tv Nightly Business Report PBS January 28, 2011 6:30pm-7:00pm PST
>> susie: from cairo to the suez canal, tens of thousands protest on the streets of egypt with nearly half that nation living on $2 a day or less. middle east experts say protestors want egypt's president mubarak to go. >> people want something better, people want a slice of the pie. people want to feel that their lives can get better. >> tom: could the turmoil spread through the region? and what will it mean for the u.s. and the global economy? you're watching "nightly business report" for friday, january 28. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening, everyone. violent street protests in egypt sent shockwaves through financial markets around the world. egypt has been viewed as one of the most stable economies in the middle east, but now tom, there are serious concerns about that and the impact on the global economy. >> tom: susie, the turmoil roiled stock markets overseas and here in the u.s. the major stock averages fell 1% to 2%. oil prices rose sharply spiking
nearly $4 to almost $90 a barrel. gold prices also surged as investors looked for safety: up $22 to $1,340 an ounce. >> susie: as tensions intensify in egypt, darren gersh looks at the implications for the global economy. >> reporter: the conditions that brought egyptians out in mass protests can be found across the middle east-- high inflation, high unemployment and little hope of change. at the center for strategic and international studies, middle east expert jon alterman says the street protests that threaten the rule of hosni mubarak, a close u.s. ally, are not so much about democracy as restoring a basic justice. >> there is a sense that, while
people keep talking about how the macroeconomic numbers are getting better, their microeconomic numbers are staying really weak and a lot of these protests are about people feeling, well, where's my future? >> reporter: as the most- populist arab state, egypt has been the bedrock of the region. images like these are so stunning, because the mubarak regime has been stable for three decades. now that egypt is shifting, alterman says, the entire region is likely to be more tense. >> if people don't have confidence in where egypt is that would make a lot of people uncomfortable, sometimes to take matters into their own hands, sometimes to be even more unwilling to make change because of uncertainty about where change leads. >> reporter: protests have spilled across the region, raising concerns about whether unrest might soon threaten the oil-rich gulf states. but analysts say saudi arabia and the emirates have no
tradition of street protest and their economies are much stronger. georgetown university professor samer shehata in egypt, 40% of the country gets by on close to or less than $2 a day. >> the levels of income in saudi arabia and many of these other gulf states are three, four times what they are in egypt and yemen, for example, so economic difficulties certainly, high levels of unemployment, youth marginalization, but nothing close to countries like egypt. >> reporter: analysts expect the egyptian military will remain in control of egypt and vital shipping in the suez canal will not be affected. but egyptians, governments in the middle east and investors around the world are nervously watching what many believe are the last days of mubarak's rule. darren gersh, "nightly business report," washington. >> tom: as we mentioned, the u.s. economy picked up steam as 2010 came to a close with much
of the gains coming on a pick-up in consumer spending. g.d.p. grew at an annual rate of 3.2% in the fourth quarter, up strongly from the previous quarter. experts say the data suggest the u.s. economy has moved from recovery to expansion. but what about the global economy? erika miller has an update. >> reporter: a pick up in u.s. consumer spending is moving beyond our borders, improving the outlook for the global economy. the i.m.f. recently raised its forecast for world economic growth to nearly 4.5% this year with a slight improvement next year. developed nations like the u.s. are expected to post just small gains. instead, the i.m.f. says the big winners will be asia and other emerging markets. economist david wyss sees one major reason developing countries are growing so quickly. >> a lot of the developing nations are commodities exporters. commodity prices have been very strong. they went down a bit during the recession, but they've bounced back. and therefore they're doing fine. >> reporter: but there are some
risks that could threaten the global recovery. one is the return of panic about european debt loads. economist bob brusca says another concern is political instability in the middle east. >> it has reared its ugly head again. and it's always something that's sitting there in the background. we know that we have a lot of fairly unstable governments in areas that have important mineral resources oil in particular. >> reporter: the big question, of course, is what the global outlook means for u.s. investors. if developing countries do well, analysts predict big gains for many emerging market funds, as well as u.s. firms doing business in those regions. erika miller, "nightly business report," new york. >> susie: here are the stories in tonight's n.b.r. newswheel: those worries about egypt as well as concerns about corