tv Nightly Business Report PBS May 1, 2017 4:58pm-5:29pm PDT
. this is "nightly business report" with tyler mathisen and sue herera. setting records, the tech nominat dominated nasdaq as companies go old school or pay or raise dividen dividends. tornadoes and ice storms in the first three months of the year. why your premiums may head even higher. and curdled relations. america's dairy farmers are not happy that some of their canadian customers disappeared with no warning. those stories and more tonight on business report monday, may 1st. i'm tyler mathisen reporting tonight from new york city. >> and i'm sue herera.
we begin with the hottest sector of the year getting even hotter. the technology stocks started off the month with a gain and that powered the tech-heavy nasdaq with a new record, after it reached 6,000 for the first time ever. so far this year the nasdaq has risen 13%. easily outpacing the other major indexes. so here are today's closing numbers. the dow jones industrial average fell 27 points to 20,913. the nasdaq added 44 to a new high. the s&p 500 gained four. sue, apple shares are up more than 26% this year, and they have, of course, helped power the nasdaq so far. and tomorrow, the world's most valuable publicly traded company will report earnings. historically, this is the quarter when apple typically announces its annual dividend hike. last year, apple paid out the most in the tech sector by far. followed by microsoft and ibm.
so how should dividends figure into your technology stick picking strategy? kim forrest is a portfolio manager at ft. pelt capital and joins us now. good to have you with us, kim. i've always thought of the tech stocks fundamentally as growth stocks like apple, even microsoft and others. are they different now? are they yield stocks? are they income stocks? or are they still growth with a little sweetener? >> i think they're that -- the last one, growth with a little sweetener. and i'll tell you why. i think their shares trade with too much variation. the volatility is too high for them to be really one of those dividend-paying stocks that low risk investors love. like utilities. but they also don't have to invest a high proportion of their earnings back into their business. so they can pay it out as dividends. so you get the best of both worlds. growth and a dividend.
you say that you need to take a barbell approach to investing in tech. tell me a little bit more about that. >> well, you know, to have some distributed risk, you could have some of the older stocks like apple and microsoft and intel in your big cap portfolio. and then here on this side of your barbell, you could have smaller stocks that do not pay a dividend. some of the small cap stocks that are really high growth sort of plays. >> so, let's talk about some of these stocks that are out there for the picking, if you like them. which of these big cap tech stocks that pay a dividend are at the top of your buy list? and we know we've got apple tomorrow coming out with earnings. so i'd like to get your thought on that, whether it's at the top of your list or not. >> sure. well, let me give you the list and then we'll talk about apple. because apple doesn't make it quite there for me. we tend to like microsoft and
intel as our two kind of old school plays. they both pay nice dividends. and we don't think either one of those dividends is in any sort of trouble. so if that's what you're looking for, tech with a dividend, take a look at those two names. and i think apple's a big head scratcher. everybody's buying this company in anticipation of its next product releasement, which should be later this year. so that's the big question. do you feel like apple is going to produce this must-have phone that is going to drive all of these people there? i don't know. i can't tell you. >> all right. kim forrest, love the jean jacket. kim forrest. >> thank you. >> it's not just technology stocks that investors are buying up, but etfs as well. investors plowed on average more than $1 billion a day into exchange traded funds last month. and tell us about the trend continuing. >> for the etf business, april
came in like a lion and out like a lion. etfs continued strong in april. roughly the same inflow we've seen every month this year. the four-month total is $170 billion, the highest ever for four months. at this pace we could have a $500 billion year for inflows, which would be a record. so three sectors saw particularly strong inflows. flows were strong into european funds. third, emerging markets saw inflows. finally, we saw money flow back into high yield funds even. everything. who's losing? gold miners. after months of strong performance in flows, gold mining stocks funds had outflows. mexico also saw outflows, a continuation of the war of words between that company and president trump. the etf will top $3 billion under asset management any day now.
