tv Nightly Business Report PBS August 5, 2019 5:00pm-5:31pm PDT
this is "nightly business report" with bill griffeth and sue herera. the dow plunges nearly 800 points. the major indexes haveheir worst day of the year, and there's a global selloff after china's currency falls to its lowest level in a decade sparking fears of an intensifying long term trade war. d so whas it all mean and how does it impact you, your money and your investments? we'll do our best to explain on a special edition of "nightly business report" f monday august 5th. and we do bid you a good evening, everybod welcome. not exactly the way you want to start a week, is it? by the timeur alarm clocks went off this morning, stocks were already falling around the world after china's currency fell to its lowest levelgainst
th dollar in more than a decade. most european markets were down 2%. hong kong was dow 3% and then it was time for wall street to get to work, and it wasn't pretty. when you have names like apple down 5%, boeing down 2.5% you know you're going to be in for a rough time, andxa that'sly what happened today. here are the final numbers with the dow down 767 points just about 3%. it had been down nearly 1,000 at one time. the nasdaq was hit the hardest off 278. about 3.5% s and the dropped by 87. it was the worst day of the year for all three major indexes. now numbers like this can be concerning f investors, especially when it's driven by complex things like currencies, and tonight we're going to try to put everything in perspective on what this a means for you and your money. and we start with two reports. eunice eun will tell us what
happen but first bob pisani wkicks offith a recap. >> the markets were in turmoil today. the dow plunging more than 900 points at its lowest tends to bubble over but closed well off of that. the adselloff was b based. everything except gold and utility stocks tumbled 2 to 4%. techs, industrials all closed sharply in the red. even csumer staples which is usually a safe haven play didn't fare well. krogerets 100% of the revenues in the u.s. this tells you that some investorsaking down exposure to the overall market. it makes sense given how pricey arocks are and the risk. right now thets in august are looking an awful lot like they did in early may. would he saw trade talks break down and china retaliated. in fact, the vix, the markets of widely watched fear gauge is back above 20. that's where it was in early may. lls say we are one treat away from a rally, maybe, but the problem is the positions are much firr than three months
ago. the bottom line, this is not may. now we have currency isss and possibly other retaliatory easures outside the tariffs and could getn more serious. this could escalate, that's the worry. market charters are watching technical damage, the small cap russell 2000 andow the transports dipping below key sector levels. both worrying that the dow jones industrial average has given up half of itsai for all of 2019. it had been up 17 last month. for "nightly busii'ss report," m bob y pisani at the nework stock exchange. the chinese yuan has weakened past the psychologically important 7 mark or crack seven raising questions as to wheth or not making policy makers are purposefully devaluing the currency as a w to offset the potential impact of president trump's next round tariffs. today in a statement on its tibsite the people's bank of
china didn't m the u.s. by name but explicitly linked theo depreciao the trade war saying the losses today were largely due to unilateralism, trade protectionism andar tiffs on chinese goods.th for e past decade the authorities here have kept the yuan above the 7 level. ve government heavily controls theue of the remnant b but today they set the signal tha it would tolerate a weaker yuan. that's being received welby manufacturers since the weaker yuan makes chinese exports cheaper but it anger the white house which could see t move as beijing weaponizing the currency or giving up on the trade talks set for the u.s. in september. and there's another risk for ijing with thismove. capital flights. the #r&bcrack7 which li410 m used so far. people are expressing their doubt that people will be able to keep the value of theirnd
currency their money safe. for nightly business reports i'm eunice eun inbeijing. >> we should point out that the chinese central bank purposefully devaluing its currency in response to the latest u.s. tariffs. nstead, it blamed the marke forces that eunice itemized. a report in chinese state media said chinese firms have suspended purchasing all u.s. agricultural products and that the country has not yet ruled out iosing tariffs on the ag products it purchased in the past>> few days. now to washington and questions about president trump's china trade strategy and where negotiations go. from he kayla tausche has more. >> reporter: from the diplomatic room of thehite house the president addressed the weekend's massot sgs and took to twitter calling it historic and calling it to the attention of the federal oeserve. president trump aaying china has always used currency onipulation to steal businesses and factories, hurt
jobs and depress wages, and harm our farmer's prices. china would stop buying u.s. agricultural promises, that b triggere the threat of new tarits. that threa violated the terms of trump and president xi's agreement back in june. president trump had been pushino china buy more farm goods not less to offset the impact on red states as a trade deal remains elusive. china experts say beijing is unlikely to budge in the coming months even as that september tariff deadline looms. president xi under pressure from protests in hong kong, u.s. arms sales to taiwan and a sagging economy. >> the danger that i see going forward is that the president is acnotring in or not appreciating what's happening with chinese domestic politics. >> reporter: in a text an outside ally of the white house described president trump's new ta aff threat a real miscalculation and one that might be difficult to undo fo "nightly business report," i'm kayla tausche in washington.
