tv Nightly Business Report PBS May 26, 2011 1:00am-1:30am PDT
>> tom: wall street snaps its losing streak. the move higher comes as the economy may hit a summer soft patch and the federal reserve prepares to end its government bond-buying binges. >> suzanne: a summertime investment strategy for when the fed buying stops. you're watching "nightly business report" for wednesday, may 25. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made pole by:
this program is made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt >> tom: good evening and thanks for joining us. susie gharib is off tonight. i'm joined by my colleague suzanne pratt. suzanne, stocks moved higher today, putting a halt to a three-day selloff. >> suzanne: tom, one of those bumps could be the completion of the federal reserve's bond- buying program, scheduled for the end of june. the $600 billion strategy is known as qe2, or quantitative easing. its goal has been to keep bond prices high and interest rates low. >> tom: so, what will the end of qe2 mean for your portfolio? erika miller reports. >> reporter: ask anyone on the street about qe2, and here's
what you'll get: >> qe2 means queen elizabeth the second. >> that's a cruise ship? >> qe2? >> reporter: but the end of the fed's second quantitative easing program could affect borrowing rates on everything from mortgages to student loans to credit cards, not to mention a ripple effect across financial markets. unfortunately, there's no clear- cut answers about what will happen when the fed stops buying treasuries. pimco's bill gross-- one of the nation's most respected bond investors-- sold nearly all of his firm's government bonds in february. on our air, gross explained that he's worried about where demand for treasuries will come from once the fed exits the market. >> to the extent they don't buy on an annualized basis, most of the deficit-- that's $1.5 trillion-- then somebody else has to. and that typically results in higher yields and lower prices. >> reporter: however, the far more common view on wall street is the one held by u.b.s. economist drew matus. >> we don't look for the end of
qe2 to be a major event in markets. perhaps interest rates move up a few basis points. but truth be told, there's just as good of a reason why interest rates may move down a little bit. >> reporter: he does see one way america is likely to feel the impact of the end of qe2: a drop in economic growth. the good news is the decline is expected to be small and last only a few months. >> the u.s. economy is doing reasonably well. once again, we're in this position where everyone keeps talking about the u.s. economy doing poorly, but, simply put, the u.s. economy is growing at a trend-like rate. >> reporter: so where does all this leave stock investors, who have watched the market gain 25% the past nine months? is it time to take profits? strategist david bianco says no. >> if individual investors should be doing anything relative to the end of qe2, they should actually be making their move from fixed-income a little bit more toward equities. we think large-cap u.s. stocks with global exposure are where investors should be. >> reporter: so there's been a qe1 and a qe2, what about the possiblity of a qe3?
most experts say slim to none, unless there is a major unexpected shock to the economy. erika miller, "nightly business report," new york. >> suzanne: here are the stories in tonight's n.b.r. newswheel: stocks bucked a downtrend. the dow gained 38.5 points, the nasdaq rose 15, the s&p 500 was up four. big board trading volume hit 963 million shares. nasdaq held steady above 1.9 billion. and japan's earthquake and tsunami took a toll on u.s. durable goods orders last month, as automakers struggled with car and parts shortages. orders for big-ticket items like autos and commercial airplanes fell 3.6% in april. general motors is hiring in its hometown. the automaker plans to add 2,500 jobs at a detroit-area plant that makes electric vehicles. for the first time in a decade, we used more domestic oil than
the imported variety. the energy department says oil imports fell below 50% last year due to a weak economy and more fuel-efficient vehicles. french finance minister christine lagarde wants the top job at the international monetary fund. she's considered the frontrunner for the managing director's post since dominique strauss-kahn resigned last week amid charges of sexual assault. still ahead, boeing takes flight in tonight's "street critique." hilary kramer tells us why she sees long-term value in the aerospace giant. >> tom: it has been another day of violent thunderstorms in the midwest as the death toll and damage estimates rise across four states. search and rescue efforts continued in joplin, missouri, the hardest hit on sunday with a massive and extremely powerful tornado. it has been three weeks since we saw eerily similar imagines after a devastating twister ripped through tuscaloosa, alabama. walter maddox is the mayor of tuscaloosa.
