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tv   Nightly Business Report  PBS  October 17, 2013 6:30pm-7:01pm PDT

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this is "nightly business report" with tyler mathisen and susie gharib brought to you in part by. >> thestreet.com. interactive financial multi media tools for an ever changing financial world. our dividend stock advisor guides and helps generate income during a period of low interest rates. we are thestreet.com. all time high, the s&p 500 closes at a record, the nasdaq climbs to a 13-year high but for investors what does the road look ahead as the focus is earnings and fundamentals. >> china reacts. the day after washington struck a deal they made clear they aren't happy but there is a chance china will fall out of
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love with u.s. treasuries. gaga for google, one of the widely held stocks goes to a high and one things in the earning report that every investor needs to know about. that and more tonight on nightly business report for thursday, october 17th. good evening everyone. washington was open and back to business today, and wall street celebrated big time. the s&p 5 00 closed at a new all-time high and the nasdaq setting a fresh 13-year high and more milestones, the dow transport the small cap russe russerussell 2,000 and more ending at record closes. with the budget and debt ceiling deals wrapped up, investors focused on fundamentals. stronger than expected manufacturing data from the philadelphia federal reserve bank. more on that in a few minutes but first the closing numbers, the dow was the only index in the red that lost two points
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dragged down by disappointing earnings by three components, ihb, united health care and goldman sachs. the nasdaq rose 23 and s&p added 11 points at the new record close. so was yesterday's deal in washington, all clear for the markets for something far, far less. joining us to discuss is nick colus. nick, i've been calling this the sort of resolution rally that we've been in for the most part over the past week, and continuing to today when you had 23 of the 30 doe components actually higher and the three susie mentioned, the reason it was down. so do you think this resolution rally can continue? do you think the markets will end the year higher than they are today, and if so, why or why not? >> absolutely. you're right to call it a resolution rally. after we got the good news yesterday, what is more remarkable is stocks really
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didn't sell off much during the turmoil in washington. they accurately forecast we would get a resolution and this rally say follow through. looking forward, i'm optimistip about stocks. corporate earnings are strong even though revenue growth isn't where we want to be and we have variable interest rates and hopefully, a recovering consumer and economy now that this turmoil pasted. >> a number of analysts are saying for this upcoming current quarter there will be a lot of blame put on this government shutdown. what's the spillover effect for 2014 and what does it mean for stocks. >> as we look at january when the next beginning -- the next version of the current crisis is going to play over again. the critical junction will be christmas and holiday season in 2013. the consumer was a bit shaken by what happened in washington and
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confidence fell. now we need to see a resurgence of consumer confidence in the holiday season. that's the make or break for next year. >> i heard someone describe the market this year as a teflon market, nothing seems to derail it. what could? >> the critical junction, even though earnings are quite strong, we'll see record earnings on the s&p to match the earnings today as we see the third quart e reported however revenue growth is sluggish, really plflat, no better than 2o 3% and that's 100% on the come. it a faith trade. we have to see the faith transit into actually numbers come q 4. >> you mentioned we'll be back into the crisis mode in a few months. do investors need like a two-face investment strategy,
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pre-crisis investing and post crisis investing over the next six months? >> as i talk to institutional clients, still very scared by the events of 2007 and 2008. no one is taking as much as four or five years ago and investors aren't as much over their skis as they used to be. as long as you obtain a reasonable diverse portfolio and don't invest too aggressively, you can live over this. we could see that again in q 1 because we know the play book. >> let's say i want to put a little bit of money to work, cash on the sidelines, what two sectors in the u.s. market would you favor over let's say, the next two to three months. >> one, financials. financials are a real leadership group, banks and credit card companies, organizations that lend to consumers. those should continue to do
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better as the economy improves and interest rates stay low. the second group, which is a little more controversial is consumer stocks. we talked about how consumers have been shaken by what's happened. holiday season should now have very low expectations that consumer stocks could bring into beat. >> nick, thank you very much. thanks for being with us. so we've been talking about earnings. let get more of the latest earnings. the biggest, ibm beat earning easiest mitts after the bell last night but the company reported lower revenue hurt by weaker computer hardware sales so shares fell 6.5% after an analyst downgrade and lower price targets on the stock. the big worry, the growth strategy as it focuses on software and cloud services. the second biggest decliner in the blue chip dow today, united health care, profits rose 1% after enrollment shot up by
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275,000 but the company warned of higher operating cost in the provide medicaid business. it was down 5% today. another blow to the dow today, goldman sachs, shares fell 2.5% in the first time reporting as a dow component and now the investment blank is sla -- bank is slashing expenses. >> reporter: some may call it the curse of the dow. that's the performance of the bank's fixed income trading unit known as fic. >> not a good quarter for fic. the significant decline in revenues was driven in part by seasonally smaller activity levels seen across the industry i have and a more challenging environment. >> reporter: the revenue plunged 44% from last year's third quarter, a big reason gold man's total revenue missed estimates by almost $700 million. freeman is taking in stride.
