tv Nightly Business Report PBS December 18, 2013 6:30pm-7:01pm PST
. this is "nightly business report" with tyler mathisen and susie gharib brought to you in part by. >> thestreet.com. up to the minute stock market news and in depth analysis. our raunlt rating service provides objective independent ratings daily on over 4300 stocks. learn more at the street.com/nbr. starting in january, we will be purchasing 75 billion-dollar of securities a month reducing purchases on treasuries and mortgage backed securities by $5 billion each. >> off to the races, stocks zoomed to record highs on news the fed thinks the economy is healthy enough to scale back the stimulus, but not strong enough to raise interest rates, perhaps for years.
budget deal, congress gives final approval to a government spending plan without any drama. will the agreement help with the recovery. rate watch, could today's decision cause mortgage rates to spike making it more expensetive to buy a house and throwing a wrench in the economic turn around? that and more for "nightly business report" for wednesday, december 18th. good evening everyone. all those months of taper talk are done. the federal reserve said today it will begin winding down the landmark stimulus program, a process wall street dubbed the taper. starting in january, the central bank will cut back on the huge bond purchases by $10 billion a month. why now? speaking at his last press conference as fed chairman, ben bernanke said the economy is healthier and the job market is making progress. this marks the beginning of the end of the historic money program that lunched in 2008 to
stabilize the economy during the deb tating financial crisis. the reaction was surprisingly positive. stocks skyrocketed and the dow and s&p 500 hit new record highs. the blue chip dow soared almost 300 points rebounding and closing well above the 16,000 level. the nasdaq jumped 46 and the s&p surged almost 30 points. over in the bond market, prices on the ten-year treasury fell and yields rose to 2.89%. we have two reports on the fed's big decision, the massive record setting reaction in the stock market. bob has that story but we begin with steve liesman on what the fed did, why and what the chairman said about it in the last press conference as central bank chief. out going federal reserve chairman ben bernanke, a historic move engineering the 10 billion-dollar reduction with
the purchase of assets by the federal reserve to take effect next month. it is the last press conference for federal reserve chairman ben bernanke in the second to last meting and when he explained why the fed felt comfortable reducing it. >> progress towards the economic objectives will be sustained. if the incoming data supports the committee's outlook, we'll likely reduce the pace of securities purchases in further measured steps at future meetings. >> reporter: bernanke suggested the fed would reduce the monthly qe in measured inkments, sounded like $10 billion a month, reduction depending upon the economy. he said the course of reductions is data dependent but said when the fed hits the 6.5%
unemployme unemployment threshold and it would remain on hold once they hit the 6.5% unemployment rate. >> we couldn't put it in terms of unemployment. i suspect it will be time passed the 6.5% before all of the other variables that we'll look at will line up to give us confidence the labor market will sustain the beginning of increases and rates. >> the last meeting is in january and janet yellen is supposed to be confirmed this week as his replacement. bernanke was asked if yellen supports the program and he said she fully does. policy is expected to be pretty much the same under janet yellen as it was under fed chairman ben bernanke. for "nightly business report" i'm steve liesman. the markets had been calm going into the fed statement indicating that many in the trading community expected mr. bernanke to find a way to taper
the bond purchases this month or early next year, but they are also expecting him to calm fears the fed will raise interest rates any time soon. he delivered on both counts. after a brief drop, stocks rallied with the dow jones closing at the highest for the day up almost 300 points, it was a historic closing high for the dow industrials and a 13-year high for the nasdaq. yields on the ten-year treasury bond initially vacillated wildly, rising then dropping but ending the day not far from where it was prior to the fed announcement. at the end, it was a very chain reaction in the bond market. for volatility, the fear index, a measure how much protection traders are seeking against market declines went down, and it went down dramatically, about 15%. that is a very large drop indicating bernanke is managing expectations in a way not causing traders to run out and
to panic. the bottom line, this was an almost perfectly crafted statement that clearly said first, low rates were going to be around for a very long time, and second, clearly said that there is no preset course for this taper program. so if the economic data worsened, the fed could stop the taper program or even reverse it. the fed thread of this needle as well as can be expected. we turn now to mohamed for his prospeerspective on today's decision, he's the director of pimpco the world's largest bond fund. i know you think the fed did the right thing. tell us why and what does this mean for consumer investors and businesses? >> it means the most for investors. mr. bernanke gave investors a
