tv Nightly Business Report PBS November 5, 2013 6:30pm-7:00pm EST
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 i nal sis. our kwaunlt rating service providing objective independent ratings daily on over 4300 stocks. learn more at the street.com/nbr. what goes up, may not come down. stocks soaring but will the gains continue over the next couple months? we'll tell you what history says as 2013 hits the growing stretch. growing pains? twitter one of the most high stock offerings of the year is days away from going public but do the risks of investigating
outweigh the rewards? staying put. many adults aren't moving out of their parents' homes. that depresses household growths. how stay at home kids are hurting the housing market. that and more for nightly business report on tuesday november 5th. good everyone. i'm tyler mathisen. >> i'm susie gharib in for season season. stocks ended mostly lower with momentum stoling on economic weakness in china and europe and a hand of less than stellar earnings. the major averages are sitting at all-time highs and a 13-year for the nasdaq. the dow fell nearly 21 points battling back, though, from a triple digit loss early in the session. the nasdaq bucking the trend by gaining three points and s&p down five. in the markets just like everywhere else, they say what goes up, must come down but if a
quick look at wall street history is any indication, stocks may head up, up and away for the remainder of this year. dominic chu explains. >> reporter: sure, the stock market sits near record highs, but there's a good chance that the current rally still has some legs. that's what history is saying. the s&p 500 is up 20% this year. there is only a few times that the index has been up by 20% in the first ten months of the year. in 1975 the s&p was up 30% by pact. in 1989 it was up 23%. in 1995 it was up 25% and in 1997 it was up 23%. in each of those instances stocks tacked on gains. over the last he feel sen trurry when the market is up this much in november and december, stocks finished higher every time.
granted, it's only four cases but still worth noting. what if we went all the way back to 1929? we hit 12 of those instances. 11 out of those 12 times stocks finished flat to higher to end the year. what was the average gain in the last two months? around 5%. some investors are comfortable riding the wave higher. >> the market has been consolidating since almost mid may. we're only 5% higher than mid may's point now and not as extended as people think it will be. i think we'll probably go higher. >> reporter: there are still step ticks. >> when everything is too good to be true or everybody is buying, it's time to step back and say do i want to be the last one in? >> reporter: the bulls are firmly in control and the numbers support their case but it may pay to be cautious towards year end. and it's not just stocks that may see more growth soon
following sluggish growth in the second half of the year, eric resengren is predicting a pickup in economic growth in 2014. >> the expectation, the beginning of next year we'll see better economic data and growth closer to 3%. part of that is on the consumer side, the stock market is high and housing markets going up. we're employing more people so that should result in a better situation for consumption. >> and he also said that he sees no hurry to raise short-term lending rates and expects inflation to remain low, even if the unemployment rate dips as low as 6.5%. gasoline prices got a little bit cheaper overnight falling a penny to $3.24 nationwide according to aaa and gas buddy.com says five states have gas stations posting prices below $3 a gas lan.
