tv Nightly Business Report PBS December 29, 2017 5:00pm-5:31pm PST
this is "nightly business please, don't go! investors will be sorry to see 2017 end, as stocks post their best gains since 2013. portfolio picks. our market monitor has three stocks for the new year he says will have strong earnings growth and come with a good price tag. and food for thought. how one entrepreneur made millions from his love of flowers, fruit, and chocolate. all that and more tonight on "nightly bus" for good evening, everyone, and welcome. sue herera has the rest of the year off. on wall street, it is game, set, and match. and what a match it was. the books are closed for 2017.
and for stock investors all around the globe, virtually no matter the market you were in, you made money this past year. sometimes lots of it. here in the u.s., the major indexes set records seemingly evy week. the dow and nasdaq had 71 and 72 record all-time high closes respectively. no other year comes close. the s&p 500 had 62. and those records led to numbers like these for 2017. the dow up 25%. the nasdaq, 28. and the s&p 500, 19%. we delved a lip and h and found some surprises in those numbers. if you're worried these outsized results may indicate an overheated market, you're entitled to feel that way. but consider this. going back to the reagan administrati that began in 1981, none, none of these gaudy percentage gains even rank in the top five year by year. this year's dow comes the
closest. sixth best year since '81. this wasn't even the dow's best decade, 2013 was, up 26.5%. it was, believe it or not, an eerily calm year in the market. 2015 and '16 combined saw the s&p 500 move 1% in either direction almost 120 times. guess how many this year? eight. but the many happy returns weren't confined to just stocks. oil closed above $60 a barrel for the firs in 2 1/2 years and rose more than 12% for the year. and the metals gold and copper also had their best years since 2010. as for today, stocks kind of ran out of gas at the end. shouldn't come as a surprise. it is, after all, the fourth straight year the averages ended the final trading day lower. the dow dropped 118 points, finishing shy of 25,000.
nasdaq fell 46. the s&p 500 was off just about 14. bob pisani has >> reporter: as traders look back on a very unusual year, the big issue is will all the good news continue into 2018. there was a lot of it in 2017. the s&p rose 20%, its best return since 2013. the u.s. economy grew modestly. stocks were also helped by a global economic expansion, record earnings for company, low volatility, low interest rates, and the expectation of tax cuts as income at the end of the year. the big winners were semiconductors they rode the wave of buying in smartphones, smart appliances, and electric vehicles, and homeowners roved the wave of more young people going out on their own. commodity stocks like copper were also strong because the global economy proved. even though oil moved towards $6 at the end of year to
two-year highs, investors who had been burned in 2015 and '16 mostly stayed away. economies around the world improved in developed and emerging markets. india, brazil, hong kong, saw double digit gains with mid-single digit gains in europe. will global growth continue in 2018? earnings will get a boost next year thanks to tax cuts, but what happens after that? inflation relativ contained because wage growth was modest. but with the economy heating up, that may change. if inflation picks up, the federal resee may raise rates more aggressively and that could stall out the rally. for "nightly business r bob pisani at the new york exchange. >> the nasdaq composite topped 7,000 for the fir this year. as bertha coombs reports, big name tech led the way.
>> reporter: as mark twain put it, history doesn't repeat but it often rhymes. that's certainly true of the nasdaq, the only major index up 9%, the longest win streak since the big tech breakouts of the 1990s. as then, it's the mega cap tech stocks that are responsible. amazon, apple, microsoft and facebook bigg lift to the overall market and the s&p 500. when you add in alphabet, they accounted for two-thirds of the 1500-point gain in 2017. here is the rhyme part. microsoft, a tech heavyweight back in the '90s, benefiting from its shift to cloud techno here over the last few years, up for six straight years, seeing its best annual win streak since the launch of windows back in 1995. consumer names were the biggest laggards of 2017. many like dish took a hit in the
third quarter due to hurricanes. auto parts retailer o'reilly automotive which had ridden the rally to historic highs, down for the firs in eight years. beauty, which had seen consistently all-time highs for the last three years, snapping a three-year bull run. but like a lot of retailers, bo o'reilly and alta pay a tax rate above 37%, that's what they're expecting for the fourth quarter. in 2018, under the new tax code, those retailers could see a 16-point drop in their tax rate, which could result in a big boost to earnings per share, and perhaps could get their stock back in line with the big tech leaders. for "nightly business r" i'm bertha coombs at the nasdaq. time now for our final market monitor for this week, in fact for this year. he's got three domestic picks he says will see a double digit rise in earnings per share next year, thanks in part to tax reform. last time he was on in june, he picked the s&p small cap 600
index etf, which is up 9%. i shares e markets etf up 14%. dupont is up 11%. he is hank smith, chief investment officer at haverford. happy new year. did you really think 2017 would be this good for equities? >> oh, i don't think anyone did. and it belied the headlines. the headlines were where all the volatility was. there was no volatility in the actual market, as you pointed out earlier, you could never have predicted a year like this. and if you did, you would have been laughed out of the room. >> let's look at your picks for next year, then we'll get some thoughts more broadly for next year if we have time. a lot of them are sort of expose to the consumer. one is a financial. let's begin with one of my wife's favorite companies of all because she loves home goods,
t.j. maxx. >> absolutely best in breed management. everyone talks about amazon being a disrupter in the retail industry, bricks and mortar. the fact is t.j. maxx has been a disrupter for more years than amazon. e probls that the other stores experience are because of t.j. maxx. consumers love a bargain and they love the treasure hunt. and it doesn't what part of the economic cycle we're in. t.j. maxx is good for all seasons. >> and many people are pointing out, as you do, that tax reform could help these retailers because they typically have high marginal tax rates. u.s. ban is your financial pick, why? >> again, best in breed management, terric metrics. and they have four tail winds going into 2018. one, the tax reform, which will add to their earnings. two, a pickup in gdp growth is
good for them. three, deregulation at the margin will be good for them. and finally, again, slightly higher interest rates. we're not forecasting dramatically highe interest rates, but slightly higher interest rates will be good for their net interest margins. four wonderful tail winds, with great management, reasonable valuation. that should be a good stock for 2018. >> and your final choice, i should point out, is the parent company of cnbc, which produces "nightly bus it is comcast. why do you like it? >> well, look. all three have been relative laggards this year. i'm not recommending stocks that have already had great moves. great management, yes, there is the issue of cable cutting. but they're getting -- that's been more than made up for in their internet services where
they're getting a lot of traction there. this is a giant, it's a beast, double digit earnings growth, reasonable valuation. it is a good entry point in our opinion. and we think -- >> and one would think with the ability to expense capital equipment fully, that will be a beneficiary of a company like that. >> absolutely. >> we have to leave it there, happy new year, hank smith, thank you for being with us. >> happy new year. as peak shipping season wraps up, president trump taking shots at the postal service, tweeting today, why is the united states post office which is losing many billions of dollars a year while charging amazon and others to little to deliver their packages, making amazon richer, the post office dumber and poorer? should be char now, the president has never been a big fan of amazon ceo jeff bezos. but does he have a point?
morgan brennan delves into the finances of delivering packages. >> reporter: the u.s. postal service does make money on package delivers, but margins are thin compared to regular mail. >> it's subsidized its parcel delivery, that's why its rates are less than ups or fedex. >> reporter: the postal service probably should be charging more. starting next year, rates in fact will be going up. regulators dictate those prices. critics argue they're still artificially low, something fedex and ups have voiced concern about on the hill. for its part, amazon relies heavily on the postal service for the last mile to home. two-thirds of its packages are sorted by the company in its warehouses and handed off to the
quasi governmental agency for fi delivery. it's less expensive option for amazon, as well as, at times, ups and fedex. >> there's clearly a need for a participant beyon fedex and ups which arguably operate a duopoly. i think what we're talking about here is getting amazon to pay a fair rate for the service from the postal service and then generally speaking, getting the volume of sales in the postal service to be enough for them to offset their cost. >> reporter: critics say those e-commerce deliveries by the usps, which isn't funded by taxpayer money, are being subsidized by the universal service obligation, which makes the usps maintain requirements under congressional edict to ensure all users receive a reasonable level of service a reasonable price. unless congress passes new legislation, little will likely change. especially since package delivery is how the postal
service is reinventing itself as mail volumes plunge and with them profitability. for "nightly business r i'm morgan brennan. up next, more confusion around that new tax code. this time it could involve your as many homeowners grapple with whether to prepay their property taxes before the new tax law kicks in next week, there is also not a little bit of corporate confusion. how much to who would from employee paychecks. .
