tv Nightly Business Report PBS August 2, 2012 1:00am-1:30am PDT
from the fed: it is "closely monitoring incoming information" about the economy. this is the same kind of language the fed used the last time it launched a new bond buying program. the fed's assessment of the u.s. economy was also pretty gloomy. it said economic activity decelerated over the first half of this year. employment growth has been slow in recent months. the housing sector remains depressed. and household spending has risen at a slower pace. >> susie: investors were disappointed that the fed decided to stick to its current policies. all of the major averages were in the red. the dow lost 32 points, the nasdaq fell 20, and the s&p off four points. we have two reports, looking at the fed decision, and market reaction. we begin in washington with darren gersh. the federal reserve has concluded the economy is slowing, which raises an obvious question. >> well, okay, now what are you going to do about it. well, they didn't do anything about it.
they said they are there for us and they will move when needed. but, when is "needed" since we all agree the numbers got weak? >> reporter: we're still not sure when "needed" is. many fed-watchers thought bernanke and crew would end today's meeting with a pledge to keep interest rates low through 2015; that would be a six month extension from current policy. >> and surprisingly their earlier statement and their individual projections in june, suggested as such. >> reporter: but that didn't happen. instead, the fed said it is "closely monitoring" the economy. of course, that's what a central bank is paid to do, but fed watchers pointed out the last time the fed used a phrase like "closely monitoring" was 2008, just before bernanke launched an aggressive effort to bring down long-term interest rates. though this time, the economy is stronger. >> i believe that their baseline view is the most likely view. that is to say that the economy will muddle through and gradually improve as time goes by, and should that baseline view play out, the need for further action isn't there.
>> reporter: but given europe's painfully slow process for cleaning up it's financial mess and the continued worries over deep federal tax and spendingg cuts in january, expectations are rising the fed will have a lot more to say next month. >> they are going to have a few more pieces of information so they can determine their move and i am expecting another round of quantitative easing in september. >> so what all this really means is the fed is waiting, looking for more readings on jobs and unemployment and basically watching the news like the rest of us. darren gersh, "n.b.r.," washington. >> reporter: the stock market was hoping for a stimulus party, catered by the federal reserve. it never came, and disappointed investors sold shares in reaction. hopes had been building that the fed would announce another round of bond buying, or at least extend it timetable for low rates. attention now shifts across the pond to tomorrow's european central bank meeting. e.c.b. president mario draghi has recently raised speculation
it will announce it's own stimulus plan. >> of course, this wasn't the only game in town. and, in honor of the olympics the market has passed the baton to the european central bank to see what they do tomorrow. >> reporter: u.s. stocks have been in rally mode for weeks, as investors hope for more stimulus from world central bankers. after hitting a summer low in early june, the dow has gained more than 7%. but, market pros say the europeans need to do something really big tomorrow. otherwise expect more serious selling. >> what the market really wants is for the e.c.b. to say that they're going to start buying the sovereign debt of spain and italy in the open market. that's really what the market wants that's what you would get the most positive response in the market from. i'm not 100% sure they're going to do that now.
>> reporter: if the european central bank disappoints the stock market tomorrow, all eyes turn to the next fed meeting a two-day one on september 11 and 12. that would mean six more weeks of pinning for more stimulus. suzanne pratt, "n.b.r.," new york. >> reporter: i'm diane eastabrook in lincolnwood illinois. still ahead, consumers let up on the accelerator when it comes to auto sales, i'll have details. i'm join now by mohamed el-erian, see you of pimco. so, mohamed, did the fed do the right thing today. >> the fed surprised everyone because it had every reason to do something. the domestic economy is vogue. -- slowing. the global economy is slowing. inflation is fragile. but they didn't. we would suggest three reasons that went into that decision not to act. first, there was concern about the effectiveness of what they
can do. if you like, the benefits of coming down and the costs of going up. second, i think that they wanted to keep the powder truck dry. they're worried about the fiscal cliff and they're worried about europe. and third, they don't want to take pressure off congress, so they didn't act today, but we would agree that most likely they will act in september and you'll probably get a signal in august during the jackson hole speech of chairman bernanke. >> susie: as you know, i mean, so many people think that even if the fed does act, it's going to have a minor effect on the economy. but then you wonder, is it going to be worse if the fed does nothing. where do you come on that discussion? >> and that is the big dilemma. we are in a lose-lose world in the sensthat the fed on its own cannot deliver outcomes, economic outcomes. it can influence the market, but it cannot deliver economic outcomes because it doesn't have the right policy tools, but if it does nothing at all, things
may get worse. and that's why i think we're going to continue to muddle along with the fed trying to do whatever it can, but we will have unfortunately the same discussion, susie, you and i, in a few months' time because unless the other government entities react, the fed will not be able to deliver on outcomes. >> susie: let's turn to what's going on in europe. you heard our report. investors are hoping for something big out of europe when central bankers meet to talk about the european situation. now, you just came back from europe. you've been talking to some of the policy-makers there. what's your sense? are they going to do something big? >> my sense is that the market may have gotten ahead of reality on the ground. the markets got very excited when the president of the european central bank said on thursday they would do whatever is needed, and believe me, it's going to work. so the markets took off on that. the problem is that the ecb
cannot deliver the other entities, in particular there's a lot of political concerns. so i worry a little bit that we have priced in more action that's likely to materialize tomorrow out of the ecb. >> susie: all right. so we have two big events yet for investors this week. we have the ecb, european central bank meeting that you just talked about. we also have the jobs report that's coming out on friday. which is more important for u.s. investors and the markets? >> i think ironically europe is more important right now. that doesn't mean that the friday numbers aren't important. they are. they're going to also signal the underlying strengths of our economy. but europe today is playing a massive role. i mean, just look at what has happened in markets on thursday and friday based on a statement of a european policy-maker. so europe is more important, but keep an eye on the employment numbers because they are also full of information.
