tv Bloomberg Markets Bloomberg August 18, 2015 10:00am-11:01am EDT
hike -- was the move actually bad for business? >> housing boom helps home depots bottom line. higher forsales the quarter, but how will that impact the company's growth? >> bb&t is expanding its banking footprint. the ceo joins me later on. olivia: good morning everybody. i'm olivia sterns. matt: i'm matt miller. just a half hour into the trading day. markets down across the board. the s&p 500 down 2/10 of 1%, as is the dow.
3/10 of a down percent. take a look at oil. crude actually trading up a little bit but still holding under $42 a barrel. brent.e a look at well under $49 a barrel. said, we cannot be expected to cut production and hold the oil price up. but they are not doing it at all. then we had another drop in chinese stocks overnight. olivia: a little bit of demand pressure. also the fact that we are opec countries pumping near record levels. rigs in keep adding the u.s. as well.
let's take a look at what's moving in the news this morning. iny was the best month almost eight years for new home construction. housing starts last month reached an annual rate of 1.2 million homes. single-family homes led the way. themortgage rates and greater jobs picture are encouraging buyers and builders are stepping up because there is a shortage of homes on the market. walmarts second-quarter results missed analyst projections. the company blames the strong dollar and raises for workers. its projection for the court recorder is also lower than previous targets. we will break down those numbers. the country's largest car retailer gets bigger. autonation is buying 16 auto dealerships. its operating income has risen by double digits in each of the last five years.
sprint is the latest wireless carrier to end two-year mobile phone contracts. it will offer cheaper monthly plans but won't give customers big discounts on phones. sprint's ceo explains the thinking behind the move this morning. >> the american consumer will know what they are paying for a phone and what they are paying for service. been sodustry that has confusing, bringing transparency to consumers is a must. i think the big winners is american consumers. olivia: t-mobile ended contracts more than two years ago and verizon drops them this month. only at&t still subsidizes phone purchases. matt: the major broadcast networks agree on one thing. the importance of learning. all four will simultaneously air and education special month. stephen colbert will be among the stars taking part. it will showcase teachers and students and will be shown on nbc, cbs, abc, and fox.
those are some of the top headlines. is having trouble logging on to her bloomberg terminal as usual. olivia: it has nothing to do with me. thank you for sharing that with the viewers. lots of things coming up in the next hour. saying the force may be with you on a special 787 plane. matt: as r2-d2. also bb&t makes a deal for another bank. we will discuss. olivia: and we will be joined by the ceo. macy's is hoping to take on amazon in the one place they can, the dressing room. coming up in the next hour. matt: the strong dollar is weighing down on walmart.
the stock is taking a hit this reported its second-quarter earnings, missing estimates. walmart's ceo complained that a strong dollar overseas is cutting into revenue. shannon pettypiece joins us. we have been debating all morning. isn't a strong dollar a boon for walmart? olivia: the nation's largest importer? >> and they were completely quiet on china's currency change. which is obviously something going forward -- they lowered their guidance. that could potentially lower the cost of goods for them. there is a lot going on. the company admitted there are a lot of factors. currency, labor costs. we have been talking about walmarts increasing the minimum wage. training, increased hours. that is weighing on costs and they said that will be higher
than they expect it. -- expected. they also have some surprise factors. lower margins at pharmacy and higher shrinkage, the retail thingsr theft, waste, not being properly counted in inventory. sales are growing. revenue was increasing. but they are spending money in other places and they still have rushers like currency weighing things down. making it difficult for profits to start growing. olivia: the overall story for the past 12 months has been that they need to fix u.s. stores. that is 70% of their profits. they need to get that right before there is going to be big earnings for the company. 1.5% store sales looks like a pretty good number.
