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tv   Nightly Business Report  PBS  July 23, 2010 12:00am-12:30am PST

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>> susie: stocks surge, with the dow notching triple-digit gains just one day after taking a big tumble. so what gives? it's earnings, of course. >> tom: several blue chip results hit the street, including strong numbers as expected from microsoft after the bell. you're watching "nightly business report" for thursday, july 22. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
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this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening, everyone. strong earnings from corporate america gave stocks on wall street a big boost. tom, investors turned positive on stocks and the economy after seeing better than expected earnings today from big companies like u.p.s., caterpillar, at&t, and 3m. >> tom: susie, it was a dramatic u-turn from yesterday's sell- off. the dow gained 201 points, the nasdaq added 58.5, and the s&p 500 was up 24 points. volume cut both ways, with big board volume slipping a bit, while the pace of trading picked up on the nasdaq. >> susie: after the closing bell, microsoft and american express reported quarterly
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results higher than estimates, but amazon's numbers fell way below expectations. but stock analyst scott wren of wells fargo advisors says economic data, not earnings, are what investors need to watch from here on. >> earnings have certainly been a bright spot and i think they have helped, but is that really going to carry us significantly higher? i don't think so because there are still plenty of issues out there-- traders are uncertain as far as how slow the economy is going to recover in the second half of the year. >> susie: investors even found a silver lining in today's gloomy report on existing home sales. even though june sales were off 5%, home prices stabilized month over month. if that's a trend, it might spell good news for homeowners in distressed neighborhoods. a new study by a trio of economists from harvard and m.i.t. shows just how much of a hit home prices have taken from foreclosures.
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jeff yastine spoke with the lead author parag pathak about the challenges facing the housing market. >> what i find on average is 27% of the value is reduced. if you're your typical house ñr is $200,000 that's $50,000 reduction in value. >> as soon as it hits the foreclosure process, a 20% hair cut to the value of the house? >> that's ri >> now your study was also looking at the proximity of other houses to that foreclosed house in the neighborhood, and you found there, as well, the closer the house -- a house they own is to a foreclosed house, the more it's likely to lose. within a quarter mile you lose up to two percent in value. within 250 feet, you could lose up to seven percent in value if you're that close to a foreclosed property. does that surprise you?
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>> it was surprising. if you benchmark our estimates and say what's the indirect effect of a foreclosure, you have to remember that each house surrounding a foreclosure is affected. depending on the density of the neighborhood. the effect can be quite large. we found indirect effect is larger than the $50,000 i quoted for a typical area in the state, each foreclosure impacts the value up to a $100,000. that's $2,000 rouchl per house within the distance of say a football field away. >> let me sku a question about the impact of this study. what's the importance of the study? why quantify this impact of foreclosures in a neighborhood? >> i think there's two thing that is are important to remember here. the first thing is we "all things connecticut" foreclosures cause price
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discounts, but we didn't know how large it was. many people thought it was a drop in the bucket, but what our study sos is the direct affect is more like a tidal wave. $50,000 purpose house. the second effect of the study is the innocent bystanders. the homeowners ta live near property that is have been foreclosed. we find they're also impacted by the foreclosure crisis. >> let me ask a final question to you which is, your study looks at about 20 years worth of data in massachusetts. that state, as well as other states have seen many foreclosure waves during that time have you seen data which shows the rebound in prices they'll see once the krpt foreclosure crisis currently foreclosure crisis subsides some what? >> there is something encouraging about that. in massachusetts where there was a big wave in the early 90s. if you look at the price of
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foreclosed homes and follow them in the subsequent transactions, many of them appreciate more than the typical home in the second transaction. that's another issue for policy. we think about the policies that try to encourage people to pfrn foreclosed homes and upkeep them. that may be a way. >> thank you for your time on the program. >> thanks for having me. >> our guest, an economist at m.i.t. >> tom: here are the stories in tonight's n.b.r. newswheel: millions of out of work americans will soon begin collecting unemployment benefits again. this morning, the house approved a four-month extension of those funds; this afternoon, the president signed the measure into law. that's welcome news to the growing number of people looking for jobs. the labor department said first- time unemployment claims rose more than expected last week, up 37,000 to 464,000. and oil prices spiked higher on the increased possibility of a
