tv Nightly Business Report PBS January 20, 2015 7:00pm-7:31pm EST
report" with tyler mathisen and sue herera. tale of two stocks. netflix beats earnings estimates and so does ibm giving investors in big bloom to cheer about initially, but there's more to the story. state of the union. president obama addresses the american people tonight outlining new proposals that would change the tax code and impact your money. china's challenge. growth in one of the world's biggest economies is at the slowest rate it's been in 24 years and comes at a critical time for the global economy. all that and more tonight on nightly business report.
i'm bill griffeth. tyler and sue are off tonight. ibm with better than expected earnings with a fast growing cloud computing business and security software and despite decreasing demand for its servers and storage products, here are the numbers that came out. adjusted earnings $5.70 a share, topping analysts forecast by 7 cents and fell from a year ago to $24 billion. that just missed wall street forecast. shares initially higher in late trade on the news but then turned negative on weaker than expected forecast guidance for the full year. bertha coombs joins us from the nasdaq with one big takeaway from ibm's report. >> reporter: bill the big takeaway that ibm getting smaller. the company went from over a
billion shares at the end of 2013 and as of december 31st they had 991 million shares. people said as their year over year revenues declined for seven straight quarters over the watch right now, the thing that's helped them on the bottom line is the share buyback and share reduction. some people call it financial engineering but top defense raters with the share cap now so low, below a billion for a company this size it could very well make them vulnerable perhaps to shareholders with a big stake and try to call the shots. >> something to keep an eye on from bertha coombs in times square at the nasdaq. thank you. after the bell tonight, netflix with blowout earnings last quarter after adding 4.3 million more subscribers. that was far more than expected after adjusting for certain items, the streaming video service took in 72 cents per share, easily topping estimates of just 45 cents.
despite cost cuts and all those new subscribers though revenues were just a fraction below estimates, but up from last year. but after projecting to be a fully global service by tend of 2016 except maybe in china, shares soared in late trade up as much as 13%. julia boorstin now from los angeles with her one big takeaway from netflix numbers. >> reporter: netflix shares flying higher with better than expected earnings results. international expansion. the company added more international subscribers than expected 2.4 million for a global total of 67.4 million subscribers. another factor unexpected the office. another reason earnings flew past expectations. past international growth is a big focus. ceo announcing the company will complete global expansion over the next two years, earlier than expected while staying
profitable. saying in letter to shareholders one advantage is with netflix being global it will be able to develop more originals and license more content. one international question remains, china where says they are still exploring options. back over to you. >> thank you, julia boorstin. well things weren't quite as dramatic on wall street overall on this trading day. the markets kicked off this holiday shortened week with modest gains but a flat finish and certainly a long way from the losses early in the session following some disappointing earnings. another sharp drop in oil price we saw today and concerns about that slowdown in china's economy that we'll talk about in a little bit. here's how things looked at the closing bell today. the dow and the s&p each handed 3 points higher. nasdaq up by 20. oil prices tanked nearly 5% today following forecast for the slowing global growth in 2015. west texas intermediate crude tumbled to $46.47 a barrel.
