tv Nightly Business Report PBS July 24, 2019 5:00pm-5:31pm PDT
♪ this is "nightly business report" with bill iffeth and sue herera. ♪ boeing warns the aerospace company says it could suspend production of its 737 max, and st-ever its lar quarterly loss. digging a hole. caterpillar is considered a barometer of the global economy, nd right now it ishe feeling t pain of the slowdown. friending facebook. revenues are up and a users not going anywhere as the company tries to push past all of the regulatory pressures. those stories and much more tonight on "nightly business report" for wednesday, july 24th. and we do bid you a good evening, everybody, and welcome. sue is offht ton the s&p and the nasdaq both closed at record highs todabu
the dow was dragged lower in part because of boeing, which reported a massive loss for the second quarter. it also warned about something that no shareholder wants to hearabout, that itay have to halt production of its 737 max if the grounng of the jet liner drags on much longer. that pushed the stock 3lower in today's trade. phil lebeau is on the story for us tonight. >> reporter: with the 737 max grounded for months, boeing ceo dennis muilenburg says his company could shut down the max assembly line if the current plan for recertifying the plane this fall is pushed back even further. >> if any of the timeline assumptions change significantly from start of the fourth quarter return to service, then we will have to evaluate alternatives, and those alternatives could include different production rate they could include a temporary shutdown of the line. not something we want to do, but an alternative that we have to prepare for.
>> reporter: stocting pron could mean temporarily laying off thousands of workers, which could have a ripple effect on suppliers a cund theountry. it all comes down to when the faa and other regulators say the max is safe to take off. a software fix for the plane is being tested in simulators, but ve it is app and airlines like southwest can resume max flights this year, then boeing will keep building 42 maxes a montn an p to ramp up production next year. >> if they are able tonc rel this plane and it is as they say the safest plane to ever fly once they bring it bk into service, then their reputation can be preserved. they are battling for their very existence, for their verre tation right now. >> reporter: meanwhile,ur treas secretary steven mnuchen weighed in on the max controversy and what the president thinks of the beleaguered plane. >> i think as you know the president h said he is concerned about the 737 max. qu he frankle thinks they should bring back the 757 and look at selling 757 rs.
orter: boeing is not bringing back the 757. in fact, it stopped building that plane in 2004 and reviving it would cost billions of dollars. instead, the focus right now is on getting the max backn the air by the end of the year. phil leau, "nightly business report", chicago. you just saw jim corridore in phil's story there. he's industrials analyst for cfrg research. joing us to talk abo what he believes to be the best and worst case scenarios for boeing. welcome back. >> thanks, bill. >> let's start with theest case scenario. what do you think it is? >> best case scenario isve theye close to having the software ready to go. they bring it to the faa sometime early in september. the faa, who is at boeing's side imrough the whole process, in theators with boeing, approves the planes and they get back to flying early october. then boeing can start delivering the planesarked at facilities all over the country and start gettingthe revenues and it moving again.
>> all right. worst case scenario, how bad could it b >> yeah, the worst case scenario is thea finds a problem with the software fix, pushes back against boeing, says, "we're not ready to bring the planes back out again" and boeing has to halt the production line, has to furlough workers. their suppliers will not be able to continue to produce at the rate they're producing. it causes a supply chainffect affecting boeing and a lot of companies. >> let's talk reality. what do you think is most likely happen and what will be the impact on the company? >> yes, i think boeing was very careful not to announce a timeline for return of the plane until they felt i rwasdy. last week they said they felt it was goi to be early q4. this week they said early q4. they have been testing for qui sometime. before the end of 2009, most likely scenario is the plane is
flying again. >> evenegulators here and abroad have said quietly they don't think it flies until sometime next >>year. think once the faa is on board, boeing will have a coordinated effort with european regulators, with brazilian, all over the world.ce the plane is deemed to be safe, i think there will be a push out to get everyone on board. i think they will be able to do so. >> all r jim corridore with cfra research. thanks for joining us ttonight nk you, bill. elsewhere, caterpillar is having a tou time navigating the slow economy. right now globally the maker of big machinery missed wall street earnings estimates and said that profit for the year would be at the lower end of its previous guidance. cat shares fell about 4.5% day, making it the worst performing stock in theow. seema mody has more on caterpillar's quarter. >> reporter: caterpillar is finding it tough to do business. a slowdown in the u.s. shale boom and higher manufacturing costs cut into revenue from its oil and gas