>> >> susie: what are you expecting? how strong or how weak is that number going to be, and what kind of market reaction are you expecting on friday? >> we're going to look at the composition of the number as much as the headline. so everybody focuses on how many jobs were created and what was the unemployment rate. that's important, but much more important is, is the problem of long-term unemployment getting worse. is the problem of youth unemployment getting worse, because these two things become structurally embedded in the economy, and i worry that friday's report will say unfortunately these two issues are getting worse. >> susie: all right. not the kind of thing investors want the hear. thank you so much, mohamed, as always. mohamed el-erian, c.e.o. of pimco.
>> tom: u.s. vehicles sales and economic uncertainty really sidelined consumers. here are the results of gm sales, down 6% year over year. ford sales dropping 4%. chrysler was able to post a healthy 14% increase, although ableists expected sales to be stronger at chrysler. for imports, toyota sales rebounding 26%. honda is up a whopping 46%. southsouth korea's hyundai risid volkeswagen sales rising 26%. while the big three u.s. automakers had a disappointing month, morningstar analyst david whiston isn't panicking. >> one month of data i don't concern myself too much with. in another 30 days we'll be concerned about another set of numbers anyway. i'm more concerned about does
retail demand for full-sized pick-up truck come back in the second half of the year. both gm and ford, people and r are thinking the same thing. >> tom: diana estabrook covered the auto industry for us. diane, sales were running at a pretty robust pace this springtime. what happened in july? >> reporter: well, especially for ford and gm, tom, it was a problem with late sales. this is something gm had warned about a couple weeks ago. usually these rememberral cars will buy cars early in the spring, may and june, for the summer vacation season, and then they sell off in july, but you also can't discount the fact that, you know, consumers have been pummeled with a lot of bad news recently about jobs, about europe and so that may have sidelined some american consumers. >> tom: we saw a big difference between the sales of u.s. automakers and a couple japanese automakers. are we beginning to see a shift back to a different kind of market share for japanese automakers in the u.s. >> reporter: we're definitely
seeing japanese auto companies bounce back from a year ago. they were battling those problems with the tsunami. we saw honda sales up 46%. scion, a division of toyota, saw its sales up 97%. obviously those japanese companies are back, and they're stealing market share away from u.s. companies. >> tom: any idea if that shift is sustainable as we move into the second half of the year? >> reporter: it's all going to have to depend on what kind of products the u.s. companies are bringing out. they've been very aggressive at rolling out new products. we're going to be seeing a new dodge ram coming out in september. so if they put out a good product that consumers like, they could possibly get some of that share back. >> tom: analyst david whiston also mentioned the dodge ram. how important, diane, are pick-up trucks as we move into the colder months? >> pick yum trucks are a huge segment for domestic auto companies. the second half of the year tends to be stronger for those companies. analysts are hopeful that people will come out this year. we've been seeing some better
housing numbers and people who typically buy pick-up trucks, contractors, will be buying this fall. >> tom: at a general motors dealership outside of chicago tonight, it is "nbr's" die an estabrook. thanks, diane. >> tom: an update on the hunt for missing money from failed brokerage firm m.f. global. investors might not get all of their money back. james giddens, the bankruptcy trustee in charge of returning customer cash, today told a senate panel he expects to recoup about 90% of the cash. but so far, he's only uncovered about 80% of the funds. there's still about $1.5 billion unaccounted.
