tv Nightly Business Report PBS March 6, 2019 5:00pm-5:30pm PST
this is "nightly business report" with sue herera and new normal. an influential central banker says investors should get used to slower economic growth. power outage. the ge unit isrc a s of pain for the company, and it could take years, not months, to fix. blazing new trails. could fire-resistant homes be the answer to california's growing wildfirerisk? those stories and much more toy ght on "nighsiness report" for this wednesday, nd good evening, everyone. welcome. today we got new information on the health of the economy. weht begin ton with comments from a voting member of the federal reserve board, who said tailwinds have turned into headwinds, and described the economy as havin entered a new
normal. that new normal means slower growth. john williams, the president of the new york fed, cited three factors, a global slowdown, geopolitical uncertainty and tighter financibu conditions. he also added that slower growth is not necessarily cause fo >> how much should our economy be expected on a normal average year to grow? r current estimate is around 2%. so when we see the slowdown, yot shoulde -- people shouldn't be saying what's happened to the tonomy that would cause you think this would be down to 2%. in fact this would be actually sosithing crably more normal, 2% growth in the new ew economy, normal economy. >> mr. williams said that allows the central bank to be flexible and patient when it comes to raising interest rates. and the federal reserve also alteredf ts descriptione economy in its latest beige book. that is the anecdotal look of the economy across the country which was released today. ten of the fed's 12 districts
saw teslight-to-moderowth in late january and february. more being viewed as downbeat compared to its more typical modest to moderate phrase. some of that was due to theov partialnment shutdown which the fed said hit a number of sectors, including ilre real estate and manufacturing. the manufacturing sector also cited highe costs due to tariffs. and on the trade front, the deficit rose to a record, hitting $891 billion last year th u.s. imported more goods than ever, including from china. economists say the rise was due to things like a global economic slowdown and a strengthening dollar, whichne wea overseas demand for american products. yesterday dallas fed presiden robert kaplan gave his assessment of the economy ande focused on the continued rise of debt levels. in his stament he said an elevated level of corporate debt, along with a high level u.s. government debt is likely to mn that the yutz econo econos
much more interest rate sensitive than it has been historically. with future fedate increas on hold, does that mean that rates are about as high as they're going t go f foreseeable future? and if that's the case, what does that mean for a savers investors? joining us tonight is phil, the ceo of asset management. thanks for joining us. >> thank you for hing me. >> john williams says tailwinds are now headwinds, expect slowew . robert kaplan is looking at sensitive economy. if rates are as high for the foreseeable future, what does thaterean for s and investors? >> this is the new normal. we don't have a lot of flation. we're seeing wages above 3%, which th great. but real inflation you don't get higher rates. so this is the new normal. if you look at the history of interest rates, 3% is about the norm so unfortunately this is the norm. >> in that case to bill's point
about what does it mean to savers, that's when people start to look for yield in p otherts of the market. and sometimes they take on more risk than they probably should have. do you anticipate that happening or no? >> i do, because we have -- on on s hand therch for yield or reach for yield, that makes people who need thehe income, are not accustomed to taking on risk. but the slowing u.s. economy, which was forecast, now a situatio where some of t debt may go bad. now it's really about having a plan, being strategic, not reachi to where you can afford the risk without taking the loss. itt better thans a few years ago, but still a risky environment searching f yield. >> those pass book saving accounts donle bring a w lot in, so where do you go for income right now, bearing in mind you have to balance the risks with the rates? >> fore' one all been shorter in our maturities for a
while.ev if rates off, you can extend duration for a little bit. u can buy a five-year bond or seven-year bond. the other way is to look for equities yielding decent income. the mlp market, but even verizon, for example, over a 4% dividend. it does com with volatility, but at least you can get some income to supplement what you're thnot getting o bond side. >> good advice. >> good to see you again. >> good to see you. on wall street the major te indexes p three straight days of declines. investors also tried to make sense of adp's private payroll report which saw slightly fewer jobs created than expected. as a result,he dow jones industrial average fell 133 points to 25,673. the nasdaq was down 70 and the s&p 500 declined 18. elsewhere, the organization for economic cooperation and development has issued a gloomy outlook for the global economy. the group's new forecast is for
3.3% growth, which is down from its last forecast of 3.5%, which was issued in november. one of its chief concerns is growth in china and in europe and a sldown in tra and manufacturing worldwide. to shorets up economy, china is outlining a strategy to attrac investment andts leaders are also speaking out on the crackdown on huawei, one o china's most important tech companies. eunice yoon is in beijing with >> reporter: the message out of china's congres todays that foreign investors are welcome here. at a press conference, the top state planner talked up the new foreign investment law, reiterating that one of the sore points with the u.s. tra negotiators, force technology transfers would no longer be allowed. chinese officials still don't acknowledge that this is a widespread problem. meanwhile huawei's cf is expected to appear in court today in vancouver as part of
proceedings toer set extradition date. beijing has demanded that she be released immediately.hy to understand the chinese government seems to be so extreme, one business consultet told that it might be good to think of her asch a's equivalent to ivanka trump. huawei isn't a state company but it's a national champion so the line between private and government is blurred in that sense. so imagine what t trump administration would do to get her back. lawyers tell me to influence t proceedings, china's options are to, one, pressure canada to dismiss the extradition request nce president trump t get the extradition request withdrawn. this week we saw theommunist party commission accusing two detained canadians o gatheri secrets. customs authorities also revoked an export permit for a canadian canola firm. they have not related these two events with the huawei case. expectations are also high that presidxi is going to ask
president trump to include her release a part of a trade deal. a third option is for beijing to allow the legal proceedings to continue without comment. that's been huawei's take, that she hasn't done anything wrongh and courts would come to the same conclusion. and in fact some in the public here believe that beijing's strong reaction undermines huawei's position that it is completely separate from the government. for "nightly busi i'm eunice yoon in beijing. time to take a look at some of today's upgrades and downgrades. we beginith shares of wa which were downgraded to sell. the analyst cites the lower demand for their software as some companies adopt the npe f cloud technology. the price target now $177. the stock fell more than 1% to $170.12. trip advisor was downgraded to underperfo from market perform at cowen. start lyst cited a weak
to 2019 for the company and the prospect of fewer visitors to its site. price target $40. the stock fell 3% to $50.65. and csx was downgraded to hold from buy. the analyst says that he no longer sees a solid reason why that stock should outperform the market over the next 12 months. gethe price t $47. the stock was down a fraction today to $72.05. the slide in general day ric stock extends int two. we told you yesterday about the cash downbeat outlook for flow, and today an analyst called his $6 price target on the stock generous. and that sent the shares down nearly 8% in today's session. morgan brennan takes a closer look at what's happening inside >> reporter: years, not months. that washe takeaway from larry culp this week after the general electric ceo said industrial cash flow would behi negative year. >> with respect to cash, you see
we were at $4.5 billion last year. as we come into 2019, we're going to be in negative arritory. this will be year we'll have both operating and non-operating pressuresren our cash. >> reporter: the power business continues to be a key source of pain. is year it will bring higher restructuring costs, and culp barns that a outurn-around still take years. it send shares tumbling. analysts are mixed on what it all means, with some warning the road ahead may still get hile others believe the stock is a buy for the long term. >> we've gotow organic , smaller company, right, because we've been divesting assets. we've got margins improving, okay. there's ope cash flow from continuing and then you've got all these legacyissues. an then those legacy issues will ill some be there in 2020, but they'll come down. you know, this rig will start
rolling. >> reporter: uncertainty also swirled around ge's financial arm capital which culp said would require $4 billion this year, notable for a unit that's as recently as 2017 was profitable and contributingth t company's bottom line. under culp who took the helm in october, ge has been moving fast to sell assets and pay down debt, including a $21 billion sa of a biopharma business last week. but the devil will be necessity details and we'll get more of days.in the coming tomorrow ge will disclose details about its troubled long-term care insurance business and next thursday it will share its outlook. guidance investors seek after ge pulled its previous target last fall. for "nightly business report," i'm morgan brennan at the new yo and still ahead, why las vegas may become boring.
elon musk is known for tesla and spacex, but don't forget that he also founded the boring company, which aims to change the way we travel through tunnels. and now the company is on the verghi of lau a new project in the heart of lasvegas. contessa brewer has a first look at the >>eporter: elon musk's energized over his high-speed transportation tunnels. >> at 150 miles an hour. phenomenal. >> reporter: now his company, the boring company, is proposing one for nevada. the las vegas convention and visitors authority is spending $1.4 billion to renovate and expand a massive campus. ra you know, wve been the top city for shows 24 years in
a row. we certainly aim to keep thate. ti >> reporter: moving customers over 200 acres is a challenge, an seen a crucial to competing successfully against other cities for megaconferences. the boring company is proposing an underground people mover in a tunnel called the loop. >> this kind of innovation is an attraction in and of itself. it helps our customers to experience everything on our campus. >>eporter: and at an attractive price tag of $35 to $55 million, a fraction of a competing above-ground proposal. it's likely to be the boring company's first commercial project and could boost future projects. boring unveiled a test tunnel in december but proposals have been stymied by complex bureaucracy and not in my backyard backlash. the compa president told us we won't use eminent domain. if a project tunnels under100 land owners, we need strict
permission from each one. inve las s, there's just one over owner and they only need the green light from clark county. city leaders are already anticipating ways the loop might connect all of the strip, the ai ort, the new raiders stadium, maybe even los angeles. >> we will work to look for a way to responsibly say yes to it if it what mak sense for las vegas. >> reporter: the rdlvcva b votes next week. if the proposal passes as expected, a final conact could approved by june and the people mover, moving people by the end of 2020. that would be a big win for the city of sin. contessabrewer, "nightly business report." abercrombie and fitch's turn-around efforts appear to be paying off. that's where we begin tonight's market focus with the teen reiler expecting salo increase this fiscal year. the company has been revamping its stores and adding a broader selection of merchandise to appeal to more shoppers. with its latest earnings report,
they did top analysts'ns expectator the most recent quarter. the stock rose 20% today to $25.70. but it was a different story after the bell for fellow teen retailer american eagle. that company forecast current quarter profits below analysts' estimatest continues to spend heavily on marketing. shares fell in the initial after-hours trading this evening, but they did finish the regular session up4% to $21.32. dollar tree beat fourth quarte earnings and revenue estimates, but they did veal that i family dollar brand is struggling. the retailer announced plans to shut nearly 400 family dollar stores and to renovate 1,000 more. willenovated locations begin selling alcohol and rcclude a $1 section with dollar tree ndise. shares were up more than 5% today to .$1 and bj's wholesale club beat prof and salesexpectations. revenue for membership fees rose
11%. shares were solidly higher before the market opened, but then enthusiasm sort of faded and closed down more than 3.5% to $25.62. brown foreman beat earnings expectations but missed on revenu the maker of jack daniels said it was hurt after europe, canada and china impos tariffs on whiskeyo retaliate against u.s. tariffs. the company also lowered its full-year guidance. shares were down more tha to $48.85. exxonmobil is telling investors torace for higher spending. the company expectsal cap expenditures to grow by $4 billion this yore as it focuses on deep water offshore drilling projects. ls profit potentiks better than last year but the shares lost 1% to 28$7 the fda has approved a new drug to treat depression. the medicine made by a unit of johnson & johnson is made with ketamine, a powerful anesthetic.
the drug can only be administered by an approved health care provider and cannot be taken open. j & j was up a fraction today to $139.09. a number of high-tax states have been blaming the new tax law for a shortfall in revenue. but it turns out that's not the only reason. robert frank tates y of the richest from new york to california saw unexpected lamulti-billion d dropoffs in tax revenues in december and january. new york governor andrew cuomo saying last month that the state collected $2.3 billion less than he expected and he blamed the new federal tax law, which limited state andocal tax deductions. he claimed it was driving the wealthy out ofew york. >> s.a.l.t. encourages high income n yorkers t move to other states. and what you have to remember is even if a small number of high income taxpayers leave, it has a
dramatic o effect this tax base. tax the rich, tax the rich, tax the rich. we did. now, god forbid, the rich leave. >> almost every other high tax state, california to connecticut, new jery and massachusetts reported major shortfalls in andom januaryred with the forecast. california's tax receipts came in $3.4 billion light. but tax experts and accountants tell me thel f wasn't probably due to the wealth flightut probably more to the stock market,ha specifically t big drop in december. the biggest source of the shortfalls was estimated payments. now, those are payments made for nonwage , usually from investments or businesses. now, tax advisers say wealthy investors sold stock in december during those market decli ts get the tax losses. that lowered their tax bills for the ar, but it also created a shortfall for the state.