the proposed keystone pipeline is supposed to provide massive amounts of crude from canada to the gulf of mexico but the decision on whether to build keystone has been debated and delayed because of washington politics. so now the nation's railroads piped up but will it work? jackie deangelis has more. >> reporter: the keystone pipeline surrounded by controversy, a decision pending that would transport canadian oil to gulf coast refineries on north american oil. but do we need it? believe it or not, rail is increasingly becoming a viable means for transporting supplies and a few key companies in canada are moving quickly to at capacity. >> it hit a record of 4.1 million barrels a day and expected to grow to 5 billion barrels a day. >> reporter: an lit tick firm
ihs can estimates it could grow to handle 700,000 barrels of crude a day from the oil sands region in western canada, and that's a low estimate. right now, trains carry about 150,000 barrels from there. >> without the keystone pipeline, crude by rail capacity is expected to increase substantially from about 500,000 barrels a day today in canada to over 1 million barrels a day by the end of 2014. compare that to keystone, the project if approved is designed to carry about 830,000 barrels per day, so similar amounts of oil can movie ya pipeline or rail but how much will it cost and is rail shipping cheaper than the pipeline? industry data shows shipping oil domestically by rail is 4 to $5 more expensive per barrel than by pipeline and from the canada oil sands to the gulf coast, that would be about 7 or $8 more expensive per barrel but still offers an alternative to move
crude around. critics of the rail build out raise safety concerns like the fateful accident in quebec but they say pipeline haves safety issues, too. >> we are shipping over 800,000 barrel as day of ethanol throughout the country to meet motor fuel requirements and one rarely hears about an incident by rail. >> reporter: while it may cost more to transport crude by rail, the infrastructure so in the works and could be viable if keystone doesn't move forward. well good news for would be home buyers who have put off purchasing a home because of rising prices. the real estate researcher core logic says home prices rose just 2/10ths of one percent from october, those sharp price increases may be leveling off just now. that after making huge month to month gains over the past year. a relatively obscure statistic about the housing
market is giving economist insights about the recovery. it's called household formation and falling dramatically and may cast a shadow over entire real estate sector. dianna, welcome, let's start with what household formation is. >> sue, when someone is living in a home with somebody else moves out of that home into another home by themselves. you're taking multiple people and putting them in different homes. it can be a rental apartment, a home they buy or someone else owns. it's creating the second household when there was one. >> has it been falling off and what would normal be? >> normal historically is 1.1 million new households formed every year. that might sound like a lot, but if you think about immigration, you think about young people getting out into the housing market, graduating from college, historically it's about 1.1 million. during the housing boom we saw
the numbers much higher. now in q 3 we got a report today saying 380,000 household s were formed in the third quarter this year. that's down from 750,000 the previous quarter. that's a dramatic drop and not the kind of thing we want to see in a housing recovery. you want to see more house holds formed and more demand for new house sglg what is keeping that demand down? is keeping household formation in the basement, so to speak? >> kids living in the basement. the younger kids not moving out of parents homes and people living with roommates because they can't afford their own place, beit a rental. some people are cash strapped, they can't get the credit, whatever the case, they are just not able to move into a home of their own. >> how much is this going to effect the housing recovery as we move into 2014 and beyond? >> it's certainly not a good sign. again, you want to see the household formation growing. the builders certainly want to
see it. we snow there is a lack of housing supply out there, but there is a lot of investor demand playing into that. investors bought up the homes and want to rent them out. household formation has to take place to get more renters into the market, right? you need to see more households for there to be more demand and for the builders to build more homes and there forget more healthy. was this a weird quarter or a trend to see going forward? >> i know you'll watch it closely for us. thank you so much. for more head to our website, nbr.com. still ahead, one day after sac's guilty plea and j and j's bien fine, they examine how much responsibility a ceo should take when something goes wrong at the company he or she runs.
by now, just about every one has heard about twitter's initial public stock offering later this week. but twitter is not alone. 15 other companies are currently having ipos this week, the most for any week since 2006. among the companies going public, barracuda networks that provides internet security and storage and the web developer wicks.com. two more days until twitter goes public and in regulatory filings for it's ipo the micro blogging company that has yet to turn a profit laid out more than 30 pages of risks that that business faces. so if you're thinking of investing, how risky is twitter for your money? kayla has that story.