his outlook is in conflict from the testimony of another trustee, louis freeh, who said he's confident all customers will be made whole. still, giddens warned lawmakers, getting all of the money back won't be easy. >> we very much would like to pay every customer 100%, however, it will be a time- consuming, difficult and uphill battle to be successful in marshaling substantial additional assets, needed to pay commodities customers 100%. >> tom: today's hearing in the senate looked at the bankruptcies of both m.f. global and p.f.g. best. the two futures brokerages failed within nine months of each other, leaving customers with massive losses. >> susie: a rough start to the trading day here at the nyse, market maker, knight capital group, was hit by a trading glitch, that impacted trading in 150 different stocks. >> reporter: the securities and exchange commission and the big board are investigating what caused the glitch, knight capital blamed a "technology
issue." it even went so far as to tell its clients to, "route listed orders away." traders here at the big board say it led to chaos at the open. >> one or two stocks i guess you can write it off to just an anomaly, but at some point it just seemed like there was way too many similarities between the patterns in how these stocks were trading across the floor, that there was just something that wasn't right that was happening. >> reporter: the problems at knight capital led to trading halts in five big board stocks. molycorp, corelogic, kronos worldwide, china cord blood, and trinity industries were halted in early trading, after big spikes in volume. they eventually resumed trading and went on to normal closes. knight capital stock plunged almost 33% or $3.39 to $6.94 a share on that trading glitch, and composite volume on the stock surged to over 60 million shares. floor traders call it another black eye for wall street.
>> when investors read the headlines on this tomorrow they look at wall street as a whole, when the facebook occurrence happened they look at wall street as a whole, at the end of the day you have to look at who's pushing the buttons and how the buttons are being pushed, and when something goes wrong, who's there to fix the problem. >> susie: tom this is certainly another blow to investor confidence, and it's also a wake up call for traders and people who handle these technology issues. >> tom: let's get going with tonight's "market focus." >> tom: u.s. stocks ended mixed after the federal reserve's statement and trading glitches. the s&p 500 traded mostly in
positive territory before the federal reserve's latest assessment of the economy. when that statement was released, stocks sold off. the s&p 500 dropped almost six points in two minutes. after paring back that loss, the index fell into the closing bell, ending lower by a third of one percent. trading volume on the big board spiked over the trading problems with knight trading we just mentioned. big board volume topped one billion shares. it was 1.7 billion on the nasdaq. the sector losses were led by utility stocks, falling 0.7% as a group, the industrial sector dropped 0.6%, and consumer discretionary was off by 0.5%. california utility edison international led that sector losers. while earnings were better than forecast, the electric power producer continues having trouble restructuring the debt of its wholesale power business, threatening to put that unit into bankruptcy if it can't rework its debts, or sell it. shares fell 2.7%, down to a five week low.
earlier this week shares traded at their highest price in four years. the company's wholesale business has suffered from a high debt load, aging power plants and low electricity prices. fellow power producer exelon shed 2.2% after coming up shy with its latest quarterly earnings. it also was hit by lower power prices. a different type of power company, first solar was in focus after the closing bell. earnings more than doubled from a year ago, and handily beat analyst average estimates. solar panel makers have suffered from falling prices but first solar has been developing big solar farms, helping its financial performance. this stock was the worst performer in the s&p 500 last year. and they're down 56% so far th year, including today's 4.8% drop. but during tonight's earnings release, the company increased its financial outlook, and shares jumped more than 12% in after hours action.