the analysts are saying it is going to take a long time to actually pay off. my take away from the call with the cfo is they say the investments are already paying off. investment in labor and paying people more is paying off. there was a story in business insider that it is creating a cultural clash. >> a lot of employees are upset that they didn't also get a raise. say you have been at walmart 10 years. a new employee coming in is going to be making the same as you. at thef upset employees company right now and that is weighing on morale. which was the whole point of the wage increase, to boost mora le. that will be the case for half a million employees who did get a raise. but that leaves hundreds of thousands of employees who are
not getting a raise, now seeing newer employees getting a raise. economists that i talked to said typically use the increased wages for a lot of employees at the new minimum, which walmart has an done yet. -- has not done yet. that will lead to more costs for them. olivia: some people like to default to the thinking that the biggest competition for walmart is amazon. that is very debatable. amazon's market cap just overtook walmart's market cap. amazon is really doing just a fraction. what are the prospects for walmart.com? is an interesting look
at the competition between walmart and amazon. up on the it back screen? regardless of what you think about the competition, the investors really believe in amazon. olivia: amazon now has a bigger market cap and walmart. >> every investor i talked to about this has said it is not fair. amazon doesn't care about profits yet. walmart has to care about profits. it has all this pressure. this profit problem hanging over its head that amazon doesn't have to worry about. it is not really a fair comparison. walmart is spending aggressively on their website. they have added thousands of jobs in the silicon valley operation.
they talked about this on the conference call. they are aware of this. they are trying to do something in this area. it seems like the company is behind it now. matt: i'm sure if walmart were showing the same kind of growth figures that amazon does and investing in new industries the same way, investors would treat the stocks -- >> it is a very different company. walmart is trading at a multiple of 15. matt: that's because amazon doesn't make a profit. so it is going to cost a lot more than earnings. people are buying it for a different reason. olivia: they are very different. matt: shannon pettypiece, thanks so much. i get to continue hosting the market day. coming up next, we will talk about home depot trading at an
olivia: good morning. i'm olivia sterns. matt: i'm matt miller. let's get a quick update with julie hyman on the stock market. julie: you guys talked about walmart. there are other retailers to talk about. let's start with tjx. the stock is up 6% after the company's earnings beat estimates. forecast. raising its comparable sales rose twice as fast as estimates. tjx has benefited from the trend toward off-price retailers. a lot of retailers have also
cited the west coast port shutdown. it was a boon for tjx. merchandise is very important. for tjx, it is less important. when -- it's a shipment late, tjx can get that at a discount for itself. up by a look at coach, nearly 3%. it was added to a buy list over at jefferies. apparently our analysis shows a negative correlation between handbag and footwear sales growth. you've got your accessories at dollars. you're going to buy handbags or a pair of shoes. it is an or choice. says handbags will be coming back.
sportingok at dick's goods. earnings per share beat analyst estimates even though comp sales were below what some analysts had been anticipated. and a quick check on urban outfitters. earnings beat estimates. this had to do with the share buyback. overall, sales missed what analysts had been anticipating. they were particularly disappointing at anthropologie. olivia: i like the negative correlation between shoes and handbags. i don't traditionally think of going to the same place for a fancy handbag as a nice pair of shoes. matt: and probably not urban outfitters for either one of
those things. olivia: fortunately i have graduated. but i was an enormous fan. matt: i like the little trinkets they sell. those old-school telephone handsets -- olivia: time for a look at our top stories. two more lawmakers are boasting their opposition to the iran nuclear deal. the senate majority leader admits it will probably pass. bob corker of tennessee urges congress to reject the plan. democrat bob mendez is excited to say the same thing in a speech this afternoon. but mitch mcconnell concedes probably -- congress probably can't override the president's eventual veto. and bangkok is hit with an explosion for a second straight day but nobody was hurt. yesterday's bombing in bangkok was caught on cell phone video. 20 people were killed. 100 more were hurt. police are hunting for a man seen on a security video wearing
