tv Nightly Business Report PBS August 8, 2019 5:00pm-5:31pm PDT
. ♪ this is "nightly business report" with sue herera and bill griffeth. surge.cks shares continue yesterday's strong reversal and wipe out most of the steep lossesrom earlier in the week. slowdown coming? but even as stocks rise, some warning signs are flaring about a possible slow doadown and some mentioning the "r" word. what you need to do if the economy cools. rising risks. how investors are using high-tech data to forecast clate risk to their real estate interests. all of that and much more gh tonight on "y business report" for thursday, august 8th. ♪ gend g, everyone. welcome. bill has the evening off. what a difference a few days make. after a sharp sell-off to start
the week, stocks have reversed course. tonvestors were encouraged by a rebound in global bond yields and some stronger-than-expected trade data out of china. theit up and you hav recipe for a rally. the dow rose 371 points to 26,378. the nasdaq climbed 1 and the s&p 500 added 54 and is now positive for the week. bob pisani has been looking at some themes emerging in this market. >> reporter: talk about a wild ride on wall street. stocks regained theirto footing y with the dow surging more than 300 points. the s&p 500 bouncing back to right about where it closed last friday. that's a remarkable ride. stocks got a lift as bond yields have risen off of their lows and asin s currency has stabilized, at least for the movement. cyclically, economically sensitive groups like technology and industrials, they led today's gain. they're now all positive for the week. there's two big themes emerging that investors are paying attention to. first, is there a chance for a
second trade truce between the united states and china. some say no, some say yes. second, will this brief perio stability in stocks, bonds and china's currency, will that lllast? a lot seems to be riding on the question of a possible recession in 2020. jp morgan was out with a note today saying while the economic data highlights elevated recession risk, the likelihood of a downturn in the next 12 months is still below 50%. but mark zand from moody's analytics disagrees. he says the probabity of a recession is more than 50% due to the latest rounds of. tarif bottom line is this. the two biggest determinants are whether we see progress in trade negotiations and tuccess or lack of success of central banks like the federal reserve to continue aing jui to the global economy by cutting rates. it is a tough cghl. for "y business report", i'm bob pisani at the new york stock exchange. and aside from the brokerage notes, there are some hard warning signals flashing. steve liesman takes a look.
>> several global and u.s. transport indicats flashin yellow and raising concerns about a deeper slowdown in the u.s. in particular, three indices that deal with shipping. the cash freight index turned negative in december and has been negative every month since including a 5.3% decline in june. the shipment's index has gone om warning of a potential t slowdown signaling an economic contraction. the u.s. rail freight index is sending warning signals, down and awa similar to the 2015 and 2016 slowdown that did not lead to recession and not nearly as d as it was back in the '08 recession. the port of long beach container through put falling 10% in june compared to a year ago. >> the global economy is slowing. i think the u.s economy is slowing. i do expect to see slower growth. whether we have a recession in the next 12 to 18 months, i'm betting against it. i think we will still see growth in the next 12 to 18 months, but there's no doubt we are slowing. >> the source of thes slowdown
largely from overseas. the effects of the weakness can be seen in u.s. exports. they subtracted a large amount from growth in two of the past four quarters. oxford economics writes, although we still think that a global recession is far from inevitable, we now expect 2019 to be the weakest year for global gdp growth since the global financial crisis. it is undeniable there's been industrial slowdown both in the u.s. and globally. whether it turns into recession will depend ultimately on whether u.s. consumers can remain strong. they've been doing it by strong job gains andt decage gains. the question is can they keep spending at their current pace, aien if the , trucks and airplane deliveries slow down. for "nightly business report", i'm steve liesman. as we mentioned a bit earlier, stocks also got a lift today for some positive trade data out of china and more stabilizatio from that country's currency. eunice yoon has more from beijing. >> reporter: the chinese central banks set the value of the yuan weaker than seven for the first
time since 2008, but the fix was still stronger than what most analysts had expected. traders took that as yet another sign that the government here is trying to pull the reins back on the chinese currency. no official commeary on the fix, but state news agency today had a headline that r the rate against the dollar hreaking seveas potential to stabilize the commust parties "global times" ran a piece quoting a researcher closely linked to the chinese commerce ministry that said further't depreciation w be fast to the 71 or 72 levels. it will not take a long time bere the rate returns below seven. yuin other words expect th to maintain strength. the trade data was out today and surprise to the upside. exports rose more than 3% when expectations were for a fall. imports shrank but less than expected. ho appears global demand is holding up,h exports to the u.s. contracted, showing president trump's tariffs are
