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tv   Nightly Business Report  PBS  August 12, 2019 5:00pm-5:30pm PDT

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this is "nightly business report." with bill griffith and sue herera. >> stocks skid, aave of selling hits wall street w00t as investors concern the trade troublesheill slow global economy. >> banks fall. the sector retr yts aslds fall. that could cut into the profits of an industry that isns ered an engine of the economy. at dazed and confused. the intense vity is putting focus on the outlook for earnings and it isn't those stories m ande tonight on "nightly business report" for this monday, august 12th. a >> we do bid you a good evening and welcome. here we go again. stocks plunged today to start what may be a another volatile week for ihe markets. ue once again is the
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future of the u.s. economy. and given how stocks have been trading around the world lately, investors appear to more ncerned that the trade war between the united states and china will linger for a while, further damaging the global economy. all of that fueled another rally into the safety of treasury bonds, sending some yields to multiyear lows which some analysts say could be signaling a comingrecessio one strategist today went so far as to say that the wall street bear isnd alive kicking. that may be a bit extreme, but there is no mistaking how concerned the market is about the economy. by the way, toward the close, there was a technical issue with trading computers. it's not clear if all of the volume was reported or if som of the prices of the indexes were affected. you might see different numbers elsewhere, but these are the numbers we have at the close today with the dow down 389 points to close below 26000. the ndaq fell by 95, the s&p
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down 35. bob pisani starts us off from the new york stock exchange. >> another ugly day on wall street with the dow plunging 40 points at its low. combination of trade tensions, global growth fears and geopolitical turmoils keeping stocks under pressure, and it doeshat hurt more big banks on wall street are turning bearish in bumping up their probabilities for recession happening some time in the next 12 months. goldman sachs trimmed estimates for the fourth quarter saying they expect a bigger hit from the latest round of tariffs. they're no longer trade deal before the 2020 election. morgan stanley reiterated its call that stocks will remain bank of america said the chances of a recession have risen to greater than 1 in 3 and to weaker dataois. to top all this off, geopoliticalotspots are adding
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to overall nervousness. hong kong grappling with itstr tenthght week of protests, prompting the airport to shut down. argentino is struggling with the primary eleckeons. that m struggled more than 30%, the peso set nearly a i quarter o value. a lot for the markets to digest. add it all up, no wonder investors are flocking to safety and buying bonds, pushing yields lower, putting serious pressure on bank stockss a result of all of that. bob pisani at the new york stock exchange. >> and a bob just mentioned, helping to lead this market lower today were indeed the big banks. nk of america and morgan orteereha rat t fell. what lies ahead for the sector? joining us to talk about that i eric compton, an equity analyst at morningstar. welcome. renice to have you >> thanks for having me. >> bob outlined some of the things that are t affecti market, but specifically to the
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banks, you see the risks more to e downside, more things that could go wrong for the banks than could go right. such as? >> that's correct. so our view on the banks at morningstar at least for the u.s. banks has been that there risksore to the downside at this point, so it's one wayt you see t playing out is with interest rates. as interest rates on the long g end lower, that hurts banks' profitability. o they learn les the longer duration assets and also the worse the economy gets, e more pressure that puts on the fed to lower short-term so that would also directly impact bank profitability. that would be one examplat you know, going lower, credit costs, slowing growth, a lot of issues you outlined alravdy. >> ratesbeen low for more than a decade, and banks have learned to cope with that. fundamentals for the banks are good. the latest earnings reports were very good,t yet the mar continues to wring its handle
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over what lower rates would do loveo the bank profits down the road. >> i mean, absolutely. so the rates w tl hurt banks. you know, some banks have adjusted better thanothers, and highlight the largest banks havi stronger fome streams, so as your interest income de ines, those fee income streams that aren't tied t rates serventer as call it better insulation in times of distress, so you're looking for some insulation against that could be one way to play that. >> that gets to the heart of my question. t it would appeat the markets are worrying about something that they don't need to worry do you agree with that at all?ld >> i wush back against that a little bit. banks are certainly macro sensitive. rates is one way. while fee income may provide some insulation against that, lower rates are still going to hurt them. there's no way to completely neutralize at. and then as the economic cycle
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matu tures, if we get any kind of turn in that, you could see rising credit cos t andt would be detrimental to bank performance. there's a number of things that could go wrong. i'd say the bull case right now is thingsind of stay as they are, nothing going ghost wrong from here on ou >>ric compton with morningstar. and those concerns about the economy may be starting to affect the outloo for overall earnings. bob pisani is back with us again to look at how quickly that forecast is changing. >> the latest round of tariffs is what wall street is dazed and confused trabout. e concerns weighing on that and earnings projections and that's what really matters. the weakest sectors today, trade related, banks, retail, energy, industrial, and those are the sectors seeing e biggest downgrades in earnings estimate for thcurrent quarter. 2019 earningins, lookingofo kin flatish, but additional tariffs are starting to impact