it's a long way from the $16 trillion that the mutual industry fund has, but the trend has been unmistakable for years. etfs are winning the war. bob pisani at the new york stock exchange. lawmakers reached a $1 trillion deal to fund the u.s. government. republicans and democrats agreed last night to fund the operations of virtually every federal agency through the end of the fiscal year in september. among other things, the bill includes money for defense programs, an additional border security, but not the border wall. it also plugs an emergency shortfall for puerto rico. it funds health benefits for retired union mine workers and provides additional money for medical research. the house and senate are expected to vote on the package later this week. a vote scheduled on health care. the trump administration seems to be pushing for one although there are mixed messages. john harwood is covering that story from washington. good to see you as always, john. is the house anywhere near
voting on another version of the health care bill and how is this particular version different from the last? >> so, i think they're closer than the last time this bill collapsed. principally the change they made is to give states the option to eliminate some of the regulations that conservatives had complain about with some protections attached to that. that has gotten them votes among the conservatives in the republican caucus, so it's gotten them closer. but there's still strong resistance from the moderates. there may be enough of them to stop this bill. as charlie dent told me today, i'm not aware of anybody on the center right that has moved from a no to a yes because of these changes. >> let me get a couple of questions in in a hurry here. what happens to the individual mandate in this plan? the business mandate? what happens to the exchanges? and finally, what happens with tax reform? anything new there? >> well, the individual mandate is not eliminated, but they've changed from enforcing it via
the tax penalty, which is under current law, but enforcing it via insurance companies being able to charge a higher premium if you exit the system and then come back in. that is not considered to be as strong. but it is something. and in terms of tax reform, we are still in a position where we've got to see more detail from the administration before the house can know what to do. they have sidelined the border adjustment tax, but we don't know if they will replace it with something else. >> john harwood in washington, thank you. president trump would consider raising the federal tax on gasoline to pay for his infrastructure plan. in an interview with "bloomberg news," he said a higher gas tax has the support of truckers if the money is earmarked for highways. the federal gas tax has not been raised since 1993. the president also told bloomberg he is, quote, looking at splitting apart giant u.s. banks and returning to a system
that separated traditional commercial and riskier investment banking. bank stocks were little changed on that news. treasury secretary steven mnuchin said that the economy will grow by 3% in the next two years. he also said the tax reform and deregulation will help spur that growth. >> there's really three parts that will drive that. the first is tax reform. this will be the most sweeping tax reform we've ever had. the second part is regulatory relief. we can have sound regulations, but make sure we have proper regulations. the third part is fair trade, renegotiating the trade deals. we think those three things together will create sustained economic growth at 3% or higher. >> by ben bernanke said a growth rate of 3% may be hard to come by. >> on a sustained basis, it's certainly possible, but probably not that likely. i think if there's a big tax cut, for example, that lowers tax rates, you might have a
bump, because of the increased demand, increeded consumer spending. >> over 3%? >> probably not. i would take the under on that. >> so we have 3% growth, if it's the most you can expect at best for years to come, how should you invest? kevin is market strategist and portfolio manager. always good to see you. welcome back. >> it's great to be here. >> so you say the investors want steady as she goes and safety in this environment, in this market, correct? >> yeah, i think so. the very low growth scenario that was just laid out is one that has been around for quite a while now. it's become rather a common chorus that we hear. i think investors have adapted to that new reality. you can see it in things like the savings rate, which has jumped up from about 2% to a few years ago to about 6% now as investors have come to terms with the fact that growth and returns will likely be lower than they have been heretofore.
>> modest growth and low inflation is usually a good recipe for stocks, isn't it? >> i think so. as a matter of fact, if you think back to where we were in the late '90s, very much the opposite was the case. there was a lot of expectation for growth that didn't materialize. consequently, there was a lot of undersaving, underinvestment, and the growth that has followed has been relatively low. so we've adapted now to this lower growth environment. and i just wonder if as we go forward from here, maybe some more savings in anticipation of slow growth. ironically fuels more investment. and the possibility that maybe growth might surprise to the upside over the long term. >> if indeed the case that we just set out continues, steady as she goes and low growth environment, what kind of stocks or groups of stocks do you want in your portfolio, if you're a longer term investors? >> it's slow and steady, it's a
very desirable characteristic. particularly if you have low interest rates. i think consumer is a very important theme. i think the consumption patterns have been very stable. expect them to stay that way, particularly with what we're seeing in the data. consumer discretionary makes sense. i would throw into thats utilities. and i think health care plays a very good role in providing companies with very good balance sheets for the long term. that would be a nice pairing of three sectors that i think play well off this slow and steady theme. >> on that note, thank you, kevin, as always. >> thank you. >> ty? >> still ahead, sue, a sour issue for american dairy farmers. american farmers squaring off for a milk war with canada. i'm contessa brewer in upstate new york. how canada's prices are putting a american farms in danger.