a backpack. the attack targeted a shopping area popular with tourists. another chinese company will make smart phones in india. attracted by the country's huge market for them. and tax breaks. lenovo will produce 6 million phones per year. xiaomi already has a factory there. those are your top headlines. more signs of strength in the housing markets. new home construction in the u.s. climbed last month to the highest level in almost eight years. matt: the strong housing market is providing a boost for home improvement retailers. home depot's second-quarter profits rose 9%. it also boosted its sales forecast for the year. joining us is michael regan. and on the phone is brian nagel. brian, let me start with you. home depot sales look good. is this an area that consumers are just willing to spend money ? well.hink that sums it up
we have seen us for a wilder the home improvement category has been a beacon of strength out there. i just got off the conference call. numbers -- aggregate what is really important is that the business picked up as their july quarter progressed. it sounds like it is tracking quite well. olivia: how much of home depot's success can you attribute to macro economic tailwinds? and how much of it can you say is home depot specifically hitting the nail on the head and executing well? >> that is a difficult question to answer. it is a combination of the two. the home improvement category has clearly benefited over the past several years. -- i coveris really
a wide selection of retailers and home depot is one of the best run companies out there. it is a combination of the two. i like to say to our clients that home depot is well efficient. they are running the business well and benefiting from a strengthening tailwind. matt: obviously the other big retail news was not walmart -- was walmart. they blamed wage increases for their lower forecast. the dollar goes, is home depot the flip side of that coin? it is a company that is entirely focused on the u.s.. it benefits from a stronger dollar and cheaper imports. is that a tailwind they are not giving enough credit to? >> i think it's possible. i think it is very fair to say that home depot is largely a domestic company. when we hear about multinational companies talking about the impact of a stronger u.s. dollar
on the translation of sales, that is not a factor for home depot. it does have stores in canada and mexico. but it has not been a significant headwind. matt: does this company farewell regardless of what goes on in the housing sector? houses,e are not buying are they been spending money to update their current homes? more new homee starts necessary, we assume construction workers are going to buy supplies home depot. >> i want to make sure i am careful to say -- when the housing market collapsed, home depot suffered significantly. there is a base of sales there. in a weaker housing environment, they feel the pain. what we are seeing right now is that the key metric is home price appreciation. we have seen home prices
steadily climb. that has given that homeowner confidence toased reinvest in their home. that has been a big positive. now we are starting to see housing turnover pickup. it is measured by home sales. that is an extra leg of growth. olivia: housing prices in the u.s. have now appreciated for the past 40 straight months. home depot has raised their forecast for the year. what is the biggest downside risk? risk is the macro environment. if the u.s. housing market were to slow, or the recovery were to stall, that would be a negative fundamentally in the stock. i don't see that happening.
character. inside the planes, star wars characters will be on head, napkins, and cups. , napkins,st covers and cups. successfulthe most film media franchise of all time -- it is the most successful film media franchise of all time. just dug thatyou out of nowhere. i figured maybe the japanese would have their own star wars. olivia: anime? [laughter] i was in italy recently and i saw a cruise ship with bugs bunny on it. if you can make money from licensing the brand -- there are transportation companies that want to put the image of your franchise on it, why not? matt: was there a lord of the
rings airplane? out of new zealand, because that is where they shot the trilogy. i think that is even nerdier than star wars. and stara nerd ladder wars is at the bottom. just too far off the scale. olivia: that does it for matt miller. we will both be back at 10:00 a.m. tomorrow morning. i will be back with the ceo of bb&t to talk about his acquisition of national penn. don't go away. ♪
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call 800-501-6000 to switch today. perks are nice. but the best thing you can give your business is comcast business. comcast business. built for business. tand that's what we're doings to chat xfinity.rself, we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. olivia: welcome back. let's get a look at the latest headlines. housing numbers out this morning.
july was america's best month in almost eight years for new home construction. starts of single-family homes led the way, up by nearly 13%. builders are stepping up because there is a shortage of homes on the market. plus low mortgage rates are keeping shoppers happy. more financial turmoil in china. it was the worst day for stocks there in nearly three weeks. the shanghai composite closed nearly 6% below -- china's central bank pumped cash into the financial system. the most in 19 months. the government is worried after last week's currency devaluation. tjx, the parent company of t.j. maxx and marshalls, posted second-quarter profits that beat analyst estimates. the company raised its sales forecast for the year saying the third quarter is off to a solid start.