division fell double digits due if part to weakness in the permiane basis as s customers pulled back on making large cap tal investments. weakness in china was once a key industrial heavyweight. >> cat had many shares of doing we in china, selling durable products and good stuff and several monthsf losing share again. it is related to geopolitical tensions orpricing, it is not clear. >> tariffs are pressing margins and winning new business in china isy not as e as it used to be. >> we expect continued pressur with china partly offset by growthfn other aers the ian pacific. >> reporter: it is also more positive on north america, though still sees weakness in the housing market. one thing is clear if the global economy worsens, the industrial sector is headed for more pain. for "nightly business report",
seema mody. and as we mentioned at the top of the brdcast, the s&p and the nasdaq reached all-time highs today. chip stocks a rallied investors essentially brushed off regulatory concerns facing big tech right now. we will have more on that in a moment. first, the final numbers today with the industrial averageown points, we are at 27,269. nasdaq was up0. the s&p added 14. so far the greatesty regulat pressure from washington has been on facebook, but you would nevernow it by looking at its quarterly results today. the social media company reported better than expected rnings and revenue was up sharply. but the stock was i volatil after hours trading tonight. julia boorstin has details of facebook's results. >> reporter: facebook continues to grow revenue faster than expected, even as big regulatory company.igh on the facebook's generating more revenue per user than predicted. this as the company takes an llion charge as a result of the ftc finey for
pr violations, coming in at the highest end of the range facebook gave last quarter. the company notes that the online tech industry and facebook have received increased regulatory scrutiny in the past quarter, announcing in june facebook was informe that the ftc opened an antitrust investigation into the company. this in addition to the department of justice's announcement yet tha it will begin anntitrust review of market-leading online platforms. mark zuckerberg w saying are investing in building stronger privacy protections for everyone and on deliverinex new riences for the people that use our services. for "nightly business report", i'm b juliarstin? los angeles. that ftc investigation that julia just mentioned w officially settled today. the commission fined faceboo$5 billion for its mishandling of user data after it was learned that political consultant cambridge analytica secretly gained access to 87 million ts facebook acco the settlement orders facebook
to create new layers of oversight a ceo mike zuckerberg will be held personally responsible for making sure that that happens. >> i think mar zuckerberg is held personally accountable. he is signing the order. he is named specifically in the r. the order requires him personally to certify that the companys in compliance wit our order quarterly, and if he les false certifications then he is subjecting himself to civil and criminal penalties. >> now, the ftc is not facebook's as we've been reporting, the justice department has started an antitrust review of some of silicon valley's biggest tech giants to determine if they have purposely been stifling competition. the companies being reviewed have not been named the nt announce but most believe them to be facebook, amazon, google andtopple. ght we take a look at what the doj may be tgeting at each company. back with us isulia boorstin on facebook. >> reporter: facebook is the second largest digital ad
platform with 29% of u.s. digital ad spending between facebook and inagram, and facebook is the most dominant social platform when it comes to user's time. americans spend nearly 40 minutes daily on facebook plus almost half an hour on instagram, dwarfing the time spent on snapchat. as the doj looks at how facebook has leveraged the power of its large network, it has become a force in other areas including news. communication and facebook's messenger and whatsapp have today nearly 3 billion monthly active users. by comparison, apple has 900 mi oion active iphones andr half american adults say they get news on facebook or instagram. the question is whether facebook is unfairly leveraging its social media power to dominate in new area rangi from on-lane dating to movie ticket sales to digit currency. for "nightly business report", i'm julia boorstinlo i angeles.
now to deidre bosa with a look at the issues surround in amazon. >> reporter: three reasons amazon could get caught in the regulatory crosshairs. first, it controls nearly 40% of alin u.s. onle retail sal. ebay is distant second with market.of the second, potential competition with third party merchants on its own platform. ceo jeff bezos said earlier this year that third party sales that is smalliund m businesses who use amazon's platform made up more than half of total sales. critics argue that amazon could use data from these sellers to gainst themmpete and push its own private label products from diapers to electronics to toilet per. third, regulators could zero in on the amazon prime fly. whe if amazon is using money from other business units toid subsidize or music services, how can other companies that do have to make a profit compete?
deidrebosa, "nightly business report." finally, as we mentioned, parentgolphabet and et a ogle could be under scrutiny. here is josh lipton. >> google could be inme the gove crosshairs in part because of the estimated 80% market share in search. antitrust officials will have to decide if it is a monopoly harming consumers. but google officials recently testified on capitol hill, disputing that argument. >> foron example, whenmers search for information they can choose among amazon, yelp, microsoft, travelocity and many otheromnies like these that consistently report strong user growth. if you don't want to use google, there are many other information providers available. >> reporter: and then there is >> i don't think anybody reasonable is going to come to the conclusion apple is a monopoly. our share is much more modest. weon't have a dominant position in any market.
