tv Nightly Business Report PBS May 10, 2017 4:59pm-5:29pm PDT
>> announcer: this is "nightly business report" with tyler mathisen and sue herera. retail wreck. will this earnings season be the sector's worst in nearly a decade? staying focused. the markets brushed off the firing of the fbi director, and stocks are oddly calm. why? and what moves if any should investors like you make? >> modern medicine. how artificial intelligence could one day predict what diseases we might get. those stories and more tonight on "nightly business report" for wednesday, may 10th. good evening, everyone, and welcome. the talk in washington and on wall street was about yesterday's firing of fbi director james comey. more on that in a moment, but we begin tonight with retail. some say the industry now faces its biggest challenge since the
great recession. and as the sector gets set to report earnings, investors are preparing for the worst. we've already seen a growing number of retailers file for bankruptcy. and if the pace keeps up, this year could see highest number of such filings since 2009. and just today, the retaileraber co abercrombie is in talks with buyers. tomorrow companies like macy's and kohl's report their earnings. bob pisani look at what to expect. >> reporter: the overall retail picture is looking pretty grim right now. 20% of publicly traded retailers are expected to lose money in the first quarter. 20%! 60% will report lower earnings than last year.
that's the worst performance for retailers since the great recession. retailers have richardeached a g point in the last few months. more sales are going online, and travel and restaurants overbuying apparel. and there's an oversupply of retail outlets. then of course there's amazon, the big elephant. amazon made up more than 60% of the growth in u.s. online retail sales last year. 60% of the growth. they're about 27% of the growth in the total retail market. think about that. one company with a quarter of all the growth that we saw in retail sales last year. how do you compete with that? there is no margin for error, because of the pressure amazon and even walmart are putting on the businesses in terms of pricing and delivery. still, a number of retailers are holding up, including the home improvement group. home depot and lowe's are doing
well. cody is doing well. that's a pretty small group. the typical retailer is down double digits this year. the biggest movers, what else, amazon is up 26%. and the other behemoth, walmart, is up 11%. tough year. for "nightly business report," bob pisani at the new york stock exchange. >> oliver chen joins us to talking about retail determination and what he's expecting from big names tomorrow. he's the senior retail analyst at cowan and company. nice to have you here. >> thank you for having me. >> bob pisani kind of set the stage, and it does sound like it's going to be a pretty difficult quarter for many of the retailers. what are you going to be watching for? >> yeah, there is a transformation and a revolution happening in retail. there are three main problems. firstly, physical store traffic. physical store traffic is declining anywhere from 5 to 6%. secondly, the rise of online and amazon.
keep in mind about 80% of america shops at amazon. and there's over 50 million prime members. and thirdly, the consumer transformation taking place. consumers basically have stores in their phones. so they have stores in their pockets. that's really changed a lot of behavior. what i'm looking for is really more information on the reality of store closures. at cowan and company, we think as many as 20% of companies need to close their stores. there's too many malls in america, 20% of malls could be repurposed. that is a theme that could pervade conference calls. physical store traffic is an issue. and the equilibrium point, online will grow 10 to 25% to 20 or more. >> are there stocks in the retail space that you follow that you like that are worth investors' money? >> yeah. >> which are they? >> i would say you're going to go high, go low.