>> reporter: republica want to say they're ringing in the new year with a new tax code. >> your tax relief is on its way. >> repor but it will be at least a couple of w before you see any changes in your paychecks. bu are waiting on the irs to give them some guidance on how much money they should be withholding from your wages under the new tax code. the american payroll association called this transition a, quote, herculean task and said its 17,000 employers that it represents are starting to panic. the irs tried to calm everyone down this week, saying it plans to provide companies details on how much to january. the big question is whether workers will have to update their w-4's or even fill out new ones. w-4 is a form that you submit to your employer lifting the exemptions i plan to take. those exemptions are all going away under the new tax code. so does that form even apply anymore? the irs says workers don't need to make any changes right now.
but it is possible that millions of employees will need to fill out new w-4's before the end of 2018. h&r block says it's getting flooded with questions given the confusion over all of these changes. >> this is absolutely crunch time for us, it's normally crunch time anyway, getting ready for the filing season. with a tax change this big, it adds on a whole other level of questions, interest, curiosity. people really care about getting it right. >> reporter: the danger is that workers could wind up underpaying during the year and face a huge tax bill come 2019. in the past, the irs has waived penalties associated with underpayment to give households and businesses a little bit of breathing room during the transition. no word yet on if the irs will do that once more. for "nightly business r the financial services firmco merrick cfi
firmco co-merricka will give thousand dollar bonuses to workers. the minimum wage is rising in several states beginning monday. kate rogers tells us where. >> reporter: workers across the country will ringi in the new year with higher pay thanks to a now ballot initiative. 18 states are raising their minimum wages either on december 31st or january 1st. the highest dollar amount will be in washington state at $11.50 an hour while in maine workers are at the highest percentage increase to $10 an hour, according to employm institute. there are 20 localities that are hiking pay. in mountain view and sunnyvale, california, workers will be paid $15 an hour, over a 15 perfects ie over today's rate. s stagnant at $7.25 an , that
hour. that hasn't moved since 2009. with president trump in office and republican control of congress, there is little chance of changing that anytime soon, which is why we're seeing more states and localities taking matters into thei own hands. currently these 29 states and washington, d. all have wages above the federal level. we've seen corporate america take matters into its own hands to raise wages for workers. as well, a flurry of companies at the end of this year announcing raises including wells fargo, and many more. back over to you. >> kate rogers regulatory ther . the company's first quarterly loss in six years is expected to be a short term largely technical blip for the bank, however, as it is expected to largely benefit from the lower corporate tax rate over
the next few years. shares were off a fraction today at $254.76. several private equity firms are reportedly interested in buying digital entertainment company tivo. according to t online news site the street, a potential deal would value tivo at $2.5 billion. tivo shares popped 11% to $15.60. ibm says it has reached agreement to resolve a patent lawsuit with price line group that goes back to 2015. ibm sued the travel booking company alleging that it infringed four key ibm patents and was unable to engage in meaningful discuss abo it. the new agreement allows cross-licensg of patents. ibm's shares fell a fraction, pr. the last part of this year is all about predictions for the next. and being a market prognosticator is a tough
business. for more than five decades, maybe even six on wall street, the well-known head of trader operations art cashen has a pretty good track record over the year. bob pisani has a look at how cashen's predictions have panned out since 2016. >> reporter: art cashen has had a respectable track record, with usually more h mi as we enter 2014, the five-year-old k stock mark rally was continuing. >> they have cut and diced their way down to record profit margins, followed by record profit margins, followed by record profit margins. now, that can't continue. my 50-year history tells me that profit margins revert to the mean. >> repor he was a little early. but the profits recession did indeed come, but not until later that year and into 2015. going into 2015, cashen's biggest worry was china. >> the people's back of china is