taking their toll. for "nightly business report", i'm eunice yoon in beijing. and some economic data hereo in the u.s. tell you about. the number of americans filing first-time unemployment claims fell last week, suggestiar the labort still remains strong. claims fell by 8,000 to a seasonal adjusted 209,000. serately wholesale inventories were unchanged in june. inventories rose nearly half a percent in may, so the was a slowdown in accumulation in june which could reflect the surge in consumer spending. businesses are carefully managing stock levels amid an escalation in the trade war between the united states and chin sales at wholesalers dropped by .3 of a percent. so recession orslowdown, that's the big debate. let's turn now to our two guests for opposin views on the economy. greg hahn says the economy is slowing. he is chief investment officer atthrop capital management. matt maile sees recession
coming. he is chief market strategist at miller. welcome and glad you're here. matt, i'm going to start you.h that is the big debate, slowdown recession you say the odds are above 50% for the chance of a recession by the next 12 months. what are the metrics that you are watching or seeing that make you feel that way? >> well, you know, eventually the comments ofte liesman talked about, on top of those slowing numbers we also have thin like obviously lower interest rates. interest rates have been low for a long time, but they keep goin. lo a lot of people blame it because of european rates, but they're down for a reason. and because of slower growth. at some point that spills over into other areas of the world. we have commodity prices, energy prices areoming down. copper, another important commodity, that's comingthown. shows a weakness in demand. and then, of course, we have some of the anufacturing data here in the u.s. it is in negative territory or
europe and itory in in asia, but it is right on the cusp of that in the u.s. as steve id, we are highly -- even more dependent now on the consumer than we have ever been, so it won't take much of aslowdown in the consumer to cause some problems in the economy. again, i'm not loong for an 80% chance of resection, bcessim more bearish than most>> people ll right. greg, make the case it is simply a slowdown. you have economictatistics certainly in your favor. >> thanks, sue. i think a couple of things are going on. right now t ism numbers for manufacturing are showing a bit of a slowdown but still above 50, we're at 51.2, which is still expansion but it has slowed. but we are looki at credit. private credit is expanding. we are seeing job formation in the economy we are also seeing business formation, and that creates jobs.re so t still a healthy consumer sector. his economy is not rolling over. >> you also make the point, greg, that the banking sector is relatively robust. >> and this is thedifference.
thank you, sue. this is different from 2007-2008, is our banking system is s o strong because capital levels. i think when we see credit, if credit does turn, the bankingct is going to be really strong and it is going to probably start t showtself more in the public markets, which is a risk for investors. >> ma, if, indeed, you are correct and we see a recession coming, what type ofomplexion will that recession have? i don't get the feeling that you think we'rede h for a crisisf but more o a recession. >> yes, i think there's a big difference. i mean the problem is the last two recessions have been deep -- of course, bear markets, been really deep of course, the bear market -- sorry. the recession we had, the great recession, it is called the great a recession f reason, and exactly -- i would rather get it exactly right. the banng system is in much, much better shape. what happens wit bubbles i it causes way too much leverage in
the system and that's whaha ened with last two recessions. this time, although there's certain leverage in certain areas and people worried about the corporate bond market, the banking sector is very i think we go back to if we have a recession, it will be the run of the mill kind we had from u world war il the end of the 20th century that are not -- you know, they're painful and th t're not fun, buty don't have the same kind of massive impact on people j -- on growth and on the stock market that have really, you know, crushed people's confidence in the .pa even though it can cause problems, it will create more opportunities than it has in the past. >> greg, two questions to you. the one caveat i would say about the slowdown versus recession comes from the trade war. both sides seem to have dug in their heels. at what point does your perspective cnge from a slowdown to recession based on wartrade >> yes, that's a great question, sue. the structural issue thains
created with the trade issues with china is going to be a problem if it is sustained, but part of this, i don't believe our president is going to let it exist all the wayp through the election. part of this, too, from a fundamental standpoint is we're going to see supply chains shift out of china into other t untries, and tll just be a restructuring. that will take some time, but that will be a restructuring also of this trade issue as well. >> very quickly, i need -- >> go ahead. >> -- a yo or answer from each of you. greg, you first. does the fed continue to cut? >> y, absolutely. >> matt? >> yes. >> all right. thankt note, gentlemen, you very much. greg hahn with winthrop capital management. matt maile withle m taiback. coming up, what you can do to protect your portfolio if indeed a slowdown comes. time to take a look at some of today's upgras and downgrades. goldman sachs downgrading dow component caterpillar to neutral from buy, citing headwinds from production cuts in north america and china.