go super premium or go deep value. so we like lvmh, louis vuitton, tiffany, sotheby's. or go with value, t.j. maxx, ross, costco. you want to play the theme of what's un-amazonable. that's a theme i follow closely. amazon is an awesome convenience stores. but if you're going to buy a diamond or a $100,000 art piece, you're going to go to luxury goods. and if you're going to go for a sale, you'll go to the stores to get that discount. >> bob says experiences are taking the place of regular retail shopping. i guess you could argue lvmh or a tiffany's, when you go into those places, it's an experience as well as a purchase. >> it really comes back to brands and running a great brand. at the pinnacle of luxury, it's about heritage, it's about
craftsmanship, underpinned by innovation. if you own a great brand like a louis vuitton, a lululemon, that's a powerful resource. think about that is important. costco, another great retailer, very well-priced items, deep value. customers always like a bargain. keep in mind that's another name we like too, because value will always be in style. >> on that note, thank you so much, oliver. oliver chen with cowan and company. investors were watching the fallout from the late day firing yesterday of former fbi director james comey. the big question is whether it will impact the trump administration's economic agenda. john harwood comes to washington tonight. john, connect the dots for us. how could this impact the president's push for such things as tax cuts, infrastructure spending, even health care? >> the furor surrounding a decision like this, it was the only thing anybody in washington was paying attention to today
and will be for some period of time. it prevents congress from focusing and making tough decisions on policy issues that are difficult already to begin with. second of all, it puts more pressure on the republican coalition behind mr. trump. they only have 52 votes in the senate. if you start getting people nervous about associating themselves with his position, either in the house or the senate, then it's more difficult. let me give you one piece of sound that i just -- from a conversation this afternoon with josh bolton, former bush white house chief of staff, now runs the business roundtable. it was an informal setting. when i asked him if he was disturbed by what happened with james comey, this is what he said. >> the president has the right, the authority to fire the fbi director. but there will be a lot of turbulence over the timing and the circumstances of this. and so my concern from my vantage point at the business
roundtable is that that will delay or distract from what should otherwise be a very productive period for legislating and acting on economic policy priorities. i don't think there's reason to doubt about the stability of the rule of law in this country. >> so even if there's not a constitutional crisis, which is a prospect being raised by some of the president's strongest critics, this certainly gets in the way, guys. >> mr. comey is being asked to come testify on capitol hill. so once again, that whole story will kind of be resurrected. given that, how long can investors expect this distraction to last, do you think? >> look, i think for some time, because not only do we have an fbi investigation, which will continue with the career professionals and some new head of the fbi, but you've also got
the senate intelligence committee investigation. one of the people who seemed particularly disturbed on the republican side by what happened yesterday was richard burr, who co-chairs that with mark warner, the democrat. mark warner says we now have questions about the rule of law. that is a very major topic to occupy washington. >> john, thank you very much. john harwood in washington tonight. on wall street, stocks were oddly calm. you of might expect stocks to move on a headline that read "white house fires fbi director," but not today. in fact it was disney's results that we reported on yesterday that dragged the blue chip dow index lower. here are the closing numbers, the dow jones industrial average lost 32 points to 20,943. the nasdaq gained 8 1/2 and the s&p 500 rose more than two. what should you make of today's calm stock market reaction and what if anything does it mean for your money?
eric, welcome, good to have you with us. you saw the stock market barely budge today after the sort of bombshell last night about the firing of fbi director comey. but is there the possibility that if the trump agenda gets stalled, that the market would react? >> hey, tyler, great question. when you look at what's happening and the noise centered around this, frankly it's just that, it's noise at the moment. how deep it goes, we're going to have to wait and see. the bigger question is, does it delay some of the tax reform. what's going to happen and how will that play out, and will it be delayed in some fashion. >> does it economy trump trump? >> or does the trump trade over? that being said, we think that earnings have been good. interest rates are low. money is cheap right now. and companies are hitting new highs every day. so the sentiment seems to be good. the question is, if this is
delayed a little bit or if something larger comes out of it, what happens to the market? and basically how much of it has been priced in? >> exactly. now, you like consumer staples and information technology. on a pullback at this point, yet we also have very low volatility. the volatility index has been almost at record lows. >> yes. so when you look at those two, there's two things we like to look at. one is consumer sentiment. we see consumer sentiment in the upper 90s and the volatility index sub-10. we're not saying this is going to be a big selloff, but market corrections do happen. seasonally, going into may, there's a sell in may and go away that comes up occasionally. the question is, the tax trade, if it gets stretched out, what does that do to the markets. we really haven't seen, when we think about pullback, january 1
liners. the aerospace company is citing engine problems. the jet has not yet been delivered to airlines. the first delivery was expected this month, and boeing says it plans to stick to that schedule. phil lebeau is covering the story for us from chicago, good to see you, phil. >> reporter: hi, sue. >> how unusual is this type of problem so close to delivery? >> reporter: whenever you stop flights, it gets attention. it doesn't happen very often. they're not changing the delivery schedule, if that were to happen you would see stocks taking a hit. people are a little cautious right now, but by all indications, we were out there for the first flight of the 737 max, that was in january of last year. by all indications, the first delivery, once they get done inspecting these engines, will be happening next week. this is an engine built by ge and its partner saffron. nothing happened during a flight, so they'll be inspecting these engines. again, they expect the first delivery to happen next week.
