tv Nightly Business Report PBS July 8, 2019 5:00pm-5:31pm PDT
this is "nightly business report" with sue hererandill griffeth. canceled. eing loses a big buy for its max 737 aircraft. as the t carrier decides go with an all-airbus fleet. budget.batt the debt ceiling could be breached sooner than thought. putting increased pressure on lawmakers to reach a deal or t on our nation's debt. those stories and much more tonight on "nightly business report" for monday july the 8t >> good evening, everyone. and welcome. wall street got back to work after the holiday-shortened week but it wasn't the type of monday that many had hoped for.
stocks fell,n weighed d two prominent blue chip companies. apple and boeing. investors also spent the trading seion trying to figure out what the central bank will likely do following t strong jobs report that we told you about on friday. we'll have more on that in just a moment. but first, the closing numbers. the dow jones industrial average dropped 115 points to 26,806. ase nasdaq down 63 and the s&p 500 sli 14. let's start with apple. it was the worst performing dow stock today after analysts at rosenblat securities downgraded shares to a sell. they cited the weakening demand for apple's flagship iphone especially in china and also the potential for slower service revenue growth. e calling what they called fundamental deterioration in the sck over the next 6 to 12 months, and shares of apple finished 2% lower in today's session. and now to boeing which ovec the weekendved its first major cancelation for the 737
max airpla it came from a low-cost airline in the middle east. that sent the stock down more th 1% and it renews focus on the backlog of orders for boeing's most popular plane. phil lebeau has the details. >> reporter: with the 737 max unlikely to fly until later this year, airlines are reassessing their plans. a low-cost carrier out of saudi arabia scrapped plans to fly the max, a reversal from last december when fly a deal committed to buying 50 max airplanes. instead, it now plans to buy the airbus a-320. overall, boeing still has a robust backlog of roughly 4,4007 ax orders but no firm commitments for the plane since it was grounded in march and 68 cancelations thisyear. pressure is mounting for boeing ceo dennis muhlenberg. at the paris air show he landed a big commitment from the parent of british airways for 200ax
airplanes. meanwhile, the number of max models built but not yet delivered continues to grow as boeing continues to crank o a 42 max planonth. down from 52 earlier this year. for now, it's not orders but production a deliveries driving sentiment on shares of boeing. as long as the company's 737 max production schedule remains unchanged, many analysts believe shares of boeing are move much lower. phil lebeau, "nightly business report," chicago let's turn now to sheila, she's with the -- talk about boeing. the aerospace and defense analyst at jeffreys. thanks for joining us tonight. >> thanks for having . >> you don't think this whole mess with the 737 max grounding will have a lasting impact on boeing lon term, why? >> we don't think this is a long-term impact. clearly, fly a deal was a setback ultimately, it is. we point to four things.
first, this is the first n cancelation,fact, and it was a commitment of an order. so it wasn't a firm order, in a fact it's only 1% of that 4,400 backlog. so longer term we don't think this is a big ill packeimpact. started operations in 2017 that needed aircraft immediately., the last poiil mentioned this was an order in december. they already had a fleet of airbus a-320s, about a dozen of them. somewhat surprising that they went with the maxes and lookedr o 30 of them. overall this is not long-term impact but clearly a setback. >> you pointed out the fact one of the reaso y still like boeing is the fact that although airbus may have a dominance i the international markets, the wide body sector really boeing has the advantage in that area. >> yeah. so i think the 787 h done extremely well when you look at its carrier base. i think it's 71 different carriers. it's had several repeat
customer. i think 40 of them have been repeat. so it's really taking a market share position versus theirbus a-350 and the 330. and the 777 x, we'll s how that does as that enters production next year. but, you know, i think the wide body front boeing has won. the narrow bodybv front,usly this has given airbus a bit of an advantage. >> what kind of impact short term is this going have on their earnings? has to have some material impact, doesn't it? >> sure. we cut our free cash flow estimates, 75%, $6 billion from ta$15 billion at the of the year. part of that is they're not delivering these maxes. they're blding up the inventory, the 42 a month they're producing. they're not receiving payments for ones they would have shipped. and also, we think about some compensation to the airlines as a matterse of, like, l payments that we're factoring into our estimates. but what we're looking for is to keep as much of 2020 intact as possible and 2021. what we did last week was ri
downgraded s which is a big supply toier to boeing. 57% of its revenues e to boeing they built a fuselage for e >> right. >> we thought they would have a short-term impact. not long term. >> got it. sheila, with jeffreys, thanks for joining ust. toni >> thank you. investors are also obsessing over the fed. as we reported friday the strong job report raised questions about whether the central bank policymakers will lower interest rates when they meet later this month. investors may get new clues when the fed chief testifies on capitol hill later this week. steve liesman has more. >> in two days oretestimony beongress, jerome powell has a tough choice, affirm the market's deeply seeded belief in a rate cut coming at the fed's meeting later this month or push back. in pushi ining back pouwell fac more criticism from a president who raised the prospect of firing powell if he doesn't cut rates. powell has reasons to side with
both the president and the srkets. >> tnaling has been all about inflation not meeting target, heightened risks from overseas slowing growth, and trade uncertainty which still has the opportunity toheit real economy here in the u.s. and we see the g20 as simply being neutral, slightly positive in that tariffs were not put on, but the trade war is alive and well and that uncertainty is alive and well while current tariffs remain. strong ter: despite the jobs report friday, markets still have two rate cuts priced in. fed fundsutures still see the rates falling from about 2.4% now to 1.9%. maybe as soon as september. markets are split w overther there's even the chance of a third cut this year. it's anying but textbook monetary policy for the fed to cut rates at a near record low unemployment amid the longest post-war era expansion. what will powell do? >> i don't think he's going to come out and be very specific because after all, the fed meeting is at the end of the month. but the fact is, his assessmmyt
of the eco changes at all, any of the words that he really just oil prices pushed higher today as tsions with iran reignited concerns over supply. iranian officials revealed they had breached the terms of the 2015 nuclear deal by stepping up the country's enrichment of uranium. as you rurecall, president pulled the u.s. out of that agreement a year ago. today vice president pence saidd washington wou continue to pressure tehran with sanctions. >> let me be clear. iran should not confuse american restraint with a lack of
american eresolve. we hor the best that the united states of america and ouy militare prepared to protect our interest. >> the price of domestic crude settles slightly higher in today's session. so what could rising geopolitical tensions with iran potentially mean for the markets?oi we'red now to discuss that, she is the co-founder of the researcfirm, sand hill strategies. katie, welcome, nice to have you here. you., thank it's so nice to be here. thank you. >> we have seen a lot of push and pull in the oil market based on the headline risk out of an, but how much of this saber-rattling between the two countries do you think is priced into equities? >> it's an excellent question, and the commodity market has certainly been volatile, would expect that the equity markets are looking at the commodities and wondehat to do with that. i think that's very true. the folks that we talked toe in investment community are looking at this opolitical
dynamic and kind of thinking, okay, let's just letlahis out. hope it doesn't get any worse. i just don't think that there is a lot of geopitical risk priced into oil and gas producer equities at this point. >> but as far as oil goes, we keep mentioning the --ow the u.s. production that's increased has the last five years changed the equation. ine analyst said the other day, we quoted her as s she felt u.s. oil would be at $100 a barrel right now if it were not for u production. what do you think? >> oh, i think that's very, very well put and just spot on. the term that i always come back to ishat ever since w discovered this shale oil phenomenon in the united states, thegeopolitical risk premium in the oil market is just gone. that middle eastern dynamic is no longer what drives the day-to-day moves i the commodity price. it's really about what do you think the u.s. shale producers are going to do next? >>so whatn investor to do
with all of this? i mean, on a dailyasis we're getting statements from the u.s. and iran and iran and the u.s. if you an individual investor with a longer term time horizon, what do you do?ri >>t. well, it's a great question. so, i mean, i think at the end of the day folks have to recognize that there are still -- most oil pr companies orajors that are rking with national oil ry sh it's good to maybe take a step back and recognize the world needs oils growth continues, there's going to be continued demand for energy and geopolitical issues are largely sidelined right now, but as you've seen between.s the and tehran, those issues can come surging back into the forefront at any moment. >> katie bays with sand hill
strategies. katie, thank you. >> thank you. time t upgrad and downgrade. verizon was downgraded today to neutral from buy at citi with the analysts cing rising risks industry pricing and profit margins over the long term. price target there is now $62 and that stock fell a fraction to $57.89. americanairlinesas downgraded to underperform to neutral at credit suisse. analysts cited labor issues and grounding of 737 max jets. ice target, $30. despite that downgrade theck s did rise 1% or more to $32.79. state street was dngraded to underweight from overweight at morgan stanley. the analyst cites the potential revee impact of a fed interest rate cut. the price target is $55. the shares fell 3% to 5506. johnson controls was upgraded to neutral from underweight at jp morgan. the analyst cites more stable fundamentals. $3e price target is the shares fell slightly to