the price target was cut to $130 a share from 156. catse c at 122.02, up 1%. another dow component, disney was upgraded to outperform from neutral at credit suisse. the firm citing bullish catalyst ahead with release of new "star wars" and frozen movihe. disney fin at 137.89, up better than 2%. barclays initiating coverage of apple with an equal weight rating. the analyst does not see a recovery in the iphone and expects growth in the company's services business to slow. the price target was $192. apple closed above that target, ending at $203.43, up more than 2%. coming up, as the debate goes on over a slowdown, what should youo to protect yourself? some tips from a wall street pro a little later. ♪
♪ ♪ petroleum higher after oxy coleted its $55 billion deal to buy anadarko. they approved the deal earlier today. oil jumped today after china's yuan was more stable and speculations that falling prices coulead to production cuts by opec. but despite today's rise, oi prices are still down about 20% over the past year. as brian sullivan tells us, that might be good for consumers but there's plenty of pain for investors. >> the drop in oil prices is good news at the gas pump but very bad news for oil and gas stockos investors. shares have taken huge hits over the past year with
inhestors fleeing group as fast as they can hit sell. what is interesting andou ing to so is how the stocks have split from oil itself. now, oil and oil stocks generally trade together, either up or down, but not reallyla ly. oil stocks have gone their own way, and not in a good way. if you look at the xop, one of the biggest oil stock related etfs against oil, you can see that its shares arerading lower than when oil was around $30 pe one analyst explains why. >> there's a big real loo where these emps will be in a year, year and a half. you can have crude prices dropping, you can have pipelines coming on into the at the same time you have these emps that will be brought back and reining in cap expendin spe. that will affect from midsnge companown to pressure pumpers to oil companies. >> half of more tha oil and gas stocks lost more than 50% of their value over the past year. in many cases now valuations are below where they were when oil
was 15 or $20 cheaper. one reason are the concerns about theffectiveness of newly-fracked oil wells and whether they will perform as expected. also, debt fears, they loom large. many oil and gas companies funded their growth by takingn billions in debt and as prices fall there is concern about whether the debt will paid back. investor pain in the group is everywhere. these are the average returns of stocks operating in specific parts of the united states. north dakota, which is higher cost, and oklahoma hit therd t. but texas and offshore, as you can see, also not immune to the vestor pain. but despite the negativity, one industry analyst says don't lose hope in oil. he believes that even while the united states is growing, outp other countries are not and that before long the price of oil will turn higher. the problem ght now for the price is demand, and this is really where the trade war h obviously weighed so much.
mostly as a matterte of sent mean -- sentiment, psychology rather than actual impact on demand. when the trade war subses, ybe it doesn't end but subsides, it will be a great catalyst for oil prices to go back up.he so far bull case has been put out to pasture. continue to dump th oil and gas stocks. but with everybody so negative, if oil prices do turn higher some believe it could make for a sharp reversal for this beaten up group of stocks. for "nightly business report", i'm brian sullivan. kraft heinz releases its first half earnings, and that's where we begin tonight's market focus. the results haved been del because of the company's internal investigation into its accounting practices. the packaged foods maker reported weak sales which made it right down the value of several business units totaling more than $1 billion. kraft heinz lowered its full well.uidance as shares dropped more than 8% to
28.22. symantec is selling its security unit to broad cam for more than $10 billion. this comes after broadcom's earlier failed attempt to purchase symantec's entir cybersecurity firm. symantec shares rose more than 12% to $22.92. broadcom was up a fraction to $270.98. advanced micro devices unveiled its newesss pro chip for data center and said it landed google and twitter as customers. the coany's new server chip uses technology from its manufacturers to perform better fthout using a lot energy or power. the stock soared more than 16% to $33.92. zillow missed earnings b estimates bt on revenue. the real estate website also lowered its gdance as it forecast losses in its new home flipping business. that sent shares lower by more than 15% to $42.14. and after the bell, uber lost more money than wall street was expected and missed on revenue. billion but p $5
most of that was from stock-based compensation. in the nitially dropped after hours trading but closed the regular session up more than 8% to $42.97. well, shares of uber may be down tout the market is up despite mixed signals and a growing debaten of economic slowdown. are there moves that you should be making in your portfolio in doesvent the economy indeed cool? joining us now with some tips is aaron gray. he is a well it adviser at buckingham strategic wealth. aaron, welcome. nice to have you here. >> hello, sue. happy to be here. >> you make the point that the a time to tak look at your portfolio and assess your risk is when things are relatively calm. >> thasight. really, any time is a good time to reassess and validate that your portfolio is adequately diversified and kind of in the right balance in terms of the amount of risk that t portfolio carries and what you're comfortable with experiencing. i think specifically in terms the diversification you want to