after closing below $15, the stock was trading over $16.50 in late trading. two media conglomerates turned in their latest financial report cards. time warner's earnings were one penny ahead of estimates. but ad sales growth for its cable t.v. networks like t.n.t. and c.n.n. were less than what some had anticipated, leading to less than expected revenues. comcast, the cable company and owner of n.b.c. beat earnings estimates by three cents per share. the company credited more internet and telephone phone service subscribers. time warner shares climbed 1.2%, up to a new 52 week high. comcast saw a nice pop, up more than 3%, also at a 52 week high. meantime, mastercard saw some selling pressure after its quarterly revenues were less than expected. shares fell 2.2% as volume more than doubled. facebook continues seeing heavy trading in its stock as shares continue sinking. today's 3.8% drop takes facebook to its lowest price since going
public in may at $38. it has now lost 45% since then. another social media stock, game maker zynga, also continues to see its share price fall to new lows. zynga dropped 4.8% as it reshuffles its senior executives after disappointing quarterly results. four of the five most actively traded e.t.f.'s were lower. the lone exception was the emerging markets fund, up 0.2%. and that's tonight's "market focus." >> tom: the federal reserve's low interest rate policy has led to historically low borrowing costs, but many small businesses
have complained about the difficulty in qualifying for a bank loan, especially a commercial mortgage. as we continue our look at regional banking this week, we visit a restaurant that only got its loan thanks to a government guarantee, even though banks have been easing lending standards. >> reporter: a year ago this was a greek restaurant on a busy highway in hallandale beach, florida, between miami and ft. lauderdale. in the fall, new owners opened gamaroff's bar and grill. this spring those owners wanted&
business. >> it is extremely difficult for banks to finance a restaurant. in good times its difficult, in bad times its even worse. >> reporter: seltzer turned to a small business administration program that was created by the 2009 economic stimulus law. the program provides a government guarantee for about half of smaller commercial real estate loan. >> even with the s.b.a. loans we went to numerous banks and when they knew they had no risk, no risk because they stayed in first place ahead of the s.b.a., they still weren't willing to lend on the building which i really can't understand. >> tom: it wasn't a matter of a bad apparaisal. it wasn't a matter, we had great appraisals. they just didn't want to lend to a restaurant. chris hurnauelped get the mortgage. hurn runs mercantile capital, a subsidiary of orlando, florida based community bank "old florida national bank." >> the regulatory environment for banks right now is, certainly in my lifetime and your's, the most tense its ever been. and a lot of banks, if they make too many loans to special purpose properties they really can get in some trouble with regulators. >> tom: commercial real estate lending has been getting easier if you ask bank lending officers. >> tom: a federal reserve quarterly survey of senior loan officers finds more than 13% of
smaller banks reported their lending standards for commercial real estate eased somewhat in april compared to february. >> we have seen that on the commercial credit markets outside of s.b.a. lending there has been easing in the credit markets but commercial real estate values are not coming back. >> tom: the s.b.a. loan guarantee program gamaroff's used to buy its building is due to expire in september, prompting calls from supporters for congress to extend it. we continue our look at regional banking tomorrow night, as we talk to one of the biggest, bb&t c.e.o. kelly king joins us. >> susie: also on the program tomorrow. we're heading to the hamptons, the posh vacation strip on new york's long island, we'll check on the summer rental market in one of the most expensive parts of the country. and cuts could be on the way for defense spending in the u.s., but how are sales doing overseas? we'll find out tomorrow. >> tom: when you watch the olympics, you can't help but be bombarded by some of the world's
biggest brand names, but tonight's commentator says you might be surprised to learn, there are lots of entrepreneurs behind the games. here's eric schurenberg, editor- in-chief, at inc. >> eric schurenberg for n.b.r. marketplace: the entrepreneurs behind the olympics taping july 31, 2012. >> reporter: as you watch the ads for the olympics, it's easy to get the impression that the whole event was made possible by mega-corporations like coke, visa, and citibank. the reality is that these games have entrepreneurs fingerprints all over them. take the american women's gymnastics team. notice those fetching leotards? they're made by a little outfit in reading, pennsylvania called g.k. elite, which also furnished eight other national teams. in addition to niche sports equipment, entrepreneurs also supply an outsized portion of the technology innovation. tired of tape delay? well, you can see it all on- demand on your smart phone, thanks to a six-year-old startup from portland oregon called elemental technologies. one other entrepreneurial product now in london is actually a person, u.s. gymnast danell leyva. his step-father is cuban-born yin alvarez, who fled his homeland for the u.s., knowing no one, speaking no english,
because he wanted to run his own gymnastics school. he now has 300 students, three of whom, including danell are competing at world-class level. it's a little facile to compare the passion that entrepreneurs and athletes share. so lets keep it in alvarezs words: what he admires about his gymnasts, he says, is that they don't fear failure. reminded how he risked everything to start a business, he replies: the only thing really to fear in life is not trying. spoken like an entrepreneur. i'm eric schurenberg. >> susie: and finally, twitter is getting into the polling business. it launched the twitter political index today, it's the micro-blogging site's daily measure of how users are feeling about the 2012 presidential candidates. the index weighs tweets about barack obama and mitt romney against each other. then it gives each contender a score, on a scale of zero to 100. and tom, twitter says its index often parallels results seen in gallup's presidential approval ratings.
tonight on "quest" -- elephant seals dive deeper, swim farther and hold their breath longer than almost any mammal on earth. but how do they accomplish such remarkable feats? bay area scientists have begun to unlock the secrets of these aquatic athletes. and after multiple unmanned missions to mars, we still don't know if life has ever existed there. nasa scientists are hoping a new high-tech rover will help them solve the mystery. major funding for "quest" is provided by the national science foundation and the corporation for public broadcasting.