tv Nightly Business Report PBS January 31, 2018 5:00pm-5:31pm PST
this is "nightly business report" report", with tyler mathisen and sue herera. ttubulent rern. stocks soar, then drop, then rise again as the federal serve tees up an interest rate hike for march. here comes tech. microsoft and facebook, two of the wiggest names in an influentiaep sectort earnings. and the results could impact stocks tomorrow. take off. boeing's stock has more than doubled oveye the past ar. and today the company said it's fullhrottle ahead. those stories and moreonight on "nightly business report" for wednesday, january 31st.in good ev and welcome. does your neck hurt a lib? it could, from all of the and downs in the market today. stocks leaped at the openhen dropped after the federal reserve, leaving interest rates
unchanged suggested that inflation might move high they are year. the gains, disappeared th for an hour or so. but then they were found. and here are the day final numbers. the dow jones industrial average rose 72 points to 26,149. the s&p 500 gained nine and the nasdaq 500 was up one.th choppy day closed out a very strong month. the dow and s&p extended their win streaksn to raight months something that hasn't happened since 1959. those indexes also had their best january outing in years as u can see there. not to be outdone, oil prices rosel seven p percent this month as production topped 10 millio barrels per day for the first time since 1970. now to the fed. as weed mentihe central bank left rates unchanged at chair janet yellen's last meeting but upgraded its view of the economy and expressed greater confidence that inflation will move towards
its 2% target. steve liesman is in washington i t. bottom line is that the fed pointed to market strength. it's on track for at least three rate hik this year. there is a chance for a fourth rate hike this year. they said eesloyment bus and household spending were all solid. they said the m economy willove up in the months ahead and inflation will move up this yeir. that's the time it has been this confident. they set jerome powell as the chairman of the rate setting committee. f he will mally sworn in on february 5th. yellen leaves her successor a solid economic record to build on. here's yellen on that historic day in 2015 when she engineered th first move off of 0
interest rates. >> this action marks the end of an extraordinary seven-year period during which the federal funds rater was held n zero. it also recognizes the considerable progress that has been made tow restoring jobs, raising incomes, andg easin the economic hardship of millions of americans. >> yellen's the challenge is how much rates should rise. another challenge is how should yellen through about the lofty market levels and process the stimulus coming f m the t cuts. yellen will be remembered for her dead krags to keeping rates low to give americans a chance to get back to that was despite strong opposition from members of congress and members of her own l open market committee. for "nightly business report," nteve liesman. >> january is the books.
for the most part for stocks it was a straight ride up until the past couple of days. down days to begin the week. chopiness today. let's talk about what may lie ahead with art hogan from b. riley fbr. do you think perhaps, art, that the beginning this week is a telltale of what we might see more of later this year? that is more down days, more volatility? >> i certainly do. i think if you look at some of the causes for this, i think it's threefold. certainly we have had a strong start that gets ahead of itself a bit.e to ct of the gates and be up 7% as of friday and 6% at the end of the month certainly is too far too fast. would he have to some of the gains. i think the real considering here is are interest rates going the tenher the yield on year broke out at 272. people who follow losely are afraid it's going to go to 3% in short order.
starts the conversation about does that draw money out oti eq and back into fixed income into the safety trade? i think the thi thing is this earnings season has been terrific but it's been noisy. by that i mean t it's hard figure out what the new corporate tax rate means for every individual company in the s&p 500. that's caused a lot of chop during the earnings we have got another busy week next week. >> art, is that 3% level the magic number that will make people take a second look at the fixed income market and be viable competition for stocks? or does it have to be above 3%? >> sue, can you man me if you asked me that question when we first met and the yield on the ten yearas 5 or 6%. >> we have known each other for a long time. than that.was higher >> i know. so, it feels funny to say that, but i will tell new the current environment that we are in, and i think the eity risk premium speaks to this, something in thh es. i think it's closer to three and a half would start that conversation in earnest. the problem is directionally,
when fixed income markets start moving like this andarields rising the fixed income market prices it in in a lineark assumption and the assumption we are going directly to 3, and3. shortly. that probably doesn't happen because we are anchored to german sovereign debts and t european sovereign debts. i think that keeps lid on it. we will get to 3%on but i think we are going to get to something troublesome like 3.5 or $3.75. >> like many others. i had a nice year in my founk and other holding. is now a good time for me to maybe take my foot off the gas a little bit? if so, where and how? >> if you he had a pretty good year i think this is a very good time to make sure your asset m allocatiel is what you thought it was. if you are 60% equities and 40% nds. you are out of whack already this year, and certainly out of whack fromast year. getting back to asset allocation
is always s art to dothe beginning of the year. if you think you are looking at the beginning of something very large in a correction and we are going into a recession, i think that's getting ahad of itself. i think earnings for 2017ere 12%. and to 18 issing go to be 18%. more good news than bad news. just more volatility. >> judicious trims, not slamming on the brakes. thanks. microsoft's resultsat today could impact the market tomorrow testimony dow component reported better than expecte rnings of 96 cents a share. revenue climbed 11% to nearly $29 billion which was ahead of expectations but that may not have been enough for investors as the stockn fell initial after hours trading. josh lipton has more on microsoft's quarter. >> $5.3 billion. that's the big number in microsoft's report. it refers to the company's commercialloud revenue, which jumped nearly 60%. marginr also moved hig year over year. kirk ma turn of ever corps isi
ys that's a key focus for investors. microsoft has become one of the largest cloud platforms. andhoseloud businesses that will be microsoft's main drivers of growth over the next years. he says these are strong results but he acknowledged there is great expectations with the stock up strongly heading into this even's report. fellech giants facebook also beat wall street earnings expectations. they pulled down $2.1 a share. revenue up 47% from a year ago to $13 billion. but a shift in strategy, and a dip in user engagement sent t stock all over the place in after hours trading. julia boorstin has the details on facebook's lest quarterly numbers. facebook beating financial expectations. but the company announced a nearly $2.3 billion impact from tax regulatory reform. and ceo mark zuckerberg warned that the company is takingn
short-term p for long term gains saying that after last quarter facebook made changes to show viewer viral videos to make sure people's time is well spent that reduced time spent on facebook by roughly 50 million hours edary with zuckerberg announcing he willier this year more changes o the time line, now prioritizing communication between friends over content, he says in this earnings release, quote, by molk using on meaningful conversation connections our business will be stronger over the long term. for "nightly business report" julia brstin los angeles. boeing helped lift the dow today. the lgest aerospace company and revenuefit above expectations. it sent shares up 5% to an all-time hig making it the best performing stock in the blue chip index. that dded toboeing's hot run this year that has seen the stock more than double. as phil lebeau reports the company's outlook for y ther is still shining bright. >> pardon the n, but boein is
soaring. n 2018 it could climb even higher. in fact, this year the company expects recordh operating c flow. why? look at the commercial airplane business, whereoeing is increasing production whilewn driving osts. meanwhile, its defense business has a record backlog of orders, and military spending is rising around the world. then there's the benef the new tax law, which also gives boeing more cash to spend on future products. >> we will be ramping up our investment in innovation as a result of tax reform in a meaningful way. >> there are still some bigac questionsg boeing this year, including whether it will succeed in buying brazilian plane maker embray air. the ceo says he still thinks the deal will get done. even if boeingot does buy embraer, he believes his comny is positioned to fly even higher
this year. phil lebeau,bu "nightlness report," chicago. >> let's dig a little bit deeper in s why boeingck has taken off so much and what could be next for the ao space giant. joining us is joshm sullivan f seaport global. josh, welcome, nice to have you here. >> thanks for having me. >> you say basically the i mark a phase where cash generation is highly valued and boeing is right in the sweet spot, right? >> yeah. and boeing, they have 20 billion in backlog. 5800 aircraft in backlog. they are executing on this livery or order cycle that has been a super cycle since the early 2010 now we are seeing the benefit of that. as they deliver these aircraft the cash is just coming through e door. this morning they announced operating cash flow will be $15 billn in 2018. the street was looking for something like $13.5 billion. boeing is being valued off of operating cash.
we had a step function change in that again this morning. that isoc why the working. we are delivering on the backlogs, the market is rewarding cash and boeing is right there pushing the metrics higher. >> there are some stocks, josh, i think o as must-owns, core holdings in any portfolioe i think ofg that way. am i right to? >> i think you are absolutely right you look across the industrial landscape, who has this kind of backlog? the orders are, tending. the air traffic g twths to be strong. the cycle has pointed to 5.5% growth over the last 20 years. we are getting closer to 7%. 8%.november, it was up the passenger traffic growth, which is the ultimate demand for aircra continues the elongate the cycle while boeing is already delivering on these record back logs. so the cash generation as they increase automation and their through putt is very
impressive. then you have new types of aircraft coming on line and moving through the production cycles with better price points and better mareins. so you right. there are few industrials in the u sition that boeing is in. >> how much do ink is left in the stock? t has had such a stellar performanc do you think there is a lot more to go? or maybe just a little? what is you valuation for it in terms of stock price? >> i mean, there can be an argument that it's actually undervalued to the other aerospace industrial players -ywell, utx on a free cash flo basis. so there is actually some room to be made up. as t ty continue deliver that cash, and that multiple is etween the other players in the group, we think there's a lot more room. as far as other levers left to pull, the 737 goes up in rate this iaugust. agai2019. and boeing is even talking about even taking it above 60.
ere remain at love levels for boeing to pull. >> josh sullivan with seaport global. time to look at some of today's upgrades and down grades. we begin wit a rar downgrade for apple, which comes one day before it reports earnings. bmo lowering its rating to outperformform from the firm says the average selling price of its biggest money maker the iphone will plateau. price target cut to $162 a share. despite the downgrade the stock finished up a faction at $167.43. foot locker upgraded by oppenheimer to outperform. the firm says they will benefit from thepe innovation hng at nike and adidas'songoing momentum. the price target at $70. shares of foot locker off 1.5% at $49.15. >> fitbit is upgraded at stiffel to hold from sell.
th site valuation given the recent fall in the price. but they have concern about the do you remember of the fitness tracker market and does not see a path of profitability in 2018. the stock was lower by nearly to 5.15. >> goldman sachs removed met life from its conviction buy list but maintaiat a buyg on the stock. the firm sites uncertainty around a review of its reserve. the price targetas cut to 57 a share from 61. shares fellore than3% to 38.07. still ahead the push to fix our nation's infrastructure, and how it might get paid for.
job creation got off to aro start this year. according to the payroll processer adp private businesses added more than j expecteds in january. jo me. meanhe country's top public health officials has resign. dr. brenda fitzgerald stepped own as head of the centers for disease control amid questions of conflicts of interest. there are claims she bought
stock in tobacco company before her tenure. in a letter to congressional leaders, steven mnuchin said congress needs to raise the nation's debt teiling soon avoid a government default. it estimated that the government could run out of funds to pay its bills by late march if the lawmakers don't act. the president wants to rebuild in nation's infrastructure n. last night's state of the union speech presidt trump put it on the congressional to-do list. but the price tagmps png questions.d e kayla touchy now takes a look at what the white house may be willing to pay for it. >> reporter: after touting passage of tax reform, he renewed his call to congress for infrastructure totaling $1.3 trillion. >> we will build gleaming new road, hibridges, ways, railways and waterways all across our land. and we willo it with american heart, and american hands, and
american grit. >> reporter: the white house proposal has been in the works for a year. publicetails are not yet sources say it will include at least $200 billion in federal infrastructure spending skimmed from oer agencies and will aim to streamline the pertting process. but privanvtment isn't mandatory. the president, sources say, has voiced concerns private sector partnerships aren't effective. >> he wants to make sure that would we are asking people to invest that we are giving them a return on that investment. >> reporter: instead thelan leans heavily on cities and states to create dedicated funding to their own projects. the white house is setting aside $100 billion in incentives for those ideas and $50 billion for rural projects whichhe treasury secretary said won't be attractive to companies. >> it's going to have t combination of as i said, federal dollars, state dollars, and private dollars. threes many, many infrastructure projects that are not going to be privately funded. >> reporter: there is broad agreement that t nation's
bridges, roads, and rails are in ed of repair, but political agreement on how to pay for it. the c cmber ofmerce and american trucking association want to raise the gasaxan idea trump is considering but republicans loathe. >> we are not going to turn around and raise taxes for infrastructure, period. >> reporter: on capitol hill, infrastructure will be a heavy unlike tax reform it requires bipartisan support and involvement from up to nine congre aional committees seven federal agencies. on top of that, white house official acknowledge any progress made on infrastructure has to happen in the next six months, before the august recess and before all eyes turn to the midterm election se for "nightly business report," i'm kayla touchy, washington. at&t tops expectations thankso a larger subscriber base. that's where we begin tonight's market focus. after the bell, the telecom giant reported profits in sales that exceeded expectations as
more customers signed up for accounts and fewer left the network. they are forecasting earnings t for 2018 te significantly above estimates. at&t shares initially rose following the results and they finishp the regular season a penny to $37.45. anthem reported quarterly profits that more than doubled and said it seesarnings for the full year coming in above expectations. the health insurer also raised its dividend a nickel to 75 centsay share and it's act thely ingauged in irt rship with cvs to create a new benefits manager. it was up 2% to 247.85. reporting better than expected earnings eli lily raised the company says the sales were helped by strong demand for new treatments. >> the beat and performance is driven by top line growthrorom very newcts of it's what patients want and what investors like to see. the ong quarter for company. >> lily did see some weakness in
the its animal health division and said it's still selling that part of the business. the company also says it's experiencing pricing pressure on its diabetes medications. that is what investors focused on. as a result sending share down 5% to $81.45. >> the technology cpany pitney bowes said a recent acquisition helped its latestuaerly businesses. the company which royce businesses with postage meters and i will ma -- mailing gear was up. energizer results beat st aet estimates the company hiked guidance for the full year.es sh up 10% to $58.22. >> tupperware said a charge tied to the new tax law erased all of ros quarterly profit causing the storagects maker to report
a loss. estimat stales were above estimates. that kept the lid on tupperware shares. >> there you go. which fell more than 9% to 7. . japan's fuji film will take a majority stake in the iconic american brand xerox for about $6 billion in a complex transaction that could case rdles. fuji thim will fold xerox into the two company's existing joint venture. savings, putte cost both businesses under o roof and quiet critics such as carl eye can. shares were up. how hard will the supply cris hit the housing market this spring? still ahead.
u.s. foods and cisco, two large food suppliers, are suing the country's biggest chicken processors for allegedly conspiring to inflate prices. in separate complaints the companies sued tyson foods, pilgrims pride, sanderson farms, and purdue farms. they dominate the chicken sector and have come under scrutiny when it comes to pricing and product. news sent the chicken companies lower on the day. >> the rate of home ownership is at a three year high. according to the send us bureau percentage of people who own homes is back above 64%. that number though still near historic lows has been rising steadily since economists say much of the increase over the past year has
come from 18 to 44 years-year-olds. >> a number of new housing reports today show that the hot demand for homes is being met with a cold reality. gh.ces are supply is scarce. and mortgage rates are rising. now the focus is shifting to affordability. diana olick has our story. >> reporter: home shop remembers braving the frigid cold hoping to beat the competition in a market where supplyne is l than ever. the number of buyers signing contracts on existing homes rosl about a percent in december compared to november and compared to a year ago. the gain, though, should be s bigger, giveong demand. but the supply of homes for sale is now at a record low. >> the inventory level currently is about 1.5 million. that is thees llevel since 1999, since we began tracking the data. a normal condition should be about double that number. >> reporter: that is only pushing home prices higher. >> the reason house priceswi ha been g as rapidly as they
have, which is something like f four oe times the long term average has nothing to do with credit conditions, andleery lio do with interest rate. it has much more to do with the lack of supply for entry-level >> reporter: mortgage rates are surging. the average rate on the 30 year fixed hit its highest level in four years this week. that will make housing even less affordable and will keep some borrowers on t margins from qualifying for a home loechbl all eyes are now on the builders. dr horton, which is one of the few big builders to focus on the entry level pket of the m just reported better than expected earnings. the hopepo is that cte tax cuts will help builders ramp up production. >> you g may benefit from the tax cut if builders expand on the rporate side but it's going to be offset by an increase in incomes by the entry level folks based on either the standard deduction or if the realess side picks up on wages side, that impacts the
demand side and the curve side.e weot seeing a lot of shift for the supply -- demand balancr for next y making it tougher for entry level borrowr:s. >> reporhis market is about to be tested. spring will bring new listing bu b will alsong higher home prices, higher mortgage rates, and evenr hig demand than we are already seeing now. eye ana olick in washington. that ds it for ustonight. i'mu is sioux. thank you for joining us. >> thank from me as well. i'm tyler mathisen. ha a gre night everybody. we'll see you right back here tomorrow night.
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