also keep in mind, boeing is in the midst of ramping up 737 later this year. if that were to change, that would be an issue. >> this is their key aircraft. let's talk about another company you follow, ford. there are reports over the past couple of days that the ceo, mr. field, is coming under pressure from the board to better explain his strategy. the stock is slumping. what do you hear? >> reporter: mark field is facing pressure, primarily it comes down to this. they're making huge investments trying to reposition the company for autonomous drive vehicles utilizing artificial intelligence and other future technologies. at the same time they're seeing lower profits. compounding that is the fact that they're trying to keep up with old rivals like gm who are looking at record profits, and new rivals like tesla. to drive that point home, take a look at shares of ford and tesla since mark field became ceo in
july of 2014. you would look at this and say, wow, tesla must be having great profits. uh-uh. ford has been profitable, very strong profits, yet the stock has done nothing under mark fields. >> is the gain that we've seen in tesla partly because of the ceo? >> reporter: sure. >> and because of all the different and some would say very sophisticated, very out of the box types of ideas that he has, whereas mr. fields is running an old line company that's innovating, certainly, but it's a vastly different type of company than tesla. >> reporter: exactly. it's also a profitable company, unlike tesla. and the problem for mark fields is he's made these huge investments that he eventually thinks will pay off, and most people believe that they will pay off. the question is when. two years, five years, seven years? and how patient do you have to be as an investor? that's the pressure on ford. >> is ford the hot brand?
or has gm sort of surpassed it because gm touts that they've got lots of models, including their trucks that are doing very well. i sense that gm may have a little bit more of a hot factor attached to it. >> reporter: i would say it has more momentum. it has a younger lineup of vehicles right now. and that is helping general motors. but really, when you talk about the hot brands out there, look at what's happening in the other company in detroit that nobody talks about very much, fiat chrysler. you've got jeep, you've got ram, two of the hottest brands out there. >> phil, as always, thanks so much. phil lebeau in chicago. toyota issued a downbeat earnings forecast, saying profit for the current year could slide 20%, blaming increased spending in the u.s. market and a stronger yen. if that happens, it would be the second straight year of profit decline for toyota and could crimp investments in new technologies like artificial intelligence and autonomous
driving. yesterday we talked about the airlines. and that despite all those viral videos, customer satisfaction is rising along with their stock prices. today, there was another survey with pretty similar findings. according to jd power, consumer satisfaction is up for the fifth straight year, thanks to cheaper airfares, better ontime performance, all-time low bump rates and less mishandled bags. the survey collected responses from april of last year to march of this year. but that was before the video of the passenger being dragged off that united flight surfaced. time inc. cuts its dividend. that's where we begin tonight's market focus. the struggling magazine publisher said it was lowering its dividend. print ad revenue a soft spot for the company, dragging down overall sales more than expected. time also saw its loss widen and
it missed estimates to boot. shares fell a whopping 14% to $12.95 on the session. wendy's managed to post earnings that beat expectations. same store sales beat estimates thanks to the popularity of its value meals. but overall revenue fell because the company sold more restaurants to franchisees. shares rose 5% to $15.87. charlie brown and the gang are heading north as canada's dhx media is buying the entertainment division of iconics brand group for almost $350 million. dhx will now own the rights to the strawberry shortcake brand and a controlling stake in the peanuts franchise. shares of dhx media were up more than 5% to $4.60. profit at drug maker mylan rose and topped expectations thanks to strength in that company's overseas markets. revenue also edged higher but came in a bit shy. the company did reaffirm its
guidance for the year. mylan's shares rose fractionally to $38.21. snap posted a less than teller quarter. after the bell the social media company reported slowing user growth and revenue that was slower than estimates. shares plummeted in afterhours trading. under pressure from its investors, whole foods named a new cfo and five new members to its board of directors. the news followed the company's latest earnings which were in line with estimates. whole foods also raised its quarterly dividend 29% to 18 cents a share and said it was launching a more than $1 billion share buyback. shares initially rose in after hours but finished the regular day session down. the future of medicine. that phrase may bring up the images of wearables or targeted