>> reporter: but what about the company's app store? critics of apple and google's apptores argue that the companies favor their own apps, and as a result a whopping 70% oes to in-app spending the tech giants. apple also controls access to the app store. but some analysts thi antitrust case could be tough to make because it is not clear to them how the app sre actually harms consumers given the breadth and depth o competition on the store itself, they say, and within certain categories like gaminghere some apps are free and some aren't. for "nightly business report", i'm josh lipton, san francisco. so how concerned should shareholders be about this ent review?ar joining us tonight is mark leeman, president at jm securities. good to see you again, mark. thanks for joining us. >> thanks, bill. >> i guess the short answer from you is they shouldn't have to worry much. why? >> well i mean you're going to be worried because there will be a lot of headlines coming up, and i think it is going to
continue to pay t attention but like we saw with the cambridge a llytic scaret year and facebook had the all-time high a year ago about now when theyeported second quarter earnings, there were a lot of headlinesnd legislative meetings and nothing happened except self-regulation and this slap on the wrist with the $5 billion ne. i thi you will see lots of bluffs but little coming out of congress and from the legislators. >> let's look at each company and see where the vulnerabilities may lie. facebook has clearly beenth und most intense scrutiny as pertains to their user data and the data breaches and all of that. but at the same time we just learned today that the users haven't fled at all. >> well, you know, facebook always reminds me of, you know, ll & oates who sold a couple hundred million albums and they said no onedmitted to buying one. nobody admits to being on facebook, but the data says they're on 40 minutes a day and if my kids are an example on
instagram as welle pere not going to flee that platform. it is where they get their news and social engagement. it is hard to legislate that and it is not going to change going forward. >> amazon, as we heard, mayst b vulnerable when it comes to their third party sales and so forth and the stron arming that they do there and the data they're able to accumulate. >> amazon certainly has an issue there. i think they' going to ntinue to gain the market share they have on the retail side, but it is hard togi ate where people go. i think you will continue to see consumers want that, maybe some additional choice and maybe there will be some small slap on the wrist they will probably self-legislate, but d't see congress being able to legislate where people's eyeballs go and things.ey want to b it has been historically a hard thing for congress and the justice department to legislate. >> google may also be most vulnerable as it pertains to search results and, you know, the juggernaut that they are in that area there. >> google obvusly has an overwhelming share. in fact, it has become a verb. we're going t google that
search. i think it is another area we will have great headlines and theyy could probaank choice some of the data that does come up, but it may favor some of google's top aertisers or other consumers, but they really have to pay attention to google because they have the juggernaut for market share. i think, again, all of these stocks will be in the headlines for i think some time on this data but i just don't see congoss being able legislate where people put eyeballs and clicks decide to go. >> very qui on apple, you know, tim cook has said they're not a monopoly, but what about the app store and the tremendous iron fhet that ty wield there? >> i think it is somewhat similar. you have consumer who goes to that app store constantly and is looking f new ways to access companies and data and products, et cetera. there probably will be some self-regulation where they decide to put certain things on top of others, certain things at different points on the a store. but like you said, it is an open marketplace and the congress and the legislators and people who regulate like marketplaces, they
will probably find aay to self-regulate. i think that app store is here to stay. the record, i was a big fan of hall and oats myself. >> you and me th, bill. >> mark leeman, thanks for joining us tonight. >> thank you. still ahead, does the most recent budget deal show that the deficits don't matteymore? ♪ ♪ ♪ in the news today, queen
elizabeth officially appointed borisohnson the prime minister of the united kingdom. johnson immediately began forming a government, one that he vows will lea the uk out of the european union. >> the people who bet against britain are goingos to their shirts because we're going to restore trust in our democracy and we're going to fulfill the repeated promises of parliament to the people and come out of the eu on october 31st, no ifs buts. now to the u.s. economy and th recently-agreed to budget deal. as we told you, it raises spending by hundreds of billions f dollars over the next two year now, there was a time when wall street and washington worried quite aut bit aebt and deficits. do they still matter? steve liesman went in search of some answers. >> reporter: the $22 trillion size of the u.s. debt isal astronomo matter how you measure it. in fact, it is ee kwif lint of
the estime to t total number of stars in not one, not two, dromeda galaxies, the closest neighbor to they, milky nd the debt is growing. it is set to rise by roughly $1 trillion a year in the recent budget deal is enact into law. it seems strange to ask, do the trillions upon trillions really matter? surprisingly the new trend among sides in s on both washington is that the debt doesn't matter and neither investors or economists entirely disagree for now. fi dt, while thet is doubled the government's cost of borrowing has fallen from 6% i 2000 to around 2% today for a ten-year bond. so larger debt has not pushed up sbre interest rates. second, the se of the debt doesn't appear to have dragged on growth. anal government deficits decline in times of strong growth and rise during recessions. this is in part by design as the government spends more to kickstart the economy.