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those estimates, particularly energy and industrial earnings. they've bee coming down fast in the last few weeks, energy earnings down 21 for the third quarter, deeper than analysts had forecast in the beginning of july. industrials have gone from up 6% earnings estimates a few weeks ago to now just up 2%. other sector growth forecasts have been coming down including financials that have been hit bt lower interest and specialty retail, including big apparel makers like l brand and gap. earnings group for the whole expected to be dow ightly, not surprising considering retailers have been weak for a long time, l brand, gap, all down on the corner. tiffany, which gets about16 of its revenues from mineland china has fallen 7% for the quarter. you put all these cuts together and 2019 earnings, which have been described as i said as flatish going into august, are starting to look like they could
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end up in negative territory. i'm bob pisani at the new york stock exchange. as we menti earlier, the word recession is being whispered on wall street these days. an analyst at bank of america, merrill lynch, was the latest to use tt wordust today. and while the bond market may agree with that forecast, the stock market most cerinly does not. what to make of this dichotomy? joining us now is christopher smart, chief pgiitical stra at the bearings investment institute. good to see you. thanks for joining us. >> nice to be here. >> yields on the treasuries are multiyear ws. that usually means they're worried about the economy, but the stock market, even thoug volatile, is much closer to its all-time highs. what do you make of this division right now? >> i think bob pisani had it right. the market is dazed and confused and maybe a little schizophrenic on top of it all. the ecomicata is very mixed in the sense the consumerry loo ood, unemployment is very
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low. at the same time, you have businesses that aren't reinvesting in itself. catal expenditure is low. on the stock market, we have a market that is sold off but it has sold off fromll-time highs that it set a couple weeks ago. even as i the bond mark signaling a recession. i think we've got a rec clearly in our future. i'm not sure it's going to come c quickly or as sharp as the markets arerently predicting right now. but clearly there are a lot of worrying signs on the horizon. on top of it all, it's the middle of august and there's a lot to say this might turn around. >> a lot of headline risk with trade front and ceruer. which innt usually preva prevails, the data or the bond market? >> well, the data ultimately prevails but it's always a question of timing as to when markets ultimately accept the verdict of the data. i think it's -- you know,at
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is always backward looking, and bond markets are always forward dyoking, so that is the eternal quandary for any trying to put money to work. >> it only heightens the guessing game abo the federal reserve and what they will do. the guess right now is that tyere is a certa that they will cut rates when they meet next month and thenre are two more meetings after that the rest of this year. would rate cuts help this at all at this point? >> i think they would. i think, you know, it's the old song about don't fight the fed, if theed is trying to boost the economy, trying to support economic activity, cheaper mey is alway better. and i think in particular when you look at consumer havior, mortgages, affordability of homes and the potential forta ca expenditure, that always helps. of course the trade uncertainty doesn't help. and i think, you know, investors are going to be weighing those two things at the same time. >> where is the best place to
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put your money on a global basis? i >> well, think as people look around the world, the global economy has been slowing and you've seen a variety of data streams inhe economic sphere. but even as the united states has been slowing, it is still the best game in town when you compare it to europe, compare it to pan, when you compare it to the uncertainties in china or other emerging markets right i the united states is now. still the preferred destination. that's why you see a lot ofds foreign f coming into the market both stocks and bonds right now. >> and itay explain why we see a stronger stock market thane ght other expect. christopher smart with bearings investment institute, thanks for joining us tonight. >> my pleasure. the new head of the federal aviation administration was sworn in and today he made clear how he plans to handle the grounding of the boeing 737 max. >> this plane will not fly in commercial service aga until m completely assured that it
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is safe to do so. the faa is not following any time line for returning the aircra >> as you may know, the plane has been grounded since mid-march follong two fatal crashes. shares of boeing fell more than 1% in today's trading session. time to tak a look at some of today's upgrades and downgrad. humana was upgraded to overweightut from l at cantor fitzgerald. the analyst cited the growth in its medicare advanta business and strong second-quarter results. price target $345, but despe that upgrade, shares fell traction today to $295.50. occidental pretroll yum was downgraded. anadarko petroleum makesde ocal larger but significantly less valuable. coverage was resumed without a price target. shares were down today to $44.99. still aahea view of
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international maritime trade like few have seen before. the department of agriculture is forecasting a bigger than expeesed corn ha this season. that is surprising given the harsh weather that included a wet spring followed by very dry conditions acrossuch of the midwest. that's why analysts have been expecting the government to lower itsutestimates, it was just the opposite, and that sent corn futures down sharply today along with shares of farm equipment maker deere. as we mentioned earlier in our program, mas hong kong shut down that city's main airport earlier today. nificant because it's ne of asia's mor financial