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>> not even goldman sachs out performs every quarter. >> reporter: they beat estimates in the quarter at 2. 88 a share as they slashed operating expenses by 25%. the revenue miss pressured stock prompting some to speculate this comes with being one of the dow's new threest remembers, an honor that some note becomes a course. the nine new members replacing others fell 6.1% on average in the first month and 10.4% in the first year in the index. we don't know if a similar fault will be with gold man but there is a minor blip in the performance. because the clients are talking about doing deals, he sees promise in the future. >> i think the pipeline is robust and a going forward situation. >> reporter: it's in an unfamiliar situation when it hopes to change this quarter. and one bright spot among
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the dow stocks today was verizon. the u.s. wireless quarter said profits were up 40% and sales rose 4% to 30.3 billion. the wireless unnight fueled result as customers paid for more the plans. shares up more than 3.5% today. google, the search giant reported better than expected results of $10.74 a share and profits shot up 36% to just under $3 billion. that is after raising rates for advertisements on smart phones and other mobile devices. but the news wasn't all good, losses at motorola mobile phone totalled $248 million. joining us prom the nasdaq exchange. sheila. sheila, google's numbers were strong but shares higher in trading. what is the one take away you see from this report? >> the one take away that investors are getting from
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google is if there was any concern about the company slowing down or maybe becoming a more mature tech company, pretty much gone after this solid third quarter. profits up 36% and sales, because that was a huge beat, as well. up 12% to $14.9 billion and the met trick up 26%. a solid quarter prom the company. the one other king in the report is the cost was down about 8%, a trend we've been seeing but again, big picture, more and more people are connecting to google, connecting to the advertising engine online, good news for the company and growth engine going forward. >> we'll see how the stock does tomorrow. thanks so much, sheila. still ahead, the biggest creditor is not happy about the debt deal but is there any chance china will pal out of love with u.s. treasury. first a look how the international markets closed today.
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the barriers came down at hundreds of thousands of furloughed federal workers headed back to their job that because the partial government shutdown ended after 16 days. employees furloughed of worked without pay throughout the shut down will get all their back pay in their next paychecks. and here is something else that we'll be seeing, now that the government is open, lots of reports on the economy. perhaps the most important one is the monthly jobs report. the september jobs report was never released as scheduled on october 4th because of the shutdown but now that washington is open the labor department announced it will release last month's payroll report on tuesday, october 2 2nd.