very concerned. and they are looking doing something to stimulate almost a way to -- i don't want to use the word force lending, but really promote lending as well as they can. and they have problems in shadow banking and they have problems in real estate. and they'll have to work their way through that. >> reporter: right again. china was the biggest story in 2015. it rocked the investing world in the late summer with a surprise devaluation of the yuen. in 2016, the big story was oil. many were predicting an imminen bottom. cashen was not convinced. >> my gut tells me it will stay low through the first quarter of next year, maybe a little further. >> r he was right. oil continued to drop and bottomed in e bottom of the first quarter of 2016, then began a slow crawl back. you don't hit it right all the time. at the e last year, cashen
was concerned about the wave of populism that might sweep through europe after donald trump's election. >> it wouldn't take much to get the italian government fully destabilized. we c be back with the club med problems with the banks. greece is not far from returning to crisis again. i've seen this movie before, and dies, but it's a slightlyt mov. >> reporter: it didn't quite turn out that way. populist parties did gain but populists were turned back from top leadership positions in europe. but three out of four predictions aren't bad. for "nightly business r" i' bob pisani. coming up, how an immigrant turned entrepreneur turned his small business into a half billion dollar inte
finally tonight, some of you may have sent an edible arrangement over the holidays as a gift or even received one. i sat down recently with the founder of the company to hear how his strong work ethic at an early age led him to create a half billion dollar business sell. >> you're putting a little bit of a finish on it. >> oh, look at that. >> entrepreneur tariq fareed has reason to celebrate. his company, edible arrangements, has mushroomed into an international sensation. how much total revenue? >> a little over $600 million. >> it's a success that stems from humble beginnings. at 12 years old, tariq and his family came to the united states from pakistan, settling in 1981 in west haven, connecticut. since money was tight, he and his siblings had to get busy, fast.
>> my mother would kick us out of bed every day and say, go work hard. >> tell us about your earliest days as an entrepreneur. >> a lady living down the street from me, i would cut her grass and the lawn. she said, honey, if you keep working this hard, you'll be a millionaire by the time you're 35. i liked the ring of that. >> he took a job with a local florist, where he learned about customer service and creative design. when the opportunity arose to buy a defunct floral shop in connecticut, he moved fast. with $6,000 borrowed from his father's boss, he became the owner of fareed's flowers. >> who is going to sign a lease with a 17-year-old? >> i don't think he knew the 17-year-old would be act running it. >> but he did run it, dividing his time between the shop and school. the business grew into three local locations. more than a decade later, in 1999, the seed that really took root was his idea, one he had
been toying with for a couple of years. sell fruit arrangements that looked like flowers. >> i used to call it a wow, when a person receives it, when it arrives at t house, the first thing out of their mouth should be, wow! that reaction has to be there. >> my favorite thing about edible is we're an experienced company. >> his daughter is the special projects manager at the headquarters. >> i used toed to hang out at the store after school. i started taking orders when >> still, it wasn't easy for tariq to transition from flowers to fruit. >> i would go to a supplier and say, can you make me a food-safe floral container, and they would say, get out of here, why would we do that? >> he had to create the company's entire supply chain from scratch. everything from child safe skewers to securing what he says is the world's freshest fruit.
by 2000, the business was building real traction, and tariq began getting requests to franchise the business. >> somebody saw it and called from atlanta and said, i just saw this, and opened one in atlanta. somebody from new jersey called and said, i just saw this, can i buy one for new jersey. next thing i know, i was in north ridge, california, opening the eighth store. >> how many stores today? >> 1300. >> today it's available in nine countries. 60% of orders come in online. but they're fulfilled by local shops. for the fareeds, it's been a fruitful journey, and one that continues to blossom. >> there's a lot that goes into it that we've spent the last 18 years perfecting. >> tariq fareed, from immigrant to american dream. getting rich the old fashioned way.. and man, that fruit dipped in chocolate was good.
edible a fruit bouquets range from $40 to upwards of $1,000 for more extravagant displays the company is expanding its line to fruit smoothies and parfaits. >> that's "nightly business fo. i'm tyler mathisen. on behalf of sue herera and all of us at nbr, thanks for watching all year. we look forward to 2018. have a happy ayb
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