brent north sea crude fell 85 cents to just below $48 a barrel. in the bond market the yield of the benchmark ten year notes edged slightly higher to 1.76% but there it is below 1.8%. below the opening bell a strong u.s. dollar and tough competition for some popular drugs added up to a tough pill to swallow for johnson and johnson last quarter as it missed wall street's revenue forecast. j&j was the biggest down more than 2.5%. what happened and what's ahead this year for the health giant? meg tirrell has our story tonight. >> reporter: for the biggest health care company, the fourth quarter was just okay. growth continued in johnson&johnson's farm constitute
pharma business. it was j&j's forecast for 2015 that caused the stock to plunge today. primarily due to a stronger u.s. dollar. >> the dollar kept stronger versus these overseas currencies meaning the profits that multinational companies are generating outside of the u.s. are being brought back at basically lower rates, whether it's the euro the yen or some of the emerging market currencies like russia it's been a meaningful change in rates over the last six months. so if you're a u.s. company selling products outside the u.s. you're going to get hit when that happens. >> reporter: j.p. morgan analyst mark wienstein said we're likely to see from other companies. and j&j, tough 2015 comes from key competition including hepatitis c medicine olicio. looking for the consumer products businesses to offset slowdowns in growth. coming back from a series of recalls that took popular over
the counter medicine like tylenol and sudafed off pharmacy shelves. j&j could be a big acquirer of consumer brands and pharma products. >> the track record there has been exceptional. they've done a great job of using their ballot sheet there and i think after that i think there is opportunity for them to reinvigorate their consumer business with acquisitions. and that can be established brands in the u.s. it also can mean increased emerging market exposure and opportunity. >> reporter: so the world's biggest health care company could get even bigger. for "nightly business report," i'm meg tirrell. also reporting ahead of the bell was morgan stanley which saw fourth quarter profit rise to just over a billion dollars despite a slowdown in bond trading and weakness in its commodities unit making the bank miss wall street forecast. shares today down almost half a percent as a result. switching to washington now
as president obama gets ready to deliver his sixth state of the union address tonight, hoping to jump start the 2016 presidential debate cycle by tackling the deepening problems of u.s. income inequality and the dwindling fortunes of america's middle class. after a week of calling for new taxes on the wealthy, free community college tuition and paid leave for federal workers, the president takes on the national stage tonight in front of what could be the biggest obstacle to his proposals, main ly namely the new republican congress. john harwood with more in washington tonight. >> reporter: the things to watch for in the president's speech tonight is the tax proposals to lift middle class incomes. the tax side grazed $320 billion over ten years through two main methods. one is to adjust the capital gains tax system raising the top rate to 28%, taxing for the first time the appreciated value of assets passed from one generation to the next. he would also oppose a fee,
seven basis points on the liabilities of the 100 largest financial firms with assets of $50 billion or more. he would use that money to provide new tax benefits for working families a two earner tax credit an expanded child tax credit and income tax credit for workers who don't have children. he would also fund his proposal for two years, tuition-free of community college. all that would total $235 billion over ten years. look for the extra money to be spent in other ways in the president's budget which comes out in a couple of weeks. the people who would be subject to these new taxes could relax a little bit, not likely to pass in this congress but it is going to provoke a debate with republicans which they say they want to be part of on what to do about middle class incomes which have been stagnant for the last 40 years. for "nightly business report" i'm john harwood at the white house. >> let's turn to greg here the
chief political strategist with potomac research. we've got a laundry list of ideas presented to congress tonight. virtually none of them are expected to pass. what do you make of that? is it constructive to make simply political statements from both sides of the aisle when nothing is expected to get done? >> it's not constructive if you want to get anything accomplished bill but at the same time both parties and it's the reason why people are cynical, both parties are already thinking almost exclusively about the 2016 election. so these proposals will frame the narrative for the next election. >> and as far as taxes go the president proposing higher taxes on capital gains and so forth, higher income individuals and lower taxes for middle class. where does that go then if we're looking ahead to 2016 in that debate where do you think we will find middle ground? >> well i don't think we will. i think the democrats have done
some polling or had some focus groups and they've decided that the republicans could be embarrassed or put on the defensive if their representative is defending the top one percent or defending wall street and the banks. so no this is a pretty partisan argument and though maybe a few things done bill infrastructure but i think on taxes, both parties are at an impasse. >> this intriguing proposal of free community college for working individuals, where do you think that goes? >> probably nowhere unless you can find a different way to pay for it. it does look bill as if the democrats really want to make a target out of the banks. as john harwood said a bank a tax on assets or other democrats on the hill have talked about a wall street transaction tax. you need something to pay for these community college benefits. i just don't see how they'd pay for it. >> one thing you think may happen cyber security. everybody can agree something needs to be done about that.