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hours after signing into law the bill, president obama spoke at the white house today and took congressional republicans to task for shutting down the government and bringing the nation in his wards to the brink of default. >> the american people are completely fed up with washington. at a moment when our economic recovery demands more jobs, more momentum, we got yet, another self-inflicted crisis that set our economy back. >> and just today, jp morgan said the impact of the shutdown and debt ceiling battle will reduce real gdp growth in the current quarter by a half percentage point. projected economic growth is forecast to be 2% in the fourth quarter. the good news, the bank does predict a slightly higher increase of growth in the fourth quarter of next year. during the battle to fund the government before it was
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partially shutdown, there was a lot of talk for efforts to get a clean c.r., a congressional resolution or funding bill without any earmark, no strings attached but it didn't quite work out that way in the end. amonojaif aman jaifers has details. >> reporter: he was a multi millionaire when he died this year but they decided to squeeze in a provision granting his family $174,000 benefit. that wasn't the only unusual item in the bill. tucked into the fine print was $450 million for flood relief in colorado and a 2.4 billion-dollar grand to the veterans administration to help handle a massive claims backlog, but by far, the most controversial provision is one critics are already calling the kentucky kick back, a dam project on the ohio river that benefits illinois and kentucky, which just happens to be the home state of senator republican leader mitch mcconnell that
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negotiated the last-minute deal but there is dispute who tucked the provision into the bill. >> this will feed criticism about the process, if that is even possible to make it worse. >> reporter: critics hate the side deals. >> when they snuck in something like this, it makes me cringe. why do it? it leaves a bad taste in your mouth. >> reporter: some argue those special projects are the grief that makes the deal possible and all those that benefit from the spending always think it's a good idea. >> and in the meantime, taxpayers near the ohio river will have a brand-new water project to admire at a cost of up to $2.9 billion. for "nightly business report", i'm emon jaifers in washington the deal to fund the government and the performance of our elected leaders, take a look. >> i don't think anything will
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change when it comes to january. i think they haven't done anything other than delay it again. >> we need to boot all of the people out and start over in washington. >> we do more for everybody in the world than any other country, and yet, we can't get things, you know, going straight here at home for ourselves. >> i'm canadian so it's a joke to me. it really funny to watch it from a far. >> it just seems our government ought to be able to get along and, you know, resolve these issues and it ridiculous. >> i'm fed up but this is my country, so i just keep hoping things improve. >> and here is what the international monetary funds managing director christine lagard had to say. she welcomed the bill but says the country needs more long-term negotiations, not temporary fixes. i hope the current situation is bad enough that people realize it cannot continue, end quote. >> so what does china, the world's biggest holder of u.s.
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debt and america's biggest critic think about the short-term deal signed into law last night? the chinese are not impressed. >> reporter: within hours of president obama signing the deal into law, a scathing editorial backed by a news agency in china said quote, politicians in washington had done nothing substantial but postponing once again the final bankruptcy of global confidence in the u.s. financial system. >> i think the chinese are prus rated at the quite. they have a lot invested in the united states. >> reporter: nearly $1.3 trillion worth held in the form of u.s. government bonds. china is the largest foreign owner of u.s. government debt and if those bonds fall in value, china suffers financially. in audition to the negative commentary, a chinese rating agency also backed by the government downgraded u.s. debt today saying quote, the latest
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raise of the debt ceiling shows the government's incapability in improving solvency by economic and fiscal elements. >> they in 1995 pegged their currency to the dollar thinking the dollar was a stable anchor. they lost faith. >> reporter: there are fears china could sell a lot of u.s. treasuries that could spike interest rates sharply higher but those fears are unfounded. >> if the chinese sold a lot of it to someone else, it would push the price down, that the not in someone else's interest. >> reporter: they don't have many choices when it comes to investing large amounts of money. other countries don't have enough debt to buy. >> part of the frustration is they don't have a real easy alternative strategy for doing well in the world, other than holding u.s. financial assets and wanting to collaborate with
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the united states. >> reporter: sitill, it's clear they are trying to find alternatives. >> i've had private conversation with chinese leaders where instability in terms of bail juju outs, qe is of grave concern to the chinese. >> reporter: concerns that could impact the chinese financially. so what does this mean for the u.s. economy? joining us now with his analysis, simon johnson, he's former chief economist at the international monetary fund and a professor of economics at mit. so good to see you again. >> thanks for having me. >> simon, you heard what president obama said that this whole crisis set our economy back. do you agree with that, and if so, what will it take? how long will it take for the economy to bounce back? >> unfortunately, i agree completely. the amount of uncertainty created will turn out to depress