nearly one fourth of republican voters now say donald trump should be the party's presidential nominee. he is backed by 24%. earlier we spoke with former oklahoma governor about the trump phenomenon. interesting how antibusiness and anti-big bank a lot of people are. and yet trumps success is mystifying to me. a billionaire -- olivia: jeb bush is the only one who also has double-digit support. he has 13%. announcing the schedule for postseason play. once again the world series will be contested in november. the fall classic will start on october 27 in the american league city with the seventh game, if needed on november 4. macy's is taking on
amazon by upgrading their fitting rooms with high-tech gadgets. but will this get more people off-line and into stores? then more and more people around the world are eating farmed fish. we will head to a hatchery in maine to see why farming fish is a booming business. automakers and tech companies are racing. but in order to win, they need the most detailed map software. that story and more here to come. mid-atlantic banking leader bb&t says it may take a breather on m&a activity after a deal to buy national penn bancshares for $1.8 billion. earlier this year it one approval for its deal with kentucky, financial, and susquehanna bancshares. here is bb&t ceo kelly king. he joins me from company headquarters. thank you for joining us. >> good morning. olivia: congratulations on the
deal. why does the acquisition makes sense? >> thanks. it is an outstanding acquisition for two reasons. one, national penn is a fantastic company. billion in size and a hundred 24 branches. it is very high quality and very profitable. very naturally with our susquehanna acquisition. which we just closed not very long ago. the two combined moves our market share of from seventh to fourth place in pennsylvania. it is a great company in and of itself. what makesnation is us a real powerhouse in pennsylvania which we are very excited about. olivia: so this is your third hole bank purchase in the past year. do you anticipate taking a breather? i really do. we are real excited about these
three. two of them being fairly large. so we will take a pause to make sure we properly get them executed. we are very experienced in acquisitions. we have done over 80 in the last 30 years. we know what we are doing. but it is very important to be focused and really be sure that we take the time and are patient to make sure we execute with professions. and analyst over at guggenheim put out a note this morning saying that your deal suggests that regulators are taking a lighter touch to this kind of consolidation of this size bank. what is your experience? is it getting easier to work with regulators? i certainly think over the last year or so, the regulators have decided that mergers are ok. i think they are positive on combinations that make sense.
acquirer hass the made the investment in systems and processes to be able to take on the additional volume and continue to manage a very good company. a lot of times people think it is about the acquisition target. but it is really not in my view. as long as the acquirer has the capability to do it right, the regulators will be fine. if not they will give you a lot of trouble. olivia: you are one of the few regional banks who is buying up other banks. there is not a lot of consolidation among your peers. why. you think we are seeing more regional banks do deals? think some regional banks may be have enough scale that they feeling they don't need more. some regional banks i have heard are concerned about the risk of problems that the acquisition
target may have. and maybe they have other strategies they are working on. it is really hard for me to speak for them. we believe that scale is very important in the environment we're in today. certainly the cost of regulation compliance has gone up substantially. technological investment costs have gone up substantially. margins are compressed. relatively slow economic environment. scale matters. it with aan do high-quality company like national penn, it is a win-win for everybody. olivia: do you have a sweet spot in mind for scale? how far away from you are the ideal side -- how far away are you from the ideal size? billion now.ut 220 in terms of pierce size, over a number of years, i would like to be in the $350 billion size
range. that will take a number of years. much more important is being good at what you do. well from a risk perspective. we really focus a lot on diversification in terms of products, services, and geographies. you have seen us over the last several years make investments like west markets virginia, kentucky. they served us very well. we spent a lot of time investing in texas and florida. now a great market like pennsylvania, which has the combination of rural agrarian areas and a lot of manufacturing and a fantastic metro market like philadelphia, you get all of it. we're always trying to think of combining rural and urban, fast-growing and slow-growing.