now, moody's is saying in a report that the revenue decline was owed in part to a volatile stock market's impact on capital gains income. the markets are back, of course, this year, but the carried forward, so we will see if there is more of a price to pay f those december declines. now, state that don't have much exposure to the stock market have been faring a lot better. arkansas, wisconsin and south populationsose aren't as tied to wall street hedge funds or stock-based compensation all reported recent surpluses. and get this, they're planning to return money to th taxpayers. now, for the states, there's a price to pay for having their fortunes so closely tied to the 1% and the stock markets that drive their wealth. for "nightly business report," i'm robert fran>> coming up, burning down the house. a new effort to prevent that .
the u.s. division of denim and clothing maker and retailer diesel is filing for bankruptcy. the company has struggled for decade now with mounting financial losses amid bad investments. diesel plans to enter chapter 1e with fewer s and a new strategy it hopes will help it return to profitability. fuel efficiency hit a record in the 17 model year with cars on averag getting nearly 25 miles per gallon. the agency administrator sayser are legitimate concerns, though, about the industry's ability to meet the new requirements. last summer the government unveiled a proposal to freeze meel economy requis at 2020 levels through the year 2026.
ot generals planting in lordstown, ohio, is closing two days earlier thanplanned. aat factory made its last chevy cruze today,a matter of fact. the move is part of a strategy to shift away from sedans and more toward higher margin trucks and suvs. the rdstown plant had been producing cars for 50 years. its closing will eliminate about 1,700 hourly positions. califora just saw its most destructive fire year ever, cdestroying homes andsing billions of dollars in damage. but what if you could build homes that we fire resistant? diana olick is inrichburg, south carolina, with her next installment of rising risks. >> reporter: wildfires destroyed more u.s. homes and buildings last year than any other time in recorded history. and the eight more destructive years for wildfires ever have been in just the last 13 years.
>> there is no reason to think that they're going to get better. so asou look at this kind of impact on variations in the haimate have we are far more susceptible to the size any intensf fires. >> reporter: the insurance institute for business and home safety is on the front lines of. fire resear wright is a former fema official and native californian. his parents lost their home in the camp fire last year, the worst in the ate's history. roughly 14,000 homes there burned to the ground. wildfire damage to property just in california last year totaled nearly $19 billion, according to core logic. >> there are steps that we can take so that the impact of that fire is narrowed, it doesn't spread as far, and it impacts far fewer structures in terms of that kind of generative fire beginnineg firening fire beginning fire.
>> one side of this incorporates fireproof design and materials and the other not. >> so we have a six-inch gap here to the start of the siding. this six-inch gap gives us a noncombustible area. >> repter: a wildfire's flames can look most dramatic but it's actually the flying embers that can be even more destructive. satellites have captured embers flying up to seven miles from a wildfire. these start secondary fires. the siding, roof and landscapi on this home protect it from those embers. >> there's no such things a fireproof home, but there is a wildfire-r >> reporter: while the cost to real estate from wildfires is rising, the cost to build a fire-resistant home like this one is actually the same or even less tha a typical home. the savings is in the cement siding, cheaper than wood materials. sthat offs cost increases in gutters and vents. all of it far less than the cost
of total loss fo "nightly business report," i'm diana olick in richburg, and before we go, a look at the final day on wall street. the dow fell 133 points, third straight day of declines. the nasdaq was down70, the s&p was down 18. that is "nightly businessto report" forght. i'm sue herera. thanks for watching. we'd like to remind you this is the time of year your public television station seeks your support. >> i'm bill griffeth. we do thank you very much for that su veport. great evening. we'l.
[ bagpipe playing ] steves: ol dedinburgh's maing, nicknamed "the royal mile," leads from the castle downhill through the old town to the palace. this colorful jumblenb is the tourist's egh -- a dense tangle of historic buildings, fun museums, and cultural clichés on sale. edinburgh was a wonder in the 17th and 18th centuries.
it was famed for its skyscrapers -- they say the first anywhere -- bu it was once the most congested city in europe. ul its most wretched 't even afford candles. they lived in darkness. it's said they knew each other , not by how they look but by how they smelled. medieval skyscrapers towered ten sties and higher. frontage o street was so limited that the buildings were narrow and tall, crammed shoulder-to-shoulder, with little courtyards called "cles" branching of these closes were connected to the main drag by skinny lanes or even tunnels. 400 years ago, edinburgh was nicknamed "auld reekie." the entire city was a blacstained mess of chimneys and reeked of smoke. the royal mile eols at the gates ofood palace -- for 500 years the official royal residenc here in edinburgh.