the trump administration is waiting for congress to approve trade talks so the north american free trade agreement, or nafta, can be renegotiated. it is the trade pact the commerce secretary describes as being outdated, and ripe for reform. >> nafta is an ancient treaty. it's decades old. and neither our economy nor the mexican or canadian economies are remotely similar to when they were back when the deal was done. there's nothing about the digital economy. there's very little in it about the surrogate economy. and the sections that it does address, some of those are also
clearly obsolete. >> secretary ross also said that the closer the nafta talks get to the mexican election, the more difficult they will become. trade relations with canada have also become straped. president trump recently accused the country of intentionally undercutting american prices on dairy products. contessa brewer reports tonight from new york. >> reporter: with 1,400 cows and 26 employees, dirk young runs a successful mid-sized dairy farm in upstate new york. successful, but not certain. >> it is unpredictable. it's not fun. it takes the fun out of it. >> reporter: the milk produced here goes to a company owned by 20 other farms. they process the milk into an ultra-filtered product that canada imported for cheese making. that is, until april 1st.
when canadian customers evaporated. >> the processors now take advantage of that low price milk in canada. which is basically making our price uncompetitive. >> reporter: in three days, they lost 25% of its business, $30 million. competitor grassland dairy in wisconsin lost $100 million, laid off employees and starting today, stopped buying milk from 75 daries across the state. the catalyst? a new pricing scheme in canada's dairy industry, which the government regulates in a managed supply system. but that system is not fair, according to former agriculture secretary tom ville sap. >> canada has created in the pricing system certain classifications for certain dairy products which created the opportunity for canada to essentially dump onto the world market a substantial amount of milk powder, protein concentrates and things of that nature, which will drive prices down for american dairy
producers. >> reporter: that's already happening. canada came in at a far better price. >> i lost the deal by 12 cents. which equates to about 13%. >> reporter: normally you would be competing on a 1 cents basis or 2 cents basis? >> max. business is won and lost by 1 cents. >> reporter: president trump is tweeting about the dairy standoff with canada and talking tough. >> canada, what they've done to our dairy farm workers, is a disgrace. >> reporter: and he's winning support from one of his staunchest democratic opponents, new york senator chuck schumer who promised to fight with him to help farmers. but canada is also squaring off for a dairy war, defending its preferential pricing for its own farmers. the ambassador to the u.s. said, canada is not a contributor to the overproduction problem.
the oversupply situation is real. at this dairy farm, the cows produce twice as much milk as they did a generation ago, because of efficiencies in farming. production is going up, but american consumption is not keeping pace. and that's why free trade and foreign markets are so crucial. >> dairy used to be about producing lots of good quality products at a cheap price. and i see that as changing now where market access is going to dominate. >> reporter: but uncertain times for dairy farmers trying to keep their little piece of the american dream. for "nightly business report," contessa brewer, new york. profit expectations despite falling generic drug prices. the health care company said strong performance in its medical segment helped the results. overall revenue rose but it wasn't enough for the streets. cardinal health has seen improvements in generic drug
pricing, but it still reaffirmed its downbeat outlook for the year. it fell just a fraction. several companies are reportedly eyeing tribune media as a takeover target. media giant 24th century fox and private equity firm blackstone have entered into a partnership to potentially bid on the tv operator. final bids are due on thursday. tribune media shares soared nearly 6% to $38.75. valiant pharmaceuticals made an unscheduled payment of $220 million to trim its multibillion dollar debt load. they said the transaction was made possible by the sale of a manufacturing plant and the earlier than expected closing of a skin care deal with l'oreal. shares rose more than 4% on the news to $9.66. subscriber losses
accelerated at dish network, reporting a larger than suspected drop in the latest quarter. and that hurt results. the company posted disappointing revenue while its lower profit did manage to beat expectations. shares, though, off more than 2% to $62.93. the food distributor bob evans said it completed a previously announced unit sale of its bob evans restaurant, and acquisition of pineland farms potato company. the company followed that news by saying it plans to issue a special dividend of $7.50 a share. shares of bob evans up 1% to $67.41. the first three months of the year were expensive ones for the insurance industry. in fact, it was the most expensive quarter for property insurers in 20 years. there are a few reasons why. floodwate floodwaters, and tornadoes led to dramatic rescues. some were lucky to survive.