because that combination minimizes risk. all markets have good times and bad times. what we want to do is have stable, fast-growing, and less volatile earnings so that we can have less volatile performance for our shareholders. olivia: you also have new risk targets thanks to regulation. my thanks to bb&t ceo kelly king. congratulations again on the deal. still ahead, much more including macy's. will smart dressing rooms be enough to compete with amazon? ♪
we are one hour into the trading session. time to get you caught up on all the market action around the world. i want to start in asia. you will see red across the board. seng falling about 1.5% and the nikkei down just over 3/10 of a percent. new home prices picking up in more cities last month. stephen filed this report from hong kong. >> new-home prices rose in more chinese cities than they fell for the first time in 16 months. 31y new home prices rose in out of the 70 cities tracked by the government. 29 cities and were unchanged in 10. the numbers are driven by the interest rate cuts and the relaxation of property curves in march such as the mortgage and down payment requirements. beijing also saw a
price increase month over month. but the pace of games slowed perhaps due to the stock market correction slightly affecting buying power. olivia: that was stephen engle's reporting from hong kong. for a look at what is happening in europe, elliott gotkine. >> just an hour to go before the markets close. this is the picture across the continent. small gains in spain and austria. many declines. italy, france, germany and the u.k.. we had inflation numbers out today coming in at .1% for the month of july. that was higher than economists had expected. pound increasee by half a percent today. the other big move, the turkish lira hitting another record low after the central bank declined to raise interest rates to try to support the lira. the president chief advisor
reckons that a rate of three to the dollar is a pretty competitive rate. we can always seek greek bonds. five european governments must now approved the bailout deal. u.k. barn costs also rising ever so slightly on the back of those inflation numbers. -- borrowing costs associates interesting -- increasing its shares by 4.5%. ing was one of the big gainers. d, biggest gainer of the lot. to you. olivia: u.s. stocks are in the red today.
the s&p and the dow lowered. we got housing data out here. take a look at the map on my bloomberg terminal. technology is more steeply in the red. that reflected also in the nasdaq being the underperformer today. picture when you look within these. energy the second worst-performing group at the moment. it has been an interesting kind of day. they actually turned higher. we have not seen any news that has created the catalyst. unless it was just a technical level. now looking at a gain of about .9%. and oil more broadly is definitely weighing on the emerging markets. that is something i have been
watching today. the emerging market index is down, at its lowest since 2011. that bombing in bangkok is creating issues. the msci emerging markets index versus the s&p 500. this is the msci sort of divided by the s&p. the s&p is highest versus emerging markets in about a decade's time. his back to the beginning of 2004. on a relative basis, we have seen a lot of outperformance here in the u.s. and that is widening as we see commodities slumped. olivia: a lot of pressure on the commodity currency. i was looking for a reason why oil has spiked. no sign. thank you so much, julie hyman. now i look at the latest headlines.
arely 100 major wildfires scorching western u.s. forests. several blazes are threatening a resort town in washington state. 75 homes have already gone up in smoke. active-duty troops are helping firefighters. no one survived the crash of an indonesian airliner. there were 54 people aboard when the plane struck a mountain. investigators say bad weather may have caused the crash. confirmedsal today $200 million investment in both speed. the site targets millennials. it has also invested recently in fox media -- vox media. macy's is testing new smart dressing rooms to compete with online retailers such as amazon. the company is hoping that consumers will want to try on clothes before making a purchase. tabletss now installing in fitting rooms so shoppers can
request additional items which are then delivered via a chute. with sony websites offering free shipping and returns, will this really keep them from going to brick-and-mortar stores? joining me now is lindsey rupp and rigid wishart. -- bridget weisharr. i don't think it is one of their only tools, but the ability to leverage their store base really differentiates them from the majority of e-commerce players. they have over 900 stores. the easier they make it to get the product to the customer as quickly as possible, is going to give them an edge. but there are other tools they are operating. one is differentiating their product. another is also curating the product for the consumer. olivia: maybe you can explain more we are talking about.