> so what doe the fallout for the federal reserve? and what is the central bank's ro in all of this? >> reporter: president trump ratcheted up his pressure on the u.s. federalft reserve today the chinese currency fell to its lowest level in more than aca against the u.s. dollar. the president tweeted out, quote, china dropped the price of their currency to an almost historic low. it's called currency ma pulation. are you listening, federal reserve? this is a major violation which will greatly weaken china. the president has been on a sustained campaign to lower interest rates. that will reduce the value of the dollar and help the u. economy. all of this sets up for a deeper battle between the president and fed chairman jeme powell who the president appointed. they do not make monetary pol to fix fed rate. >> the u.s. has governing over
the fed rate. we don't comment on that. we have responsibility for ximum employment and stable prices. we achieve that by changing financial conditions and we don't target the dollar. >> rorter: in fact, the treasury department has an exchange stabilization f can be used with the approval of the president to intervene to weaken or strengthen the dollar but it's rarely used in part because currency interventio is effective.s there isn't enough money to swa$ the5 trillion currency market. not t mention the u.s. has agreed to not intervene i its currency in several international agreements. if the president does intervene they can o support it not but that creates another potential flash point. it would present powell with a tough it would be unprecedented in recent memory for the united its own intervene on without the support of at least one and usually several major
nations. for "nightly business report," i'm steve liesman. >> art hogan joins us to talk about the selloff on wall street. he is the chief market strategist at national securities. welcome back, art. nice to see you. >> thanks, sue. thanks so much for having me. >> your reaction with today's selloff with thepat being played out publicly. was this a prep rate orn over reaction? >> i think it was very appropriate only in so much as we were caught off guard by what i would characterize as escalations inrade tensions. last week with tri week characd by the fed, the earnings, the company's reported earnings and be then we got a jobs report and none of us expected h toe a drive-by tariff announced and have this trade with china t escalatethe point that we don't know how bad it gets now. that's the problem. we saw t exact thing happen in may. over a weekend we found out that trade talks had fallen apart and then we escalated in tariffs on the first io$250 bi remember back in may we sold off about 8%.
we feel like we' in is that same position where we need to recalibrate valuations and markets to adjust to the new nes in front of today. >> where do you go to hide? >> bonds went up. terest rates went down, gold went up. are those the safe havens that you look to or what do you do? >> those are the safe havens that are very, very crowded, bill. in the near term you wait for this to wash out a bit. if you want to hide, i would raise cash levels. i would not chase things like staples. i think some of the other dividend darlings are getting expensiv c after aple of days we have to work this out. health care looks very good. it outperformed today and is very defensive. >> art, if you were a term investor how do you harness this volatility and, say, take advantage of the selloff that we saw? foeinstance, in s of the big tech stocks and the like. >> i think that's a good point, sue. i think one of the things you want to think about, name s the threcks you have -- don't have in your portfolio that
you've been thinking about. find price that you missed in the past, apple falls that category, amazon is under a lot of pressure. those names that have never bn inour portfolio, they're going to come to you. sharpen your pencil, make that list. if you're a long-term investor, don't change your plan. we have 25 5% draw downs. this, too, spall . in the long term you don't want to change game plans because we have recent latility. >> very quickly. it's different this time because the currency devaluation affects all currencies and not just the u.s. and all markets went down overnight and this morning. so this is really becoming a obal issue now, isn't it? >> it certainly is. i would o,gue, i think that's completely correct. i would argue, too, this is a global issue. the two largestconomies in the rld are in a trade war and that trade war got worse not better. we're escalating that trade war. china's devalued before august of 2015. we had a 10% drive down in
market spend. thisll passed. this is another flavor of that medicine. >> art hogan withcuational ties. well, the real world impact of a trade war is not only being felt in stocks as we mentioned, oil prices fell again today on concerns that a prolonged trade war could put a crimp in global demand. both benchmark brent a domestic crude fell. retail stocks took it on the chin again.&p the00 retail etf, that fell more than 2% last week we told you the latesi round of tarif expected to especially hit retailers. >> mortgage rates have fallen to three-year lows, and that was before today's wealth in bond yeelt. as diana olick says, some borrowers may be making a big mistake. >> repter: escalating tensions had investors rushing further to the safety of the bond market and that follows the yield on the ten year treasury. the average rate on the 30 year six was at 3.70 according to