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tropical storm heading into the gulf of mexico. in new york trading, september crude rose more than 3.5%, settling at $79.30. still ahead, are airline stocks ready for takeoff? tonight's "street critique" guest says that all depends on ticket prices. airline analyst ray neidl joins us. >> susie: general motors hopes to drive up sales by financing more of them. today, it agreed to buy sub- prime auto lender americredit. g.m. hopes the $3.5 billion deal will make it more competitive. the price for americredit: $24.50 a share in cash, a 24% premium over yesterday's close. g.m. says car deals have been left on the table in the last year because buyers couldn't get financing. by adding americredit, it hopes to help buyers with less-than- perfect credit. sub-prime customers buy two of every five cars sold in the u.s. >> tom: g.m. also is busy gearing up for the rollout of
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its first mass-produced electric car, the chevy volt. many other vehicle makers are also launching electrics, and some cities are getting ready. erika miller checked out new york city's first charging station, and whether it could help spark sales of plug-in vehicles. >> reporter: it's not yet attracting cars, but it sure is attracting attention. this four-foot-tall, thin electric car charger is the first of its kind in new york city. well, that's not exactly true, there's another one on display at the smithsonian cooper hewett museum celebrating innovative design. the charger we're talking about is available for public use, located at a commercial parking lot in midtown manhattan. scott miller works for the california company that installs the chargers. he says encouraging electric car sales not only helps the environment, it also creates jobs. >> we are creating a whole new industry. detroit is revving up for electric vehicle productions. all the vendors for the major automobile companies are gearing up. the battery manufacturers are
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gearing up. so there will be some substantial job creation due to this. >> reporter: the chargers are part of the chargepoint america program, funded by the federal government. in addition to new york, eight other regions are also participating: los angeles, sacramento, california's bay area, austin, washington d.c., detroit, orlando and redmond, washington. they will be getting a combined 4,600 chargers in the next year and a half. >> right now, there's not much demand for electric car chargers, because there are not very many electric cars on the road. but that could change as car makers start selling mass-market electric cars later this year. 10 auto makers are planing to roll out plug-in cars, including g.m., ford and nissan. the only pure electric car available now is the tesla roadster, priced at over $100,000. but for all the attention electric cars are getting, they face an uphill battle. analyst jacob grose thinks it
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will be a decade or longer before there is widespread acceptance. >> i can tell you, from my analysis that i've done, electric vehicles are not going to represent more than a few percent of the entire vehicle fleet-- or even new vehicle sales-- by 2020, under pretty much any realistic scenario. >> reporter: he says sales will depend on many factors, including the cost of the cars, the price of gasoline, and federal subsidies. >> the past is littered with technologies that were going to be the next big thing and weren't. >> reporter: but chargepoint america is optimistic, hoping that if you build it, someday they will come. erika miller, "nightly business report," new york.
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>> whax* a difference a day makes. big change in the wall street rally. and investor psychology about buying stocks and based on today. >> lots of sentiment changes in a short period of time. we saw the major indices make up all of yesterday's losses. let's take a look at tonight's market, folks. >> tom: it was a fast move higher out of the gate on the not-bad-as-feared home sales and day two of chairman bernanke's economic testimony. the s&p 500 opened and stayed strong, except for a slip off its high in the last half hour. after the close, the focus again turned to earnings, with
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microsoft leading the way. its windows 7 operating system and the new office software led to earnings coming in a nickel better than estimates. revenues also were stronger than anticipated, with sales up in all five of its business units. shares participated in the rally before the earnings news. after the close, microsoft stock saw some fractional losses. amazon shares saw heavier volume and buying ahead of its earnings. but, after the close, the stock fell as much as 15%. if that weakness holds through until tomorrow, shares will be at nine-month lows. it was an earnings miss for amazon. margins were essentially flat even as net sales jumped 41%. and dow component american express illustrates just how far it has come in a year with earnings tripling compared to last year. it set aside less money to cover bad consumer loans and spending by card members was up. a-x-p was the second-best percentage gainer of the dow today, up 4%. shares were fractionally lower after hours. investors had no shortage of earnings to consider, but the leading dow component today doesn't report earnings until