he joins us on the phone. mr. mayor, welcome to "nightly business report". a month ago since your tornado, describe your community tonight. >> well, we're in recovery mode. we started debris removal. but from a physical, from a spiritual sense we started that road towards recovery, and we feel like we're beginning to turn the page. >> tom: what does tuscaloosa need as it works to rebuild a month after that disaster? >> we need to expedite the debris removal as soon as possible. we also have several hundred that are homeless, living in a shelter or living in hotels as they try to move towards a more permanent housing. >> tom: to those two ideas of cleaning up and now rebuilding, what can you tell us tonight and what can you tell your constituencys a month after the storm in kerms of federal aid and state aid that's been pledged as well as aid that's been put to work in tuscaloosa? >> well, the operation clean sweep is a joint collaboration between f.e.m.a. and the core of engineers that's been very
successful. we cleared search and rescue two weeks ago, so we've only been in debris removal for two weeks. at this time we've removed over 300,000 cubic yards of debris, that would fill up a stadium. and we have two million, it will take us for to six months. in terms of the housing, it's not been as positive. we for four weeks now we've had hundreds of those that are calling in between, with in where to go. and we haven't moved very quickly on that and i'm days pointed, i want more of a sense of urgency out of f.e.m.a. in the days and weeks to come. trm i know that f.e.m.a. has talked about providing trailers to your community. are you saying that the trailers are not arriving fast enough or there are not enough of them? >> they're not arriving at all. on april 30 if we subject 34i9ed a list of potential sites that would be suitable, work e we're working as hard as we can with f.e.m.a. to get those in shelt skperls hotels into some mobile unit that they can begin to reestablish their lives. >> tom: as you look at the pictures coming out of joplin,
missouri and other states, what's your advice to the folks there as they are dealing with the situation you dealt with a month ago? >> first it's a marathon and not a sprint and your progress will be measured in inches and not miles. we're a month out and we feel like we've just started to make some return to normalcy. it's going to take a long while. what i would tell their mayor and their city managers, focus on search and rescue, first and foremost. humanitarian skpefrts getting your volunteer situation coordinated. then once that is established, begin working towards debris removal. >> tom: mayor maddox, our best wishes to you in tuscaloosa. walter maddox, the mayor of tuscaloosa, alabama.
>> the democrats vote down a house republican budget proposal that would reign in spending. that senate vote came on the heels of a democratic upset in a new york congressional race. the house republican plan was a key issue in that context, and throws open the question of how to cut costs in one of the nation's largest industries, health care. darren gesh takes a look at what's at stake. >> reporter: this has only happened four times in the last 150 years-- a democrat winning an election in new york's 26th congressional district. and that's why democrats are calling karen hochul's victory an important political indicator. >> tonight we showed voters are willing to look beyond party
labels to vote for the candidate and the message they believe in. >> reporter: and the main message in this election was not on the economy or the war. "hotline" editor-in-chief reid wilson says it was a warning about republican plans to overhaul medicare. >> the democrats have found a message that works, and the message that works is the other guy is wrong. it's the same message we saw in the 2006 election, the 2008 election and the 2010 election and now. voters are in a mood to kick the bums out. >> reporter: there were special circumstances in this election, including a tea party candidate who took 9% of the vote. still, the win was enough to throw republicans on the defensive. rep. paul ryan's plan to transform medicare into a premium support program where beneficiaries get a fixed amount to buy coverage became a centerpiece of the campaign. today, ryan charged democrats misled voters. >> if we wait, if we allow these medi-scare tactics to continue, seep in, demagogue and inflict political paralysis in our
system, then we're gonna have a debt crisis. >> reporter: president obama's economic advisor, gene sperling, pushed back hard. sperling said the cuts ryan wants to make in health care spending would jeopardize nursing home coverage for millions of older americans. >> we are not criticizing their plan, we are simply explaining their plan. >> reporter: while one election does not change everything, the results from new york are likely to make it even tougher to hammer out a compromise between two parties that don't trust each other. >> entitlement reform is the key to getting the debt and deficit under control. you can't do it simply by cutting discretionary spending. this just makes entitlement reform more difficult though. if everybody sees cutting social security or cutting medicare, cutting medicaid as some kind of political third rail, it's not going to get done. >> reporter: wilson says polls show ryan's medicare reform plan is about as unpopular now as president obama's health care overhaul proved in the last election. darren gersh, "nightly business