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hubs. the unrest is putting some luxury brands in an unusual position. >> the hong kong airport is effectively shutdown. l flights canceled. airport officials have been warning people not to go there because many fear a major do sh between thousands of proertss and riot police. protesters have been at the airport for days to raise awareness among travelers thate th're increasingly encroacng on their civil liberties. police charged into a subway station, firing people at point-blank range wit nonlethal weapons. one woman was shot in the eye and that has been enraging people,g motivathem to join the demonstrators at the airport. the protesters are calling for an inquiry into the police. chines officials i hong kong has said the recent violence is showing signs ofis terr state media have been featuring videos of armed police gathering across the boarder from hong kong and that has been raising
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concerns about what beijing will do next. businesses are under pressure to take a side over hong kong.pe le on social media have been calling for boycotts for brands th believe don't properly respect china'ser sgnty. coach, givenchy are being criticized for designs that as ar to list hong kong separate country to china instead of a chinese territory. all three labels have apologized but there was a warning directed at all multinational companies saying if you challenge the bottom line of chinese sovereignty, how far d cyou think y stay in china cold? your body becomes for "nightly business report," beijing. black rock buys a stake in the parent of "sports illustrated." and that's where we begin tonight's "market focus" with the asset management firm buying aority stake in authentic brands group for about $875 ll n. authentic brands also owns the regional schans aero postal and
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9 west. the s ceos this deal values this deal at more than $4 million. cloud dera says it will give carl icahn board seats. icahn will cap his ownersh stake at no more than 20%. shares dropped more than 4% to 669. and tyson foods n saysrly 4,000 workers will be out of work after a wildfire partially of its meat processing plants in kansas. no injuries were reported. see company did say it's going to provide t workers with what it called some guaranteed pay.be the plant wil closed indefinitely and there are still no details about what caused the blaze. stock was down a fraction today to 88.27. rite aid has named a new ceo replacing john standley who
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stepped down after leading that drugstore chain for the past nine years.sh es fell more than 2% to just about 702. barrett gold's results came in line with estimates and earnings estimates. the world's second largest gold producer saw an increase in production and a rise in the price of gold due to the contued trade war with china. the stock was down a fraction to 17.97. and food distributor cisco beat earnings expectations but fell short on revenue estimates. igher labor and supply chain costs. shares rose more than 3% to 72.19. ramco reported a 12% drop in its profits in the first half of the fiscal year, although i still generated about $47 billion in net income. c theyed weaker oil that decline. they've been releasing more details about its finances as officials consider whether to
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list its shares on the public market. today the price of domestic crude rose despite concerns we've been talking about about a global economic downturn. at the center of the energy market is the strait of hormuz, considered theine most important oil passageway because it's the only way to move oil from the p sian gulf to the world's oceans. we traveled to the region for a firsthand look. >> withrude oil prices in a slump that eve n a geopolitical crisis failed to shake, the.s. is struggling to form a coalition to protect international maitime trade including oil in transit each day. >> in this particular case, oile 20% of the world's comes through the strait of hormuz, that's not just a united states issue. that's a global issue. >> operating today out of the north arabian sea at the southeai tip of the s of hormuz, the "uss abraham
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lincoln" is one ofwo u.s. aircraft carriers in the region. >> this is 4.5 acres of sovereign u.s. territory that i can park anywhere in the world. we're nd of the 911 force if something were to happen. we can move the ship up the ry quickly. the beauty of a navy aircraft andier is our speed agility, one of the fastest ships the navy has so we' able to reposition very quickly. >> though with six attacks on tankers since president trump's decision to double down on security in the gulf back in may, many question whether a sizable force is really enough. s>> the aircraft carrier a great symbol of american presence. we show up, we're ready, ready to act, and what that does is if we try to add stability to the region, what we have seen is we've seen there's an understanding from iran, our goal is not to go to war with iran. >> the 5,600 crewmb s, 89 flights a day, a massive undertaking abrd the "uss
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abraham lincoln" but many questioning whether the action in the persian gulf is paying off. in ntjune, presirump tweeted as much saying china gets 91% of its oil from the strait. japan 62%. and many other countriesli wise. why are we protecting the shipping lanes for other countries for zero compensation? while the u.s. already partners with 33 nations to protect commercial shipping lanes, gulf oil exporters may find getting their crew to marketren the fuould come at a cost. >> what's more critical for them, the navigation is maintained through theait of hormuz probably than it is for i thin see us as a us. reassuring presence here. >> they shld be payingor it. >> i can't say that. >> for "nightly business report" in the north arabian see, hadley campbell. and coming up, how to get a legitimate edge in the college application process.
