a big loss. land thebilities that they had already booked, like long-term care insurance, didn't get sizedup. overall i thought today was a great day for ge. it was one goodday. we've had some bad days. >> they still have to right size capital and figure out that puzzle. now they're talking about selling a bigger piece of ge health care in asp -off maybe to help pay for the ge capital problem, ri yt? have -- i mean in the grand scheme of things, this is a hundred billion dollarish market cap stock, call it 90. there's about a $2 billion hole in the balance sheet they need to fill. you willse $10 billion or so just from the health care ipo and you'll raise $10 billion from what was announced with the new app deal, which is the locomotive business. so i think you'll plug the holes in the balance sheet and then you' fine. i'm not worried about ge capital
the way we were two years ago. it half aircraft leasing and the other half financing. >> what's your price target on the stock? >> it's 21. othink you can get to 15 or 16 by the e this year. again, it was a $20 stock just a year ago. it's not hard to imagine it getting back there. >> scott davis, thanks again f joining us tonight. >> happy to be here. u.p.s. delivers for its shareholders. that's where we begin tonight's market focus. ivery company reported higher revenue in the holiday quarter as earnings topped expectatns. u.p.s. said network upgrades will help improve its bottom line this year and it is seeing opportunities outside the united states. >> we're focusing on europe, we're focusing on emerging markets. there are opportunities out there. theye in select markets. but that's where we think that we can focus, and we had very good success. we think that will continue.
>> shares rose 4% to $105.40. hershey's earnings and revenue came in below analysts' pectations as it faces higher costs and more competition. the candy maker did, however, say it expects full-year profit and sales to be better than expected, thanks to new product and packaging. shares rose a fraction to 06.10. conoco phillips talked quarterly profit estimates. they saw a rise in output from its north american shale fields at said it sold more oil higher prices. the stock gained 3% to $669. shares of charter communications soared after reporting better-than-expected revenue for the fourth quarter. the broadband and cable operator attracted more intnet customers but did lose 22,000 tv subscribers but benefited from ad sales. the sto gained 14% to $331.05. northrop grumman beat earnings estimates thanks to higher sales in its aeros mce
ansion systems units, but the company did issue a downbeat outlook tayingt 2019 profit and revenue will likely come in below estimates. that stockell morhan 1% today to $275.55. diaggio reported a strong quarter thanks to demand from china and india. thworld's largest spirits maker also increased its divide and said that industry trends are good for the company no matter what the economic environment. >> we benefit from in the u.s. a trend where people are moving to spirits and cocktails in a gger way from wine and beer. and people are trading up for more premium brands. that trend is very strong and ntinues on a secular basis. so while there will be some impact from an economic slowdown, we're not seeing it yet. >> shares rose about 5.5% today to $152.65. intel has named a ceo,
ending a nt-long search. bob swan will take over the job after having been the chip maker's interim chiefve execu for the past seven months following the rfignation brian krazanich. he had been the chief financir offiince 2016. he becomes intel's only seventh o in the past 5 years. the stock fell a fraction today to $47.12. p >>sident trump is reportedly considering herman cain for a seat on the federal reserve board. he is the former ceo of godfather's he made a bid to be ta republicn candidate in 2012. he reportedly met with the president yesterday. coming up, learning the value of a dollar at a young age.
here's what we're watching toerrrow. the gent releases its employment report for january. economists expect an increase of about 170,000 jobs. we'll find out how the swings in the price of crude oil impacted chevron and exxon's bottom line and automakers release their sale for januar so another big day coming up on friday. general motors, ford and chrysler have temporarily suspended operations michigan plants. this after a utility made an appeal to users t conserve satural gas during the extreme
dip in temperatund a recent fire at a compression station also contributed to supply concerns. production schedules are expected to be interrupted through tomorrow. 401(k) saverstayed the course during the rocky month of december. according to new data from fidelity, 401(k) balances dropped to 95,600 by the end of the year. balances fell along with the broader marke last month. fidelity says it is an encouraging sign that people continued to save and n did have any knee-jerk reactions. we all know spending money can be easy, but saving it can be difficult, even for adults. that's w some schools are starting to teach lessons about money at anar eer age. sharon epperson is in jersey city, new jersey, tonight. >> hi, everyone. >> this sixth grade class at golden door charter school in jersey city, new jersey, may look bike many others the subject is not science or english. >> who can tell me what dirt depositis?
>> these 11 and 12-year-olds are learning about money and the basics of saving. >> you're writing that check. and that money is coming out of your account. >> spending. >> i h you can get in a lot of debt due to credit cards, so i will stick to sh. >> and the cost of borrowing. >> if heard interest, like asking questions about it and e would answer and i'm like oh. >> some are sharing what they learned with their parents. >> i pay more attention to what they purchase and what i purchase as well. >> and finding out for themselves how to secure their own financial future. >> it's something that has to stick with y for the rest of your life. it's something that helps you. >> new jersey hadin somecial education standards in place, but a new law that goes into effect in september is taking those benchmarks art step r, requiring all school districts to teach financial literacy in sixth, seventh and eighth grades, includingopics this public school already covers. st states have financial education standards in high
school, yet a recent report by the brotiings insti founding that only 28 states have financial education standards in lower grades, including middle school. yesterday advocates say essential to start teaching at a younger age so they can better manage their money asad ts. >> angela mcknight, who cosponsored the bill which is nowaglaw, des with skeptics who question whether financial literacy can be taught in a classroom. >> they will not forget it. this is ae skill. you do not forget a life skill. >> danielle traina agrees and looks toward to infusing financial education into her curriculum and having more teachers across the state do the same. >> i tell my kids all the time i wish i had a teacher when i was in middle school that the way they're being prepped. they're really doing well. i told them they should be proud of themselves because not a lot of schools teach this course, so they're ahead of the game. >> for "nightly business
report," i'm sharon epperson in jersey city, new >>jersey. before we go, one final look at this final trading day of janue.y, a big the dow was down 15 points, the nasdaq up 98, the s&p rose 23. for the month, big gains, at least 7%.as it the best january for the s&p since 1987. >>amhat's ing. we'll see how the rest of the year goes. that will do it for us tonight on nbr. i'm sue rera, thanks for joining us. >> i'm bill griffeth. have a wonderful evening. see you tomo