treatments. but one thing could revolutionize health care more than any other -- artificial intelligence. >> reporter: soon artificial intelligence may be able to predict what diseases we could get. >> the potential is perhaps the biggest of any type of technology we've ever had in the field of medicine. >> reporter: it's being worked on by tech giants from google to ibm to phillips. >> in many of the fields that we are in, we're using ai already. in patient monitoring, we can predict hours in advance whether a patient will get a heart attack. >> reporter: startups are proliferating. researchers are training computers to analyze information from sensors, images, and language, using a technology known as deep learning. >> we give it the image and we tell it, okay, these set of pixels represent cancer while these other set of pixels are not cancer, so can you learn how to distinguish between these two
automatically. >> reporter: without human inputs and with enough data, computers may make connections we're not capable of. >> computing capability can transcend what a human being could ever do in their lifetime, because they can be fed, you know, just millions, hundreds of millions of whatever the topic is of interest. >> reporter: joel dudley's team at mt. sinai developed a system known as deep patient that mines anonymous health information on the millions of people in the hospital's database. >> it takes all of that data at a high level and starts recombining it in different ways, and saying are there hidden connections among these data to allow us to better predict who is going to get, for example, diabetes. >> reporter: many caution, though, it's early days. and the hype around artificial intelligence is significant. hurdles from access to data to reimbursement to simply understanding how ai works abound. but as investment grows, leaders in the space expect ai to influence the way doctors and
consumers think about health. for "nightly business report," i'm meg terrell. and coming up, why virtual offices are now a real player in real estate. mortgage applications are on the rise. total volume increased about 2.5% on a seasonally adjusted basis last week from the previous week, as the buyers complain about high home prices
and limited listings. according to the mortgage bankers association, volume is still below year-ago levels because of weaker refinancing. anyone with a computer can launch a website and start working from basically anywhere. but for some, where you work is still important. that's why the boom in small business is causing yet another boom, in offices. not real offices, mind you, but virtual ones. diana olick reports from new york. >> reporter: on the 85th floor of one world trade center, there are receptionists, offices, conference rooms, and co-working spaces. but it's what's the not here that matters. what is a virtual office? >> people who are working from home. >> reporter: australia-based serve corp. has operations in 24 countries but entered the u.s. only recently in the recession, when real estate rents slumped. they took spice in several prime
locations including one world trade center where they're subleasing both the space and the address. >> we now have 40,000 customers who don't rent any space from us. they can use our space on a casual basis. they can use the infrastructure that we've got, the technology, the telecommunications technology, so their business is really well represented. >> reporter: starting at $250 a month, clients can get the five-star address, the urban area code, secure e-mail, and a receptionist who answers for their country and can accept real mail or faxes. >> it's absolutely marketing. the aim of marketing is to build trusting clients so you create an environment where they want to buy from you. maybe this is turbo charging that. >> reporter: executive office suites have been around for decades, but technology has caused a new boom in small business, marketing, tech, information services, that's where virtual offices have become a real player in real estate. jordan hamad is ceo of a small
technology consulting firm in oregon. just seven employees. but you would never know that from his one world trade address. >> there's a good deal of prestige that comes along with being here. it's the most recognizable address in the world. so it's great that we can attach the company name to that. and we primarily use it as a marketing mechanism as well as a flexible space to work. >> reporter: businesses can pay a little more to have access to co-working space like this, or a lot more to rent an individual office. competitors like regus also offer flexible work spaces but don't go as far with the high end virtual. serve corp. says virtual office accounts for 40% of company revenue. you think co-working has peaked already? >> there's a mix of space that you need to make your business model stack up. it's about an ecosystem. what i'm excited about is virtual office is the next big thing. >> reporter: the biggest
expenses for small businesses are people and rent. the longer they can put off investing in both, the more profitable they'll be. now that technology allows anyone to be anywhere, at least virtually, it makes sense that wherever you are, you should be at the top. for "nightly business report," i'm diana olick in new york. >> what a view! that does it for us tonight. i'm sue herera. thanks for joining us. >> and i'm tyler mathisen. thanks from me as well. have a great evening, and we'll see you right back here tomorrow night.