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amazon wants to open another type of brick-and-mortar store, on that sells alcohol. as first reported by the san francisco business mes, the company applied for a license in the city of the application is still pending. it would allow amazon to del alcohol through its prime mail service. prime customers can get items delivered within two hours. college students are getting ready to head to school, some r the very first time, and while the college admissions thedal remains fresh in minds of some parents, there is a way to legitimately use a college admission coach.
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>> long befor confessed college admissions rick singer, he was running a legitimate business in san francisco. but she sensed something was wrong. >> his main pitch was i can get you into college x and i was appalled because noal eth counselor can ever say that. >> she start her own business, competing with singer for a time. he moved to, southern california rigging exams and f creatingake profiles for hundreds of students. rich parents were so desperate, they paid $25 million to rig the system. getting into college c be as stressful for the parent as it is for the student, but there are ways to channel that energy cotructively and you don have to be rich or famous. first, consider what's available for free,l the sch guidance counselor. >> the ones i've dealt with, they are amazing. >> if you want to hire help,
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look for a certifiedon educa planner. they're not cheap, a full package starting aroundr jun year will cost upwards of $5,000, but a far cry from the hundreds of thousands rick singerd. char a good planner will motivate the student to do the work. >> i want the kids to be engaged they've made the choice. >> it puts young paren skills to the test. 34ealthy parent who is did not do well on that test have been charged in the college admission investigation known as operation blues. the investigation is not over yet. more parents, coaches, and othersld ce charged and authorities won't rule out charging students or schools. bill, sue? >> what is the status of rick d of this e masterm scam right now? >> yeah. extensively for an episode of "american greed." he is still cooperating with authorities, still naming names. he was supposed to be sentenced next month. that sentence has just been pushed back indefinitely as he
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continues tt cooperation. >> scott, the colleges have been portrayed as victims, so what are they doing, if anything, to prevent this from happeningai >> well, so there were eight elite colleges that were touched by this scandal, all have said they knew nothing about the fraud that rick singer was pulling off, and they've all promised various types of reforms and reviewing the students that areinvolved. but there are also those who look at this industry s who that perhaps the colleges don't mind the publicityecause it shows how desirable they are, that the richest, most powerful people areilling to get into them, willing to do anything to get their kids into them. so there's a lot of skepticism about what they're going to do on a substantive basis, but they do say the >> i'm intrigued about this certified educational planner that you profiled. what is that? how do you find one? >> you know, it's a little bit
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tricky because there are actually a number of different seganizations that have t -- issue these sorts of certifications, all totally voluntary. there are about 13,000 or so educational planners,dmission coaches or the like that are out there. only about 20% of themave any sort of certification. the american institute of certified educational planners is one of them, the one margiem he belongs to. they have to do site visits to colleges, tve to do continuing education, so it is a good thing to ask about. one of the first places you can ask i your high school guidance counselor if you're looking for outside help. these do not come cheap. it can be like $5,000 or so for a full package, but of course it is a lot less than what rick singer was charging. they do it legitimately. >> the students themselves, what are the schools doing about students that may have been admitted? >> well, they're reviewing all
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of them. in some cases their registrations are on hold. some students have been expelled. there are literally thousands of people who worked with rick singer, some elegitimately, s that did not. they're all being reviewed. >> scott cohen in san francisco, thanks, scott. to read more about these college admissions coach, head to our webse at npr.com. a quick look athe final day's numbers on wall street. due to a technic issue, the volume may not have been accounted for. s&pow 35. and that is "nightly business report." i'm sue herera. anks for joinus. >> i'm bill griffith. have a great evening. see you tomorrow.
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