41.69. still ah ud, the. could reach its debt limit sooner than originally thought unless congress acts. in the news today, california is bracing for more aftershocks fro a pair o earthquakes that hit last week. the state is also starting toos tally the of repairing things like damaged roads, buildings, and pipelines. the usgs gave a preliminary estimate of the financial toll pegging it at about billion. the governor said the cost to
repair the damageill likely exceed $100 million. deutsch bank is laying off 18,000 employees and in the process, the lender is embarking on a dramatic overhaul to return the company to profitability. germany's biggest bank plans to shrink its investment banking operations and exit its equity, sales, and trading businesses all together. it's going to cate aad bank for about $80 billion of risky business assets. recent restructuring attempts have not worked but this time around, the o is confident this new round will be its last. >> away from the more volatile businesses toward more stable, very predictable, businesses, and as investors see both that and ourcu eon against these, our targets, we believe there's a significant rerating of the company that's available. >> stock fell about 6% in today's trading but is down more than75 in the past five years as this company continues to
struinle after thecial crisis of a decade ago. in waington, new analysis shows that raising the minimum wageno $15 hour would give millions of americans a raise. but it would also putut some of work. the nonpartisan congressional budget office estimates that 17 million americans would see an increase in wages, while 1.3 million would lose theirjobs. a house democrat has introduced a bill that would gradually raise the minimum wage to $15 an hour by the year 2024. also in washington, lawmakers are returning to capitol hill from the fourth of july holiday with a big to-do list. and the item investors are most concerned with is the budget and raising the debt ceiling because if it's not liftedhe country will not be able to pay its bills. ylan mui i in washington for us tonight. >> reporter: the pressure is mounting for washington to reach a deal and avoid fiscal calamity this arll. the bsan policy center now says there's a significant risk
that the nation reaches itsit borrowing ln early september instead of its previous estimate of october. >> have huge consequences both in the markets as well as globally. the ft that the federal government, the united states federal government, could not would be debt something that would be significant long term. >> reporter: the new deadline could change the political calculus on capitol hill as well. lawmak ceiling but also funds the government andhe increases ttatutory caps on federal spending. just a few weeksur ago trey secretary steven mnuchin went tl capitol hill ad out the white house's bottom line. raise the debt limit for one year and keep the government funded at current levels during that time. buthat strategy isacing resistance from republicans. georgia senator david purdue is lead cg thelition of 15 gop senators including jim i oofe, chairmthe armed services
committee and marsha blackburn who's close to president trump. they're calling for a two-year budget deal instead of a uing resolution in order to increase funding for the military. >> crs have a direct and immediate impact across the entire department of defense from trainin to readiness to maintenance to personnel and, yes, to contracting.or >> rr: in a recent letter, they warned the administration not to hdcuff their militaries with funding gimmicks. the good news is the white house and congress agree on the need for action. the bad news is they're running out of time t do anything. for "nightly business report," i'm ylan mui in washington. google and dish might be considering making a fourth wireless carrier. that's where we b tonight's "market focus." the "new york post" says a director at google'sparent, alphabet, is in discussions with dish about possibly creating a mobile service helped by assets acquired fromt-mobile. t-mobile and sprint are looking to shed assets in order to
satisfy regulator for their own $26 billion merger. but google said the rort was, quote, simply false. alphabet shares were down nearly 1.5% to 1,116.79. dish was off a fraction. broadcomm has reportedly inched closer in an all-cash deal with symantec. toomberg says chip maker has got financing from several banks for the propos accusati accusation, coulde valued at more than $22 billion. symantec rose nearly 2.5% to 2,561. broadcom fell almost 3%. ardinal health chief financial officer jorge gomez will be stepping down from his post next month. though the company's filing with the s.e.c., they say the leave is, quote, not related to any financial performance, end quote. gomez will be taking the chief finance role at dental products company, dentfly serona. cardinal health more than 1.5%
. at> business analytic software company microsies said the two of its seven-member executive team who used to oversee esrldwide s and services have coresigned. thany's chief financial officer will assume their duties and the company willook for a new cfo. shares fell more than 10% today to 125.93. singomo therapeutics released updatedata for a drug designed to treat hemophilia "a a pair of patients reported no bleeding over a 24-week period. two additional patients experienced similar results. shares initially soared by more an 10% on the news. they closed up more than 1%. coming up, the man who created the 401(k) to help americans save for retirement has a new idea. you'll meet him, next.