report," washington. >> tom: the major indices were >> tom, a much better day here at the new york stock exchange for equity investors and maybe it's because it finally stopped raining in new york. >> tom: yes, a bit healthier no doubt for stock investors. let's go ahead and roll with tonight's market focus. the major indices were able to snap their recent losing streak, ending with small gains today. by putting some green in the screen for traders and investors. for the second day in a row, oil prices were moving high, climbing back over $100 per barrel. there have been a few bullish analyst calls on energy prices this week. crude would need to get above $105 a barrel to get out of this narrow range it has been in since falling from a post- recession high at the beginning of may. higher oil prices helped make the energy sector the best- performing area of the market. this s&p energy exchange-traded
fund closely tracks oil prices, and while it has made lower high over the past month, it has not broken below its march and may lows. energy service stocks were especially strong. halliburton was up 5% on heavier-than-usual volume. morgan stanley's analyst says there's a paradigm shift in u.s. drilling, moving toward oil. halliburton's rally takes it to within a couple of dollars of a new 52-week high. that was set back earlier this spring. fellow service firm baker hughes found buyers too, up almost 5%, also on stronger volume, and about $5 away from a post- recession high. hormel foods, maker of jennie-o turkey and spam, saw earnings up from a year ago, and matching estimates. its grocery and specialty food businesses were hit by higher commodity costs
hormel was the weakest stock in the weakest sector today-- being consumer staples. h-r-l shares fell almost 5% as volume quintupled. shares have ha a nice run over the past year, though. look at this run. shares are up 44% over the past year and were at a 52-week high just last week. perhaps a bit of profit-taking as well. it was a disappointing quarter for polo ralph lauren. the clothing designer and retailer missed estimates by a nickel per share. the combination of higher costs and lower sales in japan hurt its bottom line. shares took a nose dive, falling more than 11% with volume jumping 14-fold. this small dip in march came after the japanese earthquake and tsunami, but investors shrugged off worries about a slowdown in polo's japanese business.
the company clearly saw business there drop, and with the earnings miss, the stock is at its lowest price since february. meantime, after the close, the focus fell on guess, with this blow-away quarter. how about this? earnings beat the street by 11 cents per share. strong global demand was led by asia and europe. guess shares had a nice pop during the regular session ahead of those results, and added another 12.5% to this closing price in after-hours trading. if that holds through to tomorrow, it would take shares over $45 a share for the first time since march. finally, california pizza kitchen. this one was mentioned last night in our "word on the street" segment as a possible small cap break-out. it did just that with the announcement of a private equity buyout. the offer is for $18.50 per share. and that's tonight's "market focus." >> suzanne: report corporate fraud or misconduct and collect big bucks!
that's part of a new set of rules okayed today by the s.e.c. in exchange for useful information, whistleblowers can get almost a third of any penalty over $1 million. last year's financial overhaul law is responsible for the new program. big companies opposed the measure, saying whistleblowers should first have to tell their own firms if they suspect wrongdoing. >> tom: european debt worries, >> tom: european debt worries, energy prices and the u.s. economy all have been blamed for the recent weakness in the stock market. tonight's "street critique" guest remains an optimist.
she's hilary kramer, editor of gamechangerstocks.com. always nice to see you. so what do you make of the recent stock price weakness over the past week or so? >> it is not worrying me, tom. our market really got frothy and ahead of itself. i'm still a bull looking for s&p 1600 over the next two years. and it was simply the concerns over the european sovereign debt crisis, elections in spain, and of course our housing market is looking weaker than anyone ever expected, with the foreclosure numbers extremely worry some. but the market itself, our economy is healing and qe 2 has kicked in nicely and there's no stopping that. >> susan: to you like megacap multi-national boeing, the dow jones industrial average, b. a. the ticker symbol, it had chopped around through the springtime and finally had tried to rally but recently sold off as energy prices have come off the highs. what's the catalyst? >> boeing has short-term and near-term catalysts, you want to buy it for both reasons, it the 800 pound gorilla in the
aviation market, the commercial jet, the 787 dream liner, 96% of the test flights are done, and tom this is about fuel efficiency, the next generation of aircraft. there's globalization, you have emerging market interest in commercial flight, stronger than ever. and i see boeing, b. a., as a stock you want to hold in your portfolio, collect that dividend, and keep it there for the next peak cycle in commercial aircraft delivery. >> tom: it part of the boeing business, of course the other part is military contracts, defense contracts. and one of your previous picks also operates in that area, we got a comment saying please comment on the recent weakness and the current outlook, geoy the ticker symbol. you first mentioned this on december 22 and the share price has trended lower and took a nose dive over the past month or so. what's to come? >> geoeye is a buying opportunity, i tell everyone don't try to catch a falling