mortgage news daily. it started this year over 4.5%. very roughly, that comes out to about a $150 savings on a monthly payment for a $300,000 loan. it means more people are eligible to refinance. 8.2 million 30-year mortgage holds could most likely qualify for a refinance and save at least 3/4 of aer pntage point off their current interest ra according to a new tally by black knight. the size of that population, however, is still very sensitive to even the slightest rate moves since so many borrowers have alrey rephied to very low rates. it is always important to shop for your rate.1/ about of borrowers do not according to a new survey from fannie mae. most say shopping for a mortgage is more complicated and they with lenders they may already know and trust even if it means leaving money on the table. for "nightly business report," i'm diana olick in washington. let t turn michael
yashamikami. he is founder and ceo of destination wealt maxmennagemen. >> good to see you, bill. >> right away you see the lower oil prices, you see the lower interest rates. if you want to see a silver lining, those are it. talk about the real world impact. how are our viewers going to feel what we've witnessed today? >> as youio med, you're going to see lower energy prices, lower interest ratesly t or consumers but also for businesses. what you're also going to see are very, very painful end of month 401k statemenu'. going to see asset values be under attack. maybe even houserices under attack. so any time you have this type f uncertainty, it creates in a lot of ways great anxiety for is stors and what that does it impacts markets and when it impacts markets it basically impacts your botto line. >> you do not see a prolonged
conflict between the u.s. and china. why is that? it's been going on for more than year. >> yeah, i know. you know, sue, i go to china quite often, and when you talk to the otchinese, just regular citizens but business leaders, the chinese want a deal. the chinese need a deal. slowing andy is because they have a slowing economy it's really impting standard of living in china. i believe they want a deal and there's political reasons. certainly the unrest in hong kong is creating problems for china. of se, the administration would like a deal going into the 2020 election. i think something's going to happen in the next days. i'm surprised it's gone this far but i think there is a resolution even if it is somewhat superficial. >> right after the psident announced the tariffs, the stail federation came out and toldppers they should expect higher prices, not just for the holiday shoppingseason, but even as soon as the back to school shopping season. l right you see for ret now? >> well, it's interesting.
that's the retailer's association speaking. of cours they're goi to raise alarm bells for their members. don't see prices going up that much in the short term. many companies will just absorb what's happening in currency into their bottom line. lmaybe their profit w reduce a little bit. what's more problematic, bill, if weor go a period of time, three months, four months, six months. at that point companies are going to have to start raisingi . be clear about this. as a consumer for all the viewers out there, tariffs essentially will mean higher prices. higher pricesat nely impact gdp or negatively impact onomic growth and that's when you start heading towards things like recessions aloowns in gdp. >> chael, thanksery much for joining us tonight. >> my pleasure. we have much more on what this means for your money. coming up, what one more portfolio manager is advising s clients to do when it comes to factoring in trade.
we did get some economic news this morning. growth in the nation's services sectordn july slo to their lowest level in three years. the institute for supply management saidt its index of non-manufacturing activity fell to a reading o 53.7. that's down nearly a point and a two from june and almos points below expectations. services make up more than 2/3 of all economic activity. cars.com shares skid after failing to find a buyer. that's where we begin tonight's
marketfo s. the cars search engine said that it completed a ten-month strategic review but apparently ow one could meet its asking price so cars.com will shmain an independent public company. es plummeted nearly 35% to 1 11.82. tyson missed on revenue. the meatrocessor saw a sales increase in the beef and prepared food divisions but suffered arop in pork sales due to higher costs and the african swine fever outbreak. it rose to 83.83. british bank hsbc is parting ways with its ceo john flint after he served in that position for only 18 months. th company said it is laying off 4,000 employees, roughly 2% of its work force. the bank's chairman cited the economic uncertainties caused by brexit and the u.s./china trade wa it fell to 37.99, 3%.