double check, make sure that within your equity or stock ex poe poe -- exposure you have u is and overseas. you want to maximize diversification and i'm talking specifically within the stock side of the portfolio, but in addition to that it makes sense to have fixed income, maybe a little bit of cash, and m sbe eve alternatives, other asset classes that don't have correlation to the stock o bond market to get you really kind of the maximum benefit of diversification. >> are you talking about things like gold? >> absolutely. commodits would be a part o that. and there's other asset classes ert other managed strategieshat can demonstrate the ability to march to the beat of its own d go up and down with the stock market. it will experience its own latility, but to the extent we can put more asset classes together in a portfolio that demonstrate the noncorrelation, it is going to smooth the line over timehe and make volatility of the total portfolio less. >> one thing that we have found inthe past is t investors
who have made a decent gain in the market tend not to re-allocate even when they have made a significant advance. do you recommend lookingt your portfolio and if you have done well change things around a little bit or no? >> absolutely. that's a great point. we have a tendency once we have winners to let the winners run. for example, if you had a target allocation of, say, maybe 50% stk and 15% alternatives and 35% fixed income, if you set it and forget it, eventually that portfolio is going to lookery different than what your primary target was. if you like that 50/15/35 mix to begin with you won't own iy v long because stocks will go up, bonds will go up and down, and before you know i you have an 80/10/10 portfolio. matter want to do no the market is up and times are good or the market is down and times are a little scary i continuously check in on that part follow a portfoli see how far away
from the primary targets you have drifted. be prepared when the market is up and everybody is slapping high fives to sell some of the stuff that's up and take your profits. onhe other end o the spectrum, when the market is down 20% and we are on tvg talkbout how scary and uncertain things are, we need to be prepared to buy then and buyw the things are uncertain and a little fearful of. >> okay. >> that is rebalancing at its essence. >> aaron gray with buckinghamte stc wealth. thank you so much. >> thank you. coming up next, an innovative way real estate investors are trying to protect themselves from extreme weather. ♪ ♪ ♪ ♪
♪ ♪ for any investor, measuring opportunity against risk is critical, and for real estate investor in particular the risks are rising due to increasingly extreme weather. that's why a cottage industry of companies is stepping up to give investors a look at the future and what it could cost. diana olick has the details in the latest in her series othe rising risks to realat este. >> when typhoon mancook ravaged hong kong last summer and hurricane florence decimated lmington, north carolina at the same time in a tower high above chicago, mary ludgin was watching.
the head of global investment research at heightman, her job is tois measure rk across the firm's $42 billion worth ofty proper assets across four continents, and climate ris is the new frontier. >> we see it athe unexplored risk that we need to try to quantify. orter: heightman partnered with the urban land institu in a groundbreaking study on climate risk and real estat investment decisionmaking. it concluded that overall the real estate markets are far from understanding climate risks enough to price them in today, t those who are prepared have the potential to outperform. >> we wted to sharpen our skills and our ability to underwrite the risk of sea level rise, stormsurge, wildfires. >> reporter: so ludgin turned to a brand-new category of s, compan high-tech data analysts who go well beyond current flood t maps forecast future climate risk to real estate. >> when you look out at the water around manhattan, what is
the first thing that cures into mind? >> it is beautiful and it is incredibly dangerous. >> reporter: rich sorkin is co-founder and ceof jupiter intelligence, a barely three-year-old startup that has grow a staff of 50, backed by $40 million in venture capital. among its clients are the cities of new york and miami. >> we are seeing a dramatic expansion in large corporations coming to us,ee saying, "we to understand the risks to this office complex or the risk to this hotel orhe risk to this neighborhood wre we have hundreds of millions of dollars of mortgagesteut." >> repor jupiter analyzes specific properties using thousands of predictive data points and then gives its clies a risk score, going out 10, 20, 50 years. >> we're essentially physically modelling what is happening with the atmosphere and the water or theire at a very specific level of detail, which is now
only possible because computers have gotten so >>powerful. eporter: and it goes well beyond what insurance companies forecast. >> insurance is basically a one-year contract. at the end of that the insurer gets to say, oh, we'll keep insuring you but here is the new cost or, sorry,nsurance is no longer available given the wind risk in your location.te >> rep when most people consider climate risk, they're not picturing a gorgeous day like this along the chicago river. they're thinking about hurricanes or wildfires, butes ci across the globe are now investing in new ways to prosect thes all the time against rising sea levels and more extreme weather, and the cost of that is yet another risk to real estate investors. >> what we'vedded into the mix is what if your insurance costs quadruple, what if your property x is quadrupled, does the investment still make sense? >> reporter: the united states bases more than $400 billion in cost over the next 20 years to
defend coastal communitiesrom sea level rise according to a study just released by the center for climate integrity and resilient analytics. at includes building 50,000 miles of coastal barriers in 22 states. two years ago residents in miami voted themselves a $400 million bond, taxing themselve protect their city from flooding. >> the last 2 1/2 years have really been transformative in terms of the way the busines community all over the world is thinking about these issues. >> reporter: for "nightly business report", i'm dianak ol in chicago. >> and that's it for us tonight. we'll see you tomorrow. ♪ ♪
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