a paper presented by a economist argued that as long as a country's interest cost is below itsomal growth rate, countries can or even should borrow more. in the u.s. it is like the government invests at 2% -- th's the cost of a ten-year -- and gets returns of 4%. that's about wheregr nominal th is for the u.s. net retur assuming the money is invested well, 2%. so is all of that old thinking wrong that deficits actually matter? it migto sound like it y, but perhaps not forever. >> this may be less of a problem now wn we are in very good economic times, but it is sort of loading the shotgun aimed back at our economy if in future interest rates have to go back up and then this tremendous debt service will dramatically limit the ability or force us to borr even a vyst rate. >> reporter: higher rates could raise the cost of servicing the debt and crowdingn spending things like education and defense. the u.s. has trillions of dollars of unfunded liabilities
in health and social security costs it soon will be paying. high debt levels could lit the vernment to spend more to help the economy in the next recession. in washington the pvailing litical opinion is to ignore all of that in favor of biggers ding and lower taxes today. if rates remain low and the economy continues to grow, it is hard to arguegainst. that may be the best argument for at least some fiscal prudenceoday. no one knows quite how long all of the stars will align as perfectly as they are today. for "nightly busiss report", m steve liesman. u.p.s. delivers for investors and that's where we begintonight's market focus with the company posting better than expected earnings and a revenu it raised its guidance as well. u.p.s. also said it expects to get faa approval for drone deliveryy end of the year and to compete with rival fede x, u.p.s. will be offering a seven-day delivery service next year. >> as a company, we had to realize that sunday, saturday
and sunday is just like another day of the week. we chose to maximum partners in michael's, cvs, advanced auto parts and also for sunday delivery, enhancing share pos with usps. with those combinations and with our network we feel that we have another good offering for our customers. stock rose more than 8% today to 114.3 health insurer anthem's results topped expectations and the company also raised its full-year guidance, but anthem said that costs connected to its medicaid business w higher than expected and shares fell more than 5% today to 288.91. vf corps bea estimates thanks to increases of sales of its van sneakers. it raised its full year guidance. stock was up mor than 1% to 89.33 today. at&t beat revenuestimates and earnings were in line in growth in its wireless and media
sector that helped offset continued declines in direc subscriptions. at&t m shares roseore than 3.5% to 33.24. and then after the bell, strong sales of ford'sf-150 strucks and other suvs were not enough to offset the automaker's cost to restructure its global business. as a result ford missed earningo expect and issued soft guidance. sharesly initi dropped sharply after hours tonight but they did close the regular sessionre up than 1.5% to 1033. coming up, turning sour. why the trade war with china is the pits for one american farmer. ♪
♪ treasury secretary steven mnuchen today confirmed he and her trade negotiators will meet with chinese counterparts in shanghai. that is welcome news t american farmers hurt by tariffs, but one farmer is not sitting aroundin g for them to end. he took it upo himself to head to china to try to drum up demand for american cherries. eunice yoon has he stor >> reporter: despite the trade war, the seattle native is making his best pitch for americanhiherries. >> is the second largest china le fruit market in and every year he comes to shanghai to talk to importers to get a sense of what the appetite
isn china for u.s. cherries. >> reporter: china is a critical market for the herrygrowers, making up more than a third of total exports so they feared the wot when beijing raised the retaliatory tariffs on their cherries, forcing cost up onve average 60%. overall volumes plunged to 40% on the trade war but farmers are stil making money. so far chinese importers like george liu haveeen willing to eat the extra cost. >> but because of the tariff, the u.s. cherry right now in tds market no be selling at a higher price. in the end, it will reduce demand a little bi but chinese people are willing to pay for premium product. >> reporter: to keep people here buying, who isapping into the chinese desire to live a healthier lifestyle. >> we try to push the healthag meof cherries and the lifestyle of u.s. and northwest. we try to sell them the idea of live the pristine environment with fresh air, fresh water. >> reporter: but he still is losinghtleep over what m
happen if the trade war continues. there's new competition from cheaperries from turkey and uzbekistan. >> there's other fruits coming from other countriesig we areing an uphill battle. so with the tariff, it just made our problems even bigger. >> reporter: for "nightly business runort", i'me yoon in shanghai. and that is "nightly business report" for tonight. i i'm bill griffeth. thanks for watching. have a great evening. we will see you tomorrow. ♪ ♪ ♪ sechlt