dremond off s missed analyst expectations for both earnings and revenue. the off shore oil and gasil r saw falling sales due to higher expenses and what it call challenging market ns condit shares plummeted to $6.17. analysts at deutsch bank downgraded dollar tree. the stock dropped more than 4% today. america's two largest new hampshire chains are meing. newedia investment group, which owns gatehouse, is acquiring guinette for over a billion dollars. when it's done it will be called guinette. it fell 7% to 9.89 with guinette up to 11.84. boeing was o of the biggest drags on the dow since it could be a target in the trade war and as it continues tp
e with the grounding of the 737 max. meanwhile, its competitor from europe, airbus, has gun a major phil lebeau has more on the new a220. >> reporter: the a220, a recent addition to the airbuso, portfo is it now a huge part of the expansion in alabama where workers are starting to build the first sa220 for delivery next year. >> we have over a six-year backlog. i think that's positive. some of that from theli u.s. ai s is a function of being in t is justbut some of having the right product at the right time. >> reporter: delta is already flying the a220, a smaller, single aisle commercial aisle airplane that carries between 110 and 160 passengers. it is designed to have fater than the airbus a320 or th0 max. almost five m after the
grounding of the max the ceo of boeing says the company still expects the plane to be back in the air by the end of the year. >> we'll go through certification with the faa. we plan to submit that certification package inpt ber and currently anticipate that we'll return the airplane to ser early in the fourth quarter. >> reporter: still with airlines taking a wait and see approach with the some have suggested airbus shoul capitalize on the situation and star cranking out more planes. in reality, that's not going to happen. >> the max situation really doesn't change what we're doing today. this is not something that we can fp a switch and start producing more airplanes. it is a complicated, long lead time system. and we want to make sure thatwe e producing the highest quality air planes possible. >> reporter: while airbus has brokn ground o a new assembly line in mobile, it will be several months before it up
and running. ultimately airbus will hire another 400 workers touild the a220 in mobile, alabama, putng down deeoots in the deep south and expanding airbus's presence in the u.s. il lebeau, "nightly business report," chicago. and up next, money manager's advice for you in these tense times. well, the trade war conflict ortween the u.s. and china has been going on about a year now creating a lot of uncertainty ithe markets, so
on a day like today you're probably wondering what to do h now and should you be factoring in a trade dispute in your portfolio for the longer term. we're joined by sandeep who is the chief investment officer over at whittier trust. >> terrific. >> you think this could last for, ote, several years or maybe even a decade. if, indeed, that is the case, how are you advising clients and what should our viewers do to factor this into their portfolio? >> so, first of all, let's reset expectations. if for a moment we thought that there w cld be somevenient miraculous magical end to this trade war, well, that part needs to be abandoned. we are in this for the long haul. this could last a few years, even a few decades because the divide i notbout trade imbalances, it is cultural. it's aboutconomic dominance, technological dominance.
so the first thing investo need to get accustomed to is that this is here to stay. with it will come a fair dose of uncertainty. they need to price that into the volatility of the classes. they need not to get spooked by bi draw downs. >> okay. >> so stay committed toit es with the realization they are riskier now. >> i look at a list of comnies that you think -- you consider quality, that you would advise people to go to.s therhe disney, microsoft, google, amazon, visa. but, t you know, some degree all of those companies do have an exposure to china. they will be affected by the going trade dispute so i'm curious why you pick companies like thatnecessarily. >> so the common characteristics of all the stocks tha we mentioned here is that these companies have superior business models that have shown the ability toenate steady sustainable cash flow.
they he a significant competitive advantage. they have a bigconomic moat that protects that economic advantage. they are capturing on secular things like cloud computing, ecommerce, mobile payments. so you are right. right now the macro theme of the trade war iso dominant that nothing is spared. every singl stock will be affected by it, but the high quality of those companies will help them withstand this better and just tnk aboutthis. what a wonderful vehicle to grow wealth over a long-term basis. it just compounds without us having to trade and suddenly into cyclical stocks or defensive stocksre they tremendous vehicles for building long-term wealth. >> on that goodeadvice, will leave it there. sandeep with whittier trust, thank you so much. >> thank you. and before we go, a final look at this day on wall street andhat a day it was.
the dow down 767 points. about 3% had been down nearly 1,000 points at one time. nasdaq was hithe hardest, down 278 or 3.5%. the s&pown 87. the worst day of the year for all three major indexes. >> andus it's a monday. we'll see what the rest of the week holds. that is it foron usht on "nightly business report." i'm sue herera. thanks so much for joining us. >> i'm bill griffeth. have a great evening. we'll see you tomorrow.