knife, but it's still a takeover target in a sweet spot because it about satellite imaging, it all about reconnaisance that we've talked about before. geoeye had a police department on the screen because of concerns with the defense budget and one payment of 12.5 million with a 3.8 billion contract didn't come in on time as expected, and that was enough to send those shares down. but i sigh strong insider buying, interest in this area, and it's not just a defense and national homeland security play, it aalso for the oil, energy, agriculture, there are many applications for geoeye's technology. >> tom: one more update fromed from your inbox, saying that it mass wengsed that synovus had the potential to double. what is the current feeling toward it? the share price has continued to weaken considerably. >> well, synovus, which is the second largest bank in the southeast, based in columbus,
georgia, has a strong book of business. the bank is starting to heal. there's consolidation i'm expecting in the financial institutions and all the financial instugss have been weak. i just watched goldman sax go from 160 down to the low 130's. everyone should have heart and realize there will be rotation back to this money making business. the strongest survived, you want to own synovus. >> tom: you own all three that we mentioned? >> i own synovus, i haven't bought boeing yet, and of course i own geoeye and i'm buying more on this weakness i see as an opportunity. you can email us, email@example.com. or you can send us a note via twitter at my feed, @hudsonnbr, or nbr's feed. and facebook too. we'll feature some of your questions next wednesday. our guest this evening on "street critique," it's hilary kramer with gamechangerstocks.com. >> suzanne: here's what we're watching for tomorrow: the second estimate on first- quarter g.d.p. along with weekly jobless claims. and google is expected to announce new ways consumers can use smartphones to buy things. our "planet forward" series features a company looking to
transform how the world uses energy by controlling power usage one building at a time. your morning cup of joe is getting more expensive. starbucks is raising the price of packaged coffee by 17% in its u.s. retail locations. this is starbucks' first price increase for packaged coffee since september of 2009, and it's not alone. coffee makers have been upping what they charge due to the rising cost of green coffee. yesterday, j.m. smucker hiked the price of folgers, dunkin' donuts and millstone coffee brands by an average of 11%. >> tom: look for more detailed information on the new fuel economy labels for cars. they were unveiled today by the environmental protection agency and the department of transportation. the new labels will include the amount of fuel or electricity the vehicle needs to go 100 miles. they'll also show a numeric rating of one through 10 based on fuel economy and smog pollution.
look for the new labels on 2013 vehicles. >> suzanne: in the "money file" >> suzanne: in the "money file" tonight, breaking bad habits >> suzanne: in the "money file" tonight, breaking bad habits when it comes to investing. here's donna rosato, senior writer at "money magazine." >> reporter: no matter how good a job you do managing your money, no one is perfect, right?
of course not! even the savviest investors make mistakes. but its never too late to kick a bad habit. here's one: taking a "set it and forget it" strategy with your investments. if you've never increased how much you contribute to your 401(k) or cant remember what's in your portfolio, make an annual date with yourself to tackle those tasks. another bad habit is not controlling spending leaks. small amounts of money you spend every week on groceries and going out add up. cutting the costs of daily living can yield big saving over time. comparison shop before you buy, sign up for grocery loyalty programs to get discounts zapped directly to your car and organize potluck dinners with friends instead of eating out. and how many among us are really prepared for the long term? sure, it's great that people are living 30 years or more in retirement, but it's not so great if you outlive your money! a quick spin through a retirement calculator using age 95 as your target will let you know whether you're on track. kick these habits and you'll be richer for it. i'm donna rosato.
>> suzanne: and finally tonight, an icon in financial journalism has passed away. cnbc news anchor mark haines died unexpectedly last night. he was 65. haines had an irreverent style and the ability to cut through p.r. spin, whether interviewing business leaders or lawmakers. he was one of cnbc's first anchors and hosted a daily program here at the new york stock exchange. our susie gharib worked side-by- side with haines in the early days at cnbc. earlier today, she recalled some of her fondest memories of mark. >> susie: mark haines was a reporter's reporter. he was always interested in getting the story, digging for information, and the ib it sounds cli shea but he was speaking the truth. for many years he and i co-anchored a show at cnbc and i remembered once we were interviewing a stock market bull and mark's questions were so negative and very bearish. the next day we had a market bear on the show, and mark sounded so upbeat and bullish, and afterwards i said mark, what are you doing?
and he had this devilish look and laughed and said i just like to keep my guests off balance. that was mark, unpredictable, clever, smart. and a superb reporter. he was also funny, fun to work with, and he was my very good friend. so like many of his fans, i will really miss him. >> tom, a very sad day here at the new york stock exchange for many people. >> tom: yes, our thoughts and prayers go out to his family tonight. >> that's "nightly business report" for wednesday. may 25. i'm suzanne pratt. good night everyone and good night to you too, too many. >> tom: have a nice evening. i'm tom hudson, thank you for joining us. we hope to see you bac
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