>> i think the hack of sony was really a wake-up call and there could be worse hacks to come. and i think both parties are coming closer and close tore a deal including the president, that would allow the shares of information as the federal government gathers information from corporations. i think we could get a dweel there, bill and i think we could get a deal on infrastructure, maybe replenish the highway trust fund. >> no government shutdown this time around? >> that's an important point, bill. i think that unlike previous years, mitch mcconnell and john boehner are determined not to have any shutdown no debt ceiling, default crisis later in the year. i think boehner and mcconnell really want to show that they can govern and they certainly don't want to have another crisis that could affect the markets. >> greg valier with the research point. what china's growth could mean for the u.s. and across the globe.
more now on the international monetary fund lowering its forecast for global economic growth in the year ahead and its call for governance and central banks to jump start growth with new monetary easing policies and reforms. the imf said global growth is now projected to rise by 3.5% this year and 3.7% for 2016.
now, that's down by about a third of a point for both years. the lone bright spot for growth is here in the united states where the imf actually raised its forecast for growth this year. more now on that disappointing growth in china's economy last year. still pretty high of course but it is the slowest in more than two decades. so what's behind the downward spiral and what are the challenges that china faces in the year ahead? eunice yoon has more tonight from beijing. >> reporter: china's gdp came in at 7.4% for the year in line with the government's target of 7.5% but also the slowest growth of the country since 1990. what's weighing on the economy? a weaker housing marfgt soaring debt also overcapacity in several different industries and those issues are probably going to challenge the economy for the coming years. the imf is the latest to weigh in with some downgrades for the
coming years. they downgraded the outlook for 2015 to 6.8% from 7.1% and 6.3% for 2016. now, the report card today intensified the debate here over what beijing should do and what beijing will do. there's been several calls by many economists who believe that the economy is going to need some support, that beijing should step in with some sort of stimulus but the imf said that the main reason for their downgrade is because they believe that the authorities are going to be willing to sacrifice short-term growth in order to reach a longer term goal of rebalancing the economy and pushing to reform. they believe beijing is going to be very careful with its policy response in 2015. for "nightly business report," i'm eunice yoon in beijing. >> john brumlidge joining us now to talk more about china.
you've been an early champion of the chinese economy. you were among those back in the '80s, i remember you said china is the sleeping giant that's going to awaken. now we have this growth rate though that's the slowest in a generation. is that all part of the plan or does that come as a surprise to you? >> it's interesting, bill. it's the lowest number in umpteen years but it was above forecast above consensus. they are growing 7.5% roughly. if they grow 7 this year upcoming that will be twice the rate of the u.s. they'll make twice the contribution of the u.s. to the global economy and it will be twice the value of what it was ten years ago. the thing is the chinese economy has grown so much so long it's grown up and it's about the size of the u.s. economy in purchasing power. so 7% growth of that big beast
is a lot of money compared to either what we're doing or they're doing abroad but chinese economy is changing as the imf report said less heavy manufacturing, less infrastructure less investment spending more consumer products. so you have to be aware of that. >> so a more maturing economy and with that less infrastructure they're not buying as much in terms of materials. so do we see a decline in materials cost globally as a result of this? is that what we're getting at? >> yeah you're right, bill. we're all trained to think chinese growth as higher copper prices steel prices zinc prices but the fact is those are parts of the economy that are shrinking now and the parts that are growing are consumer goods. if they grow 7% in real terms this year and 3% inflation, that means the average person in the average city in china will have a 10% increase this their income. that's what is driving the consumer side of their economy.
so where you want to be careful about that is countries like australia or chile or other resource producers that have been making a lot of money out of this that won't, australia in particular with lower oil prices and energy prices, coal in particular and lower materials prices is going to hurt their economy but also their currency this year. >> if you're going to make an investment there, you like chinese real estate but you don't like their stock market why? >> well actually i like their private equity market and the reason is the following: it's a structural reason. in china, the big banks were created to loan money to state-owned companies which is a smaller and smaller share of the economy. the growth in china is almost all private fast-growing companies. they don't have a banking system to feed it so the shadow banking system has been invented and created just to feed that growth. private equity is where that money comes in. sales, lease of corporate office that kind of thing. the stock market is not ready
for broadway. they don't have the audits. we basically don't trust the institutions the way we would in a country where they have judges with long black robes, so i like to stay away from that. >> in 20 seconds for people wanting to participate in the growth in china, how do they do that then? >> at the moment since the chinese stock market has gone up so fast i want to get some distance and stay away from that market for a while. if we see a big correction i might change my mind later in the year but right now, i want to own no chinese exposure no chinese equities and private equity in china is too difficult to get to for most people but for the moment, make your bets on the u.s. economy. that's where the real growth will be this year. >> john thank you, good to see you. >> good to see you, bill. crude, layoffs mounting in the oil patch. that's where we begin tonight's focus. baker, hughes and halliburton the big latest to announce a
layoff. combined 8,000 jobs and along with that both companies announced earnings that topped estimates on strong demand here in north america. halliburton is actually going to process a buying. baker hughes as well. companies rose more than 1% today. not everyone though is suffering because of the falling crude prices. delta airline said lower fuel costs should save the economy more than $2 billion this year. its results topped estimates as it was also helped by an increase in passenger traffic. shares soared by 7% on delta to $49.17. outer wall the parent of red box. the video rental kiosks announced executive changes today. ceo is stepping down and resigning from the board. no explanation was given and another board member was appointed as interim chief. investors didn't like that. shares plunged as a result by 20% to $62.05.
investors bought smith and westman. hiked for the third quarter and this year citing improving consumer demand for guns. shares rose 16.5% to $11.67. and there was an interesting day for shares of orbitz. that stock was halted at one point and then it was reopened on a report that the online travel site is exploring a possible sale and has drawn interest from private equity firms as well as other internet companies. you can see shares popped midday closing 9% higher to $9.95. that story is not over yet. pepsi pepsi co led by nelson peltz looking to split up the company by the snacktivision. rose slightly today. shake shack a long way from upscale burgers out of a single
push cart in a new york city park a decade ago. it's planning to raise up to $80 million in an initial public stock offering. the burger chain now has 35 u.s. locations. more in the middle east in russia turkey and england and it expects to put 5 million shares up for sale now priced between $14 and $16 a piece. don't know if french fries are included with that though. coming up why lawmakers in the country's biggest city are zeroing in on a start-up that's trying to change the way the hotel in >> more fallout now from the swiss national banks.
the decision to remove the cap on the frank versus the euro last week which sent the value of the frank soaring. plunged after it lost $200 million on the frank forcing it to seek a bailout loan just to stay in business. today, shares plunged even further down. another 87% after we all learned the terms of that loan it received from leucadia national corp. a staggering 17% annual rate on the $300 million loan. a big win though for big credit card companies. the u.s. supreme court upheld a lower courts ruling regarding the so-called swipe fees every time a debit card is used at the checkout counter. the highest court declined an appeal on the national retail federation arguing a 71 cent per swipe cap set by the federal reserve years ago is still too high.
that story may be finally over. finally tonight, a heated public hearing in new york city over a company that has shaken up the hotel industry. officials are trying to decide whether air b&b's short-term rentals are legal and whether the popular service is taking some much needed apartments off the rental market. kate rogers has our story tonight. >> reporter: the sign of a truly disruptive kaine is ive company is railing with the establishment. ride sharing services uber and lindt facing global opposition. today, home sharing start air b&b's fight to city hall. city council members heard testimony from a variety of groups. air b&b members, the mayor special enforcement and tenants who say the service is exacerbating the affordable housing crisis in the city. >> when you take the whole building we don't know if those would have been rent regulated
units. if you're taking one or two units in the building for instance, that impacts the he quality of life for the other residents in the building. >> reporter: in fact the report released last fall eric sneiderman said nearly 75% of air b&b rentals in the city are illegal. air b&b said it's fine to weed out illegal hotels but stands to benefit by legalizing the services. the start-up claims it generated 768$768 million in economic activity and guest paid $330 million in sales tax and money spent at local businesses in new york city alone. supporters say they don't mind taxes or regulations. they just want to see them made clear and want to be a part of the conversation. >> so i don't think that we're taking anything away from the economy of the city because all of our guests are mostly international travelers only coming to spend money here. >> i'm not a legislator so i'm
not going to try to write the laws but i'd like to sit down at the table with the legislators and contribute the ideas. >> reporter: regulators say those sharing their homes must abide by the law. they must be present in their home. while rented out, it must be the primary residence and the rental can't be less than 30 days. air b&b in new york city does remain to be seen but last year we saw big cities like port wind and san francisco allow the home sharing start-up to collect and remit hotel taxes which of course is a huge move for the sharing economy. in new york city for "nightly business report," i'm kate rogers. and that is "nightly business report." i'm bill griffeth. thanks for watching. see yo
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