>> reporter: in risk, no reward and that being uttered as twitter goes public. main streets buzzing about it, wall street clambering for it despite warnings risks could lay ahead. from common to kwurk ki, 32 pages in company filings. the gravest risk, growing pains. twitter needs to make more money from more users, especially outside the u.s. expansion is costly with revenue and it could have a hard time getting them to interact with ad contact. many don't do that. it could be put off by advert e advertising that makes up nearly all of twitter's earnings. facebook, yelp, linked in fighting for lucrative deals. it could be an up-mile climb for
twitter. >> they need to make very significant changes to the features to be profitable and we don't know how the community around twitter will respond to that. >> old text bringing a fight and ibm sues over three patents. some risks are less straightforward, bad internet service could kick users off and could mean fewer mobile down houds and how twitter measures success could cause concern. in other words, are the timeline views the eyeballs from the early odds. former ceo of one.com casualty says times have changed. >> the focus is more on individual companies that have really stood the test of time, are generating major revenues, have massive multi-hundred million user bases, and i think that changes things. >> reporter: wall street has high expectations. there are more orders than shares to go around.
twitter may go above $2 billion and valued at more than 17 billion. analysts say the stock could sore, a high prize for a high risk. for "nightly business report", i'm kayla to usc he. the company also upped the guidance for the year and announced plans to open up 100 more stores next year. the stock popped to $79.13. aols net income dropped a whopping 90% from a year ago because of restructuring and write downs relates to the patch unit and revenues were strong and that's what investors focused on. the stock up to 4 2.02. the share of orbitz didn't meet estimates and lowered the
full year forecast. revenue jumped 11% but that didn't seem to impress investors. the stock finished at 7.69 dlashz. shares of gt advanced technology surged on news with a deal with apple to supply with sapphire material. they use it for the iphone 5 is. it finished at $10.10. tesla reporting an earnings beat after the bell but the shares initially dropped in the after hours session. the electric car maker delivered only 5500 model s cars and the fourth quarter outlook are lower than analysts are looking for. that's ex investors focused on. the stock ended to $176.81. build out insurance aig may file a lawsuit against morgan stanley over 3.7 billion in
mortgage backed securities it bought. they are trying to settle outside of court but regulatory filings show a lawsuit from aig may becoming soon. talks between another major bank, jp morgan chase and the justice department appears to be back on again. disagreements over a 13 billion-dollar settlement hit a snag over a separate multi billion-dollar settlement, the deal reached with fredy may and fannie mac. johnson & johnson and the hedge fund sac capital would pay 4 billion-dollar to settle long-running crime anytime investigates but the government didn't charge individuals in either case and that has some in the world of business and law questioning whether companies can commit crimes if their executives don't. james steward, columnist at the new york times weighed in that
debate and joins us now. jim, welcome, good to see you. >> thanks, tyler. good to be here. >> can you have criminality on a corporate levels? >> you can. they can act together to commit a crime in a way that any individual might somehow escape the requirements. it seems paradox but they are collections of people and treated as people and have freedom on speech and can enter into contracts and they can commit crimes. >> jim, it seems like the seck seems to be different than, say, cases in the past because, as you panned in your article, you know, steven cohen was sac and is sac capital so almost like you quoted one professor, the alleged villain basically is the same as the company. >> right, that's an important point since 100% of it was owned
by steven cohen. they are coming out of his net worth. that's anything although he'll still be a billionaire. you look at johnson & johnson and the investigation of jp morgan, these are public companies and become more difficult cases because people say the shareholders are paying fines and didn't know anything about it and didn't do anything wrong. why should they have to suffer? that's a legitimate question the justice department had to question when they decide whether to go after the companies. >> let's take the case ofson and johnson that will settle for $2.2 billion and look at jp morgan chase that may or may not admit criminal wrongdoing and pay up to $15 billion. the ceos have not been charged but a separate matter would be if they have corporate responsibility and should pay with jobs. where do you come down on that? >> it depends on the facts of each case. the ceo always says the buck stops here. the buck stopping there usually
means, with jp morgan, i'm not as familiar with johnson & johnson. they fire people lower down the chain, sometimes way down the chain and the upper level people continue to draw salaries and bonuses. jamie diamond took a pay cut and has gone symbolically through these incidents and ultimately it's up to the board to decide if they have to go farther. the interesting case is the head of ubs after it wrapped up transgressions. the chief executive was not directly implicated and not charged with a crime but he stepped down and said look, the buck stops with me. i take responsibility. i'm resigning. was he pressured by the board? i don't knowme. at least there was public accountability. it has to be decided case by case. was it tolerated? there knowledge? what's the best way to prevent it in the future? >> in the very least, if the fine is hefty enough with sec
and other cases, it certainly sends a message, a sort of chill through corporate america, does it not? >> the point is to detour others. that's a great example, they look at the dollar signs and don't want to see it happen to them. i think it will probably have a very variable deterrent affect. if they have to sacrifice earnings from gains on the stock, in theory, they may pressure the board to hold people accountable and remove ceos. that's how shareholder dem mockemoc -- democracy is supposed to work. still ahead, what is at stake for consumers and big businesses to require all genetically modified foods to be labeled?