and here's a look at what to watch for tomorrow. pepsi reports earnings and co -quarter results begin to trickle in. as we mentioned, boeing will release its orders and deliveries for june, amid the ongoing grounding of its 737 max plane. and we'll find out if small businessatners remain up with the release of a monthly sentiment survey. that's what to watch for on tuesday. newark plans to issue new debt ahead of its expected ipo. the autopoffice space company w to raise money in orde to fund its growth before it can be turning a profit. they lost nearlyli $2 b last year. it's often been compared to uber promising company that has failed to turn a
profit. ebcording to "the wall street journal," the new facility could help increase confidence in the company and improve tmand for that ipo. and now the state of retirement in america. nearly one-quarter of americans say they never plan to retire, and another quarter say that they will work beyond their 65th birthday. according to a new survey, the main reason is money. th latest u.s. government data show about one in five people65 aged or older are working or searching fo of course, many americans use 401(k) plans to help save for that hoped for retirement. well, the man known as the father of the 401(k) has watched them grow in popularity over the n,st 40 years and now he has a new miss to increase access to them. i spoke with ted benna earlier today. ted, i kw that one of your pet projects is finding ways to make even)-type plans available to small businesses that are
not -- that don't have access right now. the house a couple of months agt passs bill called the secure act which among oth things pools, would pool, small business money together to make it more cos effective to create retirement plans for these small businesses. does that work for you? >> that would be helpful for segment o the market, definitely.u know, those where 401(k) makes sense to have them and thatld ideally w probably be 20 to maybe 100-employee market. you know, that opportunity of setting up these multi-employer arrangements can generate some operational efficiencies and hopefully, you know, help drive down costs in that market. but when you getown underneath, you know, particularly, i'd say, 15 employees and less, whatever, 401(k) doesn't work. it's too complex. >> what about these state plans hat oregon, for example, has
pioneered, what, 11 other states or 10 other states are now making it available to companies through thestate, does that work or does that eliminate some of those complexities you were talking about?ig >> it's a help. >> yeah. >> and oregon did a great job in terms ofre creating ay well-designed program. now, in addition, they've done something, in my opinion, that' even more important. that is, mandait. the employers have to have a plan. you know, oregon it's no longer a choice, and, you know, that's what is going to be needed. you know, we're 40 years now into01) being around and still many works don't have the opportunity. if there are criticisms of the 401(k), a comple things to mind. it's too easy to withdraw money. to -- you can f borrowm yourself. that's number one. number two, advice to the employee who has to make the decision of where to put that money. was taken off of the
shoulders of the employer. for maybe legal reasons. what do you think aboutthose? >> well, it's become too expensive because of, you know,e all these dif layers of folks who are involved with it. you know, it's got aorot complicated investment wise. you know, than what it originally was. those things concern me. it's being -- it's one of the reasons i've worked on -- and then take an example, if i can,t you know, i swo years ago, working on these new designs for small employers. at a point where i had three of them already worked out, i was approached by ama local employer that has a 401(k). and this kindf shows the problem. you know, they ask if i could helpkeout. i l at it, you know, they were able to move to one of the models t've worked on that are i.r.a. based, eliminate over
$1,500 in empyer fees. cost went from 75 to 0.15%. mine, you kn i mean, there's no reason in that type of 401(k) and participants to be paying those kind of fees. b doesn't make any sense. >> so it'sn 40 years since the 401(k) was introduced there. has it ychieved what wanted to do? i mean, statistics show that americans still aren't saving enough for retirement right and it's in many cases too easy to withdraw moneyf out the 401(k) plan. and people are pretty much left to their ownevices to make investment decisions when maybe they aren't savvy enough to bab to do that. is the 401(k) what you hoped it be today? a sense that, you know, it's helped accumulate probably somewhere around $15 trillion in retirement savings, which certainly, you know, is al big imagine where we would be without that. but what has happened is it's
gotten much more complicateyo know, more difficult for ma participants t investment decisions and expenses, you know, have just skyrocketed particularly in the small employer market. you know, that part i'm not at all. happy abo >> and you can see our full interview with ted benna, you can go to our website at nbr.com. >> great to hear from him. >> nice man. >> that's "nitly business port" for tonight. i'm sue herera. thanks for joining us. >> i'm bill griffeth. have a great evenirr. see you to.
woman: this is "bbc world news america." ade possible by... the freeman foundation; by judy and peter blum-kovler foundation, pursuiic solutions for ams neglected needs; and by contributions to this pbs station from viewee you. thank you. laura: this is "bbc world news america." reporting from wasngton, i am laura trevelyan.