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growth, reduce job creation not just this quarter but i fear for the first quarter of next year. >> simon, let me talk about the international response michelle was talking about, china being one but only one player in the world of international finance. last night mohammed of pimco said if we keep doing this kind of lurching from crisis to crisis, eventually, other countries, other players will build pipes around us. do you agree with that? >> i certainly agree with moe h mohammed investors are looking with shock over our behavior and it's in the interest of china to develop a large, reburst market and the british said they would be happy to help the chinese do that in london. to be sure, we should expect to diverse pie a way from the dollar in part because we have demonstrated repeated
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irresponsibility and given every indication we'll go even further in the direction early next year. >> our economy, our businesses depend on the mighty american dollar. what are you saying exactly for the future? >> obviously, in the short term the dollar remains the primary reserve currency in the outstanding safe haven around the world. the question is what happens one, two, five years down the road? how quickly can portfolios shift? how fast does the eros rebound or rise as a viable alternative to the dollar? the pressure is there. we should recognize we have no birthright that says the dollar is number one currency forever. we built up that reputation, good reputation over a long period of time, 200 years i would argue and squandered it over two, five years? it's appalling. >> when we look back at the debt crisis going up against the debt
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ceiling for the second time in a little more than two years, i wonder if you feel at some point if we run head long once again towards this cliff at some point we'll slip and actually go through that debt ceiling and have either in technical terms or real terms a default. do you think that will happen? >> yes, absolutely. look, the games that have been played are playing with fire. it extremely dangerous. you don't want to pretend or say or even perhaps mean to go up to a debt default situation or go beyond that and see what happens. that is not how reasonable countries behave, and if we continue to have this kind of absolutely pointless confrontation over the debt ceiling for example but also the government shutdown, what does this accomplish? nothing but make us look unstable in the eyes of our consumers, investors and everyone around the world. >> simon, another what if question, during the crisis there were a lot of warnings the
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u.s. economy could slip into recession. what about now? are we still at risk of a recession or are we in the clear? >> well, i don't think this is going to precipitation a recession but for sure, we lose perhaps half a percentage point of growth in the fourth quarter. i would worry much more about beginning of next year. if we have a confrontation in january, february, march or all of the above, that will really hurt us and depending on what goes on around the world, i would not be optimistic about our growth prospects. >> sorry to leave it on such a down beat note, but we have to leave it there. thank you very much simon. and coming up, chipolte mexican grill soaring and profiting heating up. details next, but first, how commodities, currencies and treasuries performed today.
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federal prosecutors are closer to an agreement with steven a. cohen and capital add vie so visors of trading. it involves paying a penalty of at least $1 billion to settle a criminal complaint. prosecutors will give the firm credit after it already agreed to pay more than 600 million to settle similar civil charges earlier this year. tyler? we begin market focus tonight with a company heating up after the close, chipolte mexican grill. driven by higher customer traffic helps, offset rising food costs. restaurant expects full year, same store sales to rise in the mid single digit range, that's slightly above the prior view and the stock took off after the close, finishing the regular session only fractionally higher
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at $439.07 but you see the jump after 4:00 p.m. earnings that beat wall street estimates, the company sold more than half of the stores this year which helped lower operating cost. the chain's revenue beat forecasts, despite the good news the stock did close down automatic most 4% to . $8.07. tumble reported earnings well below estimates. they cut the full year outlook because of the economy. it fell to $18.99. it also sent competitors lower, shares of mattress firm down 4%. losing more than half of the value after an fda panel voted against expanded use of a key drug. the committee said that a study should be completed on the drug's ability to benefit the heart. the fda is not bound by a panel
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recommendation and a decision is scheduled for late december. the stock plummeted 61% to $2 a share. finally tonight, how would you like to own a piece of your own proathlete? well a company called fan text is launching a marketplace that allows sports fans to bet on the money making potential and value on professional athletes. the company filed papers today to sell stock to the public in houston. texans running back arian foster proposing that investors are really buying a stake in his future income. here is how it supposed to work. fan text pays foster $10 million in return for 20% of his remaining contract with the nfl. any endorsement deals and other future income tied to his football career. fan text is negotiating similar deals with other super star athletes but won't say who they are. are you a buy sner. >> i don't think i would invest when someone's acl ligament or
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maybe a -- oh, something nasty could happen to this guy. i would not do that. maybe i would short it. >> that's "nightly business report" for tonight. i'm susie gharib thanks for watching. >> i'm tyler mathisen. have a great evening everybody. we hope to see you back tomorrow v. a great night. "nightly business report" has been brought to you by. >> thestreet.com, interactive financial multi media tools for an ever changing financial world. our dividend stock advisor guides and helps generate income during a period of low interest rates. we are thestreet.com.
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