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next week. boeing is at a three and a half week high after today's 5% jump. it added 103 new plane orders from the farnborough international air show in the u.k. this week. competitor airbus raised its new-order target for the year. bringing up the rear for the index was travelers insurance. midwest storms last quarter hurt its financial performance. profits were a penny light as bad weather took its toll. travelers also brought down the high end of its yearly forecast as commercial policy renewal premiums are not meeting expectations. shares saw heavier volume on today's weakness. the stock has traded between 48 and 52 since late april. three other dow components turned in their financial report cards today. 3m beat the street and raised its guidance again. shares were up 3%. at&t's results were better than expected. wireless subscriber growth continued, but it slowed from previous quarters. at&t was up 2%, and caterpillar was up more than 1% after much
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better than predicted profits. cat also raised its yearly guidance. pardon the pun, but transportation was moving with earnings from airlines, a railroad and u.p.s. a higher volume of packages at u.p.s. helped it easily beat estimates. strength in asia helped. union pacific saw shipped volumes grow and freight revenue was up across all divisions. that added up to better the expected results. and airline jetblue, it saw record revenue as demand picked up and profits were two cents better than expected. jetblue led the way for the sector, up 8.5%. we'll have more on the airline sector coming up in a moment. union pacific and u.p.s. were up by about 5% each. finally, a couple of stand-outs to the downside. pharmacy benefits manager medco fell to a new 52-week low. strong earnings were overshadowed by worries that fewer drugs losing patents next year means fewer new generic drugs, which come with higher margins. mellanox makes connections between semiconductors.
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shares lost a third of their value on a weaker revenue outlook. and that's tonight's "market focus." >> supply and demand at 40,000 feet. there may be more seats in the air if the airline industry follows delta's lead and adds capacity later this year. tonight's guest says the biggest issues for the industry is ticket prices. he's an independent airline consultant joining us from the nasdaq. welcome to nbr. >> thank you. >> do you think there will be
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demand if there's more seats in the air, and does the industry have the pricing discipline to keep up the profits? >> i certainly hope so. the industry has done a fantastic job through the two year recession in cutting capacity and cutting costs. now they start to build up again, and i hope they don't add too much capacity too soon. i think most of the capacity coming in will probably be replaced with older aircraft. at this pointed jumping the gun. >> do you think their pricing discipline in the industry considering what it has gone through. >> it has great pricing discipline in a weak environment. except the airlines keep the seats full by sdounlting. right now they have the discipline to price the constructs. >> that's on the price side. but jet fuel is the biggest expense for many of these airlines. when we take a look at how a
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lot of airlines deal with jet fuel in the second quarter there was a wide despairity in terms of jet fuel. united saw an 80% increase, and delta just 8%. what's the difference? >> the uncertainties of the derivatives market and so forth. with the still weak economy, fuel prices should somewhat behave as they go into the recovery. which are best poised to manage these costs? >> southwest has been a champion in that area simply because of the stronger balance sheet. >> i want to talk about merger activity. major carriers have gone from six to four with dealt delta and northwest, and pending continental united deal. which carriers are ripe for acquisition? >> the u.s. would be well served for the consumer with three major hub and spoke
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carriers, plus a couple of low cost carriers like southwest and jet blue. tai. it would eliminate the competition and airlines could make a steady profit. >> you would to name any names that could be on the sale wlok? >> most of the mergers have been done already. there's only two out tl, american and us airways, and i don't see a potential >> lafrk lafrk and regional airlines, this is a standout, the best performing regional airline stock to date. what sets it apart. >> i was on the panel that chose them. it has a strong balance sheet, and good management and a good niche on the west coast where they continue to make money. their stock was knocked down and really rebounded. the only thing is they could become an acquisition tarpget chi think would be bad.