>> i don't know how we got out of the house. >> reporter: others less fortunate. at least 15 people were killed across five states just this past weekend. texas alone saw at least four tornadoes. dozens were injured along a 35-mile path of mayhem and destruction. in missouri, floodwaters left whole communities under water. >> in many parts of missouri, this will be a flood of historic proportions. >> reporter: severe flooding and tornadoes are an unfortunate rite of spring. but in 2017, it's been happening across the country since the first of the year. the number of tornadoes more than doubled in q1, and the spike in claims has investors watching and insurance industry weathering an unusual burden. from 2000 through 2016, first quarter costs averaged about $1.5 billion. but this year's first quarter has been the most expensive
ever. nearly $7 billion. with severe storms accounting for about $6 billion. >> it's been a fairly active first quarter. i think it's probably going to be among the highest loss activity that we've seen. >> reporter: travelers announced 9% first quarter jump in catastrophe costs to nearly $350 million. profit fell 11%. allstate reporting tomorrow, has estimated a slight drop in catastrophic payouts from last year's first quarter. but it's more than $780 million. another major property insurer, aig, reports on wednesday. >> anybody else who's got any personal lines, homeowners insurance exposure, will have some of that. i think most consensus estimates factored it in already. >> reporter: home insurance costs are up 16% on average since 2014, due in part to catastrophic activity in the years just prior to that. and there's no relief in sight,
as more dangerous weather is forecast tonight across the midwest and the southeast. the harsh weather in parts of the country is also sending grain prices higher. corn, soybean and wheat prices are rallying. the damage from the storm in kansas which is the top grower of wheat is still being assessed. but the early estimates suggest losses could exceed 50 million bushels. coming up, entrepreneurial obstacles. >> i'm kate rogers in atlanta. on nightly business report quig, we're going to tell you which generation is on track to become the least entrepreneurial in recent history. the answer may surprise you. here's a look at what to
watch for tomorrow. as we reported, apple reports earnings along with fellow dow components pfizer and merck. auto sales for april will be released. and on capitol hill, the ceo of united continental will testify in front of a house panel over the recent removal of a passenger from a recent flight. sue, more than half of americans either own or work for a small busi. according to the small business administration, they create about two out of every three new jobs in the united states every year. a growing number of small businesses are started by millennials, but this group is facing some challenges. as part of our small business week series, kate rogers traveled to atlanta. >> reporter: like many millennials, 29-year-old candace mitchell graduated from georgia tech with student debt. but that wouldn't stop her from pursuing her passion. >> rather than seeing it as a weakness, i saw it more as an opportunity to really be even
more courageous when it comes to making sure that i am successful. >> reporter: in 2014, mitchell decided to start her own business. >> my ivana specifically recommends the perfect products for your hair. >> reporter: the idea came from mitchell's personal struggle with brittle hair. now her team uses science and technology to recommend the best products. her goal is to one day become the amazon of hair care. >> we want to provide every product, service, content, anything that women need for their hair care journey. >> reporter: millennials like mitchell have been slow to jump into entrepreneurship in recent years, outpaced by the baby boomer generation. in fact, data from the small business administration finds millennials are on track to be the least entrepreneurial generation in history. access to capital and student loan debts are the two key deterrents for this age group. the capital has launched a
campaign called choose atl in part to lure millennials to launch new ventures. >> a community that invites, encourages and really provides resources so that any young person who wants to start a business knows that atlanta is the place to do it. >> reporter: the city is also home to a chapter of youth entrepreneurs, a nationwide year-long accredited course for high school students in underserved areas. the goal is to show the next generation that becoming your own boss is a viable option. >> if we can use entrepreneurship to help them find passion, to help them hone in on their natural abilities, they look at entrepreneurship as a viable option to not only improve their lives, but the lives of others in their communities. >> reporter: over the past decade, 2,600 students in atlanta have participated. 99% graduate high school, and 80% enroll in higher ed. 16-year-old justice said he's already caught the entrepreneurial bug.
>> i want to run my own app company. the best thing about being my own boss, not having someone tell me what i can and cannot do. >> reporter: for "nightly business report," i'm kate rogers, atlanta. good for him. >> yeah. i like the young lady who said she wants to be the amazon of hair care. >> absolutely. aim high. good to see you, ty. >> see you tomorrow night. >> you got it. that does it for "nightly business report." i'm sue herera. >> i'm tyler mathisen. have a great evening. see you tomorrow.