what is a virtual dressing room? >> macy's dressing rooms are very real. what is more virtual is the selling floor. you are walking through and looking at mannequins wearing bathing suits and you can say, i like that. tap it with your smartphone and it will send a message to someone which will send the bathing suit into your fitting room. so you can more easily select a lot of items without hauling them off the fitting room. and once you are there, we have all had the experience where something doesn't fit and you need the next size. this eliminates that. you can select a new size or color on the tablet in the fitting room. so they are thinking it will be a smoother experience for the customer and they will want to buy more. olivia: i'm not totally sold yet. amazon really direct competition for macy's? >> it is. i think amazon is really making strides to grow their presence in the apparel sector.
they have the scale to make themselves very attractive to apparel wholesalers. i think you will see the number of rands offered on amazon growing over the next couple years. olivia: i gave this a little test. buydn't realize you can things like a dress on amazon.com. >> i think a lot of people don't know that yet. they will start to market that a bit more and that will only increase the number of rounds that they have -- brands that they have. olivia: amazon will replace macy's as the number one online fashion retailer, is that realistic? >> it's possible. right now people are buying staples that they don't need to try on on amazon. as they are gaining more brands, it is a lot easier to order from amazon. free two day shipping, try it on at home. it is definitely a contender. i have heard mixed reactions as
to whether the timeline is realistic. olivia: we will leave it there. thank you so much. we have to go shopping after the segment. still ahead, the world is eating more fish from the farm than the open sea. the demand is driving business for aqua feed supplier. alix steel will explain what that means next. ♪
olivia: welcome back to the bloomberg market day. i'm olivia sterns. one of the biggest agricultural companies in the world just went -- fish. just paid one half million dollars for a company that makes fish food. alix steel visited a hatchery in maine to see why salmon production is so hot right now. salmon. high in protein, and
americans eat more than one billion pounds a year. and most of that is farmed. canadian-based cook aq uaculture is the only one operative on the east coast. it marks a huge opportunity for a farm to -- in nature, salmon lay eggs in freshwater lakes. in a farm, the eggs start in a hatchery. >> the temperature they are at, they will double about every two weeks. alix: farmed salmon grow faster and are more likely to survive than in the wild. when they get big, they move outside. is ae average weight hundred 50 pounds. alix: they move to pennsylvania planting to mimic how wild smolt would move from rivers to ocean. to pens ined to the
the atlantic to mimic how wild smolt would move from rivers to the ocean. the gulf of maine is an ideal environment. strong tides help circulate the waters to prevent disease and illuminate waste. -- eliminate waste. an underwater camera monitors the offshore feeding facility. this prevents overfeeding the fish and saves on feed. one of the biggest expenses for the company. at 10 pounds, the fish are big enough to eat and wind up on your plate in 48 hours. olivia: alix steel joins me now. story is really fascinating. we are eating more fish in general because protein is so hot right now and there aren't enough wild fish to satiate our demand. farm fishing is a necessity to keep up with demand.
at the end of the day, salmon eat other fish and there is not enough of those fish in the ocean to feed them. therefore you really need that fish feed. get is what we saw cargill into with that merger. olivia: how quickly as demand growing? 70% byt is set to grow 2050. one of the few banks that follows salmon says demand for salmon feed is expected to rise 5% this year more than any other animal protein. you get more fish for your buck. you get about 70% of the delay because they have a small head and a large body versus other fish like a shrimp or something. so you are actually getting more fish yield. which is why a lot of money is going to salmon. it is not just cargill.
we have seen two other mergers. holdings by eight dutch salmon farm. mitsubishi bought a norwegian feed company. this is definitely where the m&a is. olivia: this is a total alix steel report. it is fascinating that salmon is a more efficient protein. thank you so much on this news that cargill is going long fish. coming up, much more including the selloff we are seeing in the commodities markets. alix will be back later on in the day. we will talk about shell's plans to start drilling in the arctic. ♪ . .
pimm: and welcome to the bloomberg market day. the irs is tripling the number of accounts hurt by online breaches. how much good this and that hurting everybody's favorite agency. pimm: sometimes even the smart money gets earned. ceqa is going through cash. we will find out details about the maker of aerospace part and metal coatings, next. olivia: welcome back to a quiet august tuesday. pimm: we are 90 minutes into the trading day in new york. what's look at how markets are faring. not much action -- the s&p