president obama met with the chef executives of some of the nation's biggest come pae ppaniy with immigration reform. the economic benefits of legislation that already passed in the senate but facing a tough challenge in the republican controlled house. >> we know that the senate bipartisan bill that already passed would grow the economy by $1.4 trillion above and beyond the growth that's already taken place. we know it will reduce our deficit by $850 billion. >> the president says the senate passed a bill that would secure the nation's boarders and provide a road to citizen ship for 11 million immigrants already in the u.s. but
initially entered illegally. >> the white house is asking other ceos to explain why some american's health insurance plans were canceled. the chief of staff met with some of the nation's largest health insurancers today getting their in put on the healthcare.gov market place and explaining cancellations notices sent to customers signing up for new plans on state and federal websites. at a state senate committee meeting, marlin, the head of the centers for medicare and medicaid services that control healthcare.gov says information on the number of enroll lees will be released next week. >> if we can know how many hamburgers and cars and recorders are being sold every day, how come we can't know how many people are being enrolled in obama care? wouldn't it build confidence in it? >> we'll have that information next week.
>> that's once. why don't we know it every day? >> next week may not be soon enough for some on the hill. the house weighs and means committee chairman soupaubpoena cms asking for the information. election day, in washington state a controversial ballot initiative caused a multi million dollar food fight over the labeling of genetic foods. >> reporter: in washington state they are paying crazy amounts of money to take food labs to the next level. >> people have a right to know what is in their food. >> reporter: air waves have ads of i-522 that would be the first law in the nation to mandate labels on foods. >> i-522 claims are very
misleading. >> reporter: $30 million have been spent with opponents claim there is no proof gmo foods cause harm and a label will drive up grocery bills. >> this is an attack on our family farmers here in washington. it's a resickled initiative from california that they rejegt add year ago. >> the opposition has fought labeling every step of the way, nutritional and ingredient label list and fought whether to label farm raised salmon and they deserve. >> reporter: many foods will be exempt. >> the new law will label meat from genetically labeled animals. what it would not do is label meet from genetically engineered feed. >> not one country in the world required labeling for genetically engineered feed.
when we eat that, we're not genetically engine neared. 522 is leading but not much, one race too close to call but voters agree on one thing. they are sick of hearing about it. >> it's a lot of money going into a big waste. >> too many of them. >> for "nightly business report", jane wells. finally tonight, an update on a story we told you about last night, the kick off to the busy fall auction season that christi is in new york city and the bidding was a bit of burst. the 62 works of art up for sale from the private collection of a swiss dealer, 17 of them left unsold and the total take for the night was $92 million, far short of the $147 million on the low-end of estimates. >> so you can get the balloon dog -- >> i want the balloon dog -- but i'm worried about the lawn. the lawn and dog -- >> that does it for us tonight
on "nightly business report." i'm sue herrera thanks for joining us. >> i'm tyler mathisen. have a good night. we'll see you back here tomorrow night. "nightly business report" has been brought to you by. >> thestreet.com, up to the minute stock market news and in depth analysis. our quantity rating service provides objective ratings daily on over 4300 stocks. learn more at the street.com/nbr.