big christmas present with three parts to it. he removed the uncertainty when the fed will taper and how. in fact, in the press conference, he even gave us a road map for the next 12 months. second, they compensated what they are taking away with a lot, in particular they said interest rates would remain low for a long time and thirdly, they upgraded their economic projections. so put all that together and the markets love this. for investors it's great. for businesses, it's quite good because it increases the wealth effect and therefore households are better off. but for the average person and particularly the unemployed person, it is not clear whether this will materially influence their outlook. >> you know, mohammed, mr. bernanke was asked today and it was a question he didn't really seem to have a particularly adroit answer to, that is why hasn't quantitative easing or
the the stimulus program created more jobs than it has, or has it at all done that? do you say? >> i think what it has is avoided something much worse. i'm with him when he says the counter factual would have been much worse. i'm also with when he says we dealt with unexpected things from the european crisis to what is happening on capitol hill. fund mentally, it's not a perfect instrument. it's the asset channel, it's about making you feel better so you go out and spend more and business investors. it's a very indirect way of stimulating the economy, a much better way would be public investment, removing long-term uncertainty, doing all this other stuff. unfortunately, the fed is the only policy making entity in play and therefore, they are using i'm perfect policy and they are getting inperfect results. >> one thing that we kept hearing today from chairman bernanke is that this promise,
this reassurance that interest rates will stay exceptionally low, and we know that the markets, the stock market has rallied on these low interest rates. so can we expect that through 2014, and does this change your approach to investing in stocks and bonds? >> so clearly, what they want to do is maintain control of the short end of the yield curve. why is that important? because of the mortgage rate. they don't want to shock the market because it's a critical element of the recovery. so they are using aggressive forward policy guidance to try to convince people that short-term interest rates are going to remain stable. and today, they largely, largely succeeded on the short end. it's amazing that we had 300 points on the dow and yet, the bond market was very well behaved. in terms of what it means, you heard us say this over and over again, susie. bill said it, i've said it. be careful of where you invest on the yield curve. do not go out 30 years. do not go out 20 years.
that's dangerous territory. stay focussed and concentrated on the short-end of the curve. that's where the value is and safety is. >> all right. lots of great information. thank you so much, mohammed. hope you have a happy holiday. >> you, too. at his press conference today, ben bernanke is pleased covering the next two years and likes the way it looks. >> relative to where we were in september and october, it certainly is nice that there's been a bipartisan feel. it's also at least directly what i have recommended in testimony, which is that it eases a bit. the fiscal restraint in the next couple years, a period where the economy needs help to finish the recovery. >> and tonight, that deal is a done deal after the senate passed it late this afternoon. john harwood joins us from washington with more on today's
vote, and what it means. were there any surprises, john, in the vote? >> no, the democrats voted, 55 of them in favor. you had three fewer republicans voting yes than voted to end debate earlier in the week. so it was a 64-36 vote. but this is something that both parties wanted to -- and both parties's leaderships even though mitch mcconnell voted. both leaderships wanted this to happen for the reason ben bernanke expressed. it's not often washington gets a chance to please anybody but markets wanted this, the country wanted this. >> all right. so now that they are all getting along in washington, will that carry over to 2014, john? >> to a limited extent, susie. there will not be a shutdown when the government runs out of money in january. they will extend government funding along the lines outlined by the deal, and i think that
even though some republicans said yes, we'll make demands for the debt limit, i don't think they will push it to the brink so we'll is a smooth process on the debt limit. the question is can we get anything bigger than that? can we get immigration reform? a grand bargain? that is by far from clear and actually unlikely. >> so if you have a two-year deal on the federal budget, then if the debt limit debate becomes contankous, what would the gop look for to let administration raise the debt limit? >> you certainly could have them return to issues of obamacare, that they have loved to talk about during 2013, want to talk about in 2014 while they are trying to retake the senate, hold the house. you could have them hold out for things like the keystone pipeline, which is something that's been an issue for republicans. they used that as a job issue against democratics. those are examples. again, i don't think they are
willing to take that to the max. the republican party was wounded badly by the shut down in the fall. i don't think they want to repeat the same experience in 2014. >> conversation tb continued. thank you so much. more now on how the fed's decision to taper could impact treasury yields and mortgage rates. many home buyers and sellers are worried those rates will rise in 2014 making homeownership more costly. diana olick reports. >> reporter: at apex home loans, lender craig watched today's fed announcement with intrepidation worried mortgage rates might spike. >> i was relieved how they reacted so far and we didn't see a sharp rise as a result of the fed tells us they will taper. that certainly could have happened. >> reporter: the mouderate pull back did not push rates significantly higher. the average rate is 4.75% since
the middle of last week but concern over the fed's potential move today may have been behind a sharp drop of applications to the lowest level in a dozen years. >> mortgage interest rates generally hate the idea of uncertainty. so uncertainty is not a good thing. so this definitely brings some certainty in terms of the fed showing cards as far as the direction of rates. >> reporter: this is not the end for rate moves. the federal reserve is just beginning the pull back and this week the regulator for fannie mae and freddie mac announced they would raise dramatically the fees they charge to lenders with medium credit quality. those fees will be passed on directly to borrowers. >> the bigger of the two announcements was fannie mae, if you're a first-time home buyer looking to put less than 20% down, you could see mortgage rates rise, you know, by as much
as 4/10ths of a percent. >> reporter: while it doesn't sound like a lot, combine that with rising home prices and last lucker growth, first time buyers will continue to struggle even to make the necessary down payment. >> i think absolutely the rate increases will be painful. >> reporter: just not as painful as they could have been had the fed made a bigger move and beginning the bond buying retreat. for "nightly business report", i'm dianna olick in washington. a rough patch, as the company reports earnings, does it have a plan now to get back on track?
guilty on all five charges, the jury verdict against money manager michael steinberg. the hedge fund company run by stev steve co- -- cohen. the portfolio manager is the first of eight criminally charged employees to face trial for insider trading in the shares of several technology companies. six colleagues have already pled guilty and one more defendant goes on trail in january. the verdict is 76 without a loss. the number of insider trading prosecutions brought by the u.s. attorney since 2009. earnings from oracle topping 9 billion dollars but profit
last quarter was one percent lower on a slight drop in new software sales and subskripgss. they are offering cloud comp pugss and the troubling outlook for the next year. josh lipton now with more. >> reporter: larry elson built oracle generating billions in revenue with 120,000 employees and 400,000 customers. corporations around the world use its software to help manage the businesses, everything from human resources to accounting. along the way, ellis son built himself a fortune, forbes pegs his net worth at $41 billion. but in recent years, the technology landscape changed dramatically the and software giant's future isn't as clear. they are dealing with a weak tech spending environment, which is a reason executives offered
cautious guidance in the past there are issues specific to oracle. they offer web-based software sold as subskripgss, rather than licenses. it departments orphans of the cloud because it can help them save cost and stream line operations. analysts say their survey work shows 38% of the customers are using sales force, way up from a year ago. >> there are a lot of things going on in the software sector. >> reporter: an equity analyst says they missed the cloud trend, on track for the smallest yearly gain since at least 1987. >> the fact they are in catchup mode is a damper on the stock price as they watch others seeing greater growth from this new business model. >> we worked again and reworked. >> reporter: oracle is fighting
back. the company's database designed for the cloud announced in july could see growth pick up next year and despite the issues oracle is facing, they think it's valued. they used to think of it as a corner stone investment. the question is whether ellison convinced them it still is. four shares shifted down after the auto maker predicted a bumpy road the ahead. cost of lunching a record number of new vehicles will reduce profits which could fall by $1.5 billion. the forecast caught investors off guard sending shares 6% lower to $15.65, the worst one-day drop in two years. general electric expect as double digit profit growth in the industrial unit next year. so it now expects profits in
aviation, health care, and other areas of its businesses to rise at least 10% next year. ge said it also plans to continue aggressive investments in manufacturing in 2014. shares rose more than 1% to $27.41. some key management changes at boeing today. the company promoted the head of defense to the post of chief operating officer and named two other executives vice chairman. the moves might be part of the ceo succession plan since chief executive retires next year. the stock fell slightly to $135.49. fedex reported an earnings missed and blamed it on a drop in revenue in the biggest unit, express deliveries, despite the numbers, the company forecast add strong holiday season and outlook for 2014. shares were up a fraction to $139.72. general mills lagged estimates, the packaged food company saw sales slide in part
because this late thanksgiving meant the quarter ended before the holiday. increased commodity cost and unfavorable currency changes didn't help the scereal maker, either. harland clark, a bank check printer said it would buy the public community for $1.8 million. they have newspaper inserts and coupons. the company said the deal would create a company with more than $3 billion in combined revenue and that sent shares of valassis way up. shares of amc entertainment rose in the first day of trading. the theater operator raised more than $330 million in the market debut. the ceo said the company's success is in the business model. >> not just adding more theaters but making them a little better.
we find that rest significant nates with our guests and when they come, they spend more money and makes for a good business model. >> that stock ended the day at $18.90, up 5%. another delay for the healthcare.gov marketplace. this may help americans still shopping and figuring out how to pay for a plan. the industry says consumers who choose a plan by the monday, december 23rd deadline have until january 10th to pay the first month's premium for coverage to take effect on january 1st that trumps the new year's eve deadline set by the government. find out how much money the boom in america natural gas production could save you. that's next.
dow jones is reporting tonight target was hit by a credit card breach. the theft happened in stores, not on the line. it may be tied to malware at card swipe devices and according to this report, it was extensive. if you like peace and quiet, delta may be the airline for you. they said no matter what the faa decides about lifting the ban on in flight calls, delta will not allow on board calls on any flights, so there. it's been cold and snowy but the official start of winter is this saturday and despite forecasts of a colder than normal season, there is some good news for the millions of americans who heat homes using natural gas. there is a lot of it and prices keep falling. sharon epperson explains. >> reporter: there is a revolution brewing in america's
heartland, an american consumers have been big winners, especially the one whose heat houses with natural gas, or use electricity made with natural gas or even use detergents and plastics made from gas products. the benefits may not have been readily apparent but are significant. >> you can't go to a store and say uh-huh, that price is lower because of lower natural gas prices. they are, and that feeds through. it's not obvious to the eye but clearly adding up for most people's pocketbooks. >> the ramp up in shale gas has contributed to a more than 60% slide in natural gas futures since 2008. a new study by a consulting firm, shows lower prices are benefitting consumers and economy. >> over the next five years, we expect the number to grow from 400 to $700 to $1200 savings.
this will have a big impact on the economy because it frees up discretionary spending. >> reporter: while the slide in gases has been a big plus to the economy, some say future benefits to consumers may be somewhat over stated. >> i don't think going forward we'll see natural gas prices fall much further. the plus for the economy, it's significant but a lot of it is in the economy already. >> reporter: natural gas prices have been on the rise recently and are expected to continue to climb into the new year, which may stall consumer savings for awhile. for "nightly business report", i'm sharon epperson. finally tonight, there were two lucky winners in last night's mega millions lottery drawing. one sold in atlanta, the other in san jose, will split a jackpot that ballooned to $6$64 million. the two winners will get about
$173 million. i went and bought a ticket right after the program last night. >> since you're here, you obvio obviously. >> keep trying. >> that's nightly business report for tonight. i'm susie gharib. >> i'm tyler mathisen, have a good night everybody. hope to see you back here tomorrow night. >> "nightly business report" has been brought to you in part by. >> thestreet.com, up to the minute stock market news and in depth analysis. our kwanlt rating service provides objective independent ratings daily on over 4300 stocks. learn more at the street.com/nbr.