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>> any ownership of alaska airlines any ownership for you? >> no. >> thank you for being with us. independent airline consult anlt. >> and here's what we're looking for tomorrow. >> susie: a new twist tonight is making the disaster in the gulf even worse. now, online crooks are targeting victims of b.p.'s massive oil spill. florida's attorney general is warning consumers about an e-mail scam. the letter claims to be from b.p. ceo tony hayward and offers half a million dollars in compensation for the spill in exchange for personal information. the a.g. says it appears to be the latest version of a long- running phishing scam out of
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nigeria. >> tom: the economic downturn is taking an especially hard toll on hispanic americans. a new poll by the associated press and univision interviewed more than 1,500 latinos. nearly half were very worried about losing their jobs, paying bills or saving for college. that's much higher than the general population. experts say latinos are more vulnerable because they tend to work in industries that have been hard hit during the recession.
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>> susie: you may have seen the late night commercials offering to buy your life insurance policy for cash. that business, known as "life settlements," is loosely regulated. but now, the securities and exchange commission is changing that. it wants to classify and regulate life settlements as securities. and, as stephanie dhue reports, it's not the only agency calling for new protections for policyholders. >> reporter: you can find golden girl betty white pitching life settlements on the web with this message. >> "your existing life insurance policy may in fact offer a new road to the financial freedom you desire." >> reporter: she's talking about selling a life insurance policy to a third party for more than its cash value, but less than its payout at death. the third party continues to pay premiums on the policy, collecting the benefit when the
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insured person dies. companies like coventry buy insurance policies and sell them to investors. i asked coventry c.e.o. alan buerger about his business at a conference this spring. >> it's a simple concept, someone has a life insurance policy, it's a million dollar policy, it has $40,000 cash, they can get $40,000 from the insurance company or from a life settlement company they can get $80 or $100 or $200, that's very simple. >> reporter: a simple concept that's loosely regulated. the g.a.o. reports 12 states and the district of columbia have no laws or regulations for life settlements, and there's little uniformity in states that do have rules. frank keating of the american council of life insurers worries about life settlements, and what's called "stranger originated life insurance," or "stoli." that's when policies are taken out only to resell to investors. >> this is a system that
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corrupts life insurance, wrecks the white-hat image and the reality of the industry, and encourages people to buy a policy for short-term gain, but for long-term loss. you know, die as quickly as possible, you have a group of investors who can't wait for you to die, what a ghoulish business. >> reporter: but brueger says his business is no more ghoulish than life insurance companies selling annuities, and his industry doesn't condone stranger originated life insurance. he says the real problem insurers have is competition. >> the life settlement business and the life insurance industry are competing for the lapse or the surrender of a policy, the life insurance industry wants to collect the premiums, but, would like to avoid the claims, so they don't want the policies to continue in force. >> reporter: still, his company's business practices have been under fire. in 2006 and 2007, two states moved against coventry alleging
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it made secret payments to life settlement brokers. if those brokers convinced people to sell policies for low prices and enticed rival buyers to drop out. coventry paid $12 million to settle the allegations, but admitted no wrongdoing. >> coventry has provided consumers with $3 billion, which is $2.6 or $2.5 billion more than they would have gotten had the insurance carriers, had the policies been surrendered or lapsed. >> reporter: senate aging committee chairman herb kohl is calling for tighter regulation of the life settlement business. the s.e.c. also recommends greater oversight. in the meantime, insurance policyholders and investors are largely on their own to figure out if the risks are worth the rewards. stephanie dhue, "nightly business report," washington.
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>> tom: finally, feeling a little cranky today? if you were, you're not alone. scientists at harvard and northeastern universities looked at more than 300 million posts on twitter and found people are at their angriest on thursdays. that bad mood peaks in the middle of the day from about noon to 3 p.m. the study searched for words linked to certain moods and tracked how frequently they were used on twitter. the study found folks are at their happiest on sunday mornings. >> we're angry on thursday because it's not friday, we're happy on sunday, because it's not monday. >> i not coo put a fing or t. i was wondering what it was today around 3 tx*nd00 when i was getting crank ef. >> that' . >> susie: that's "nightly business report" for thursday, july 22. >> tom: i'm tom hudson, good- night everyone and good-night to you too susie. >> susie: good-night tom. i'm susie gharib. goodnight everyone. "nightly business report" is made possible by:
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captioning sponsored by wpbt captioned by media access group at wgbh >> more information about investing is available in "nightly business report's" video "how wall street works". to order this dvd, call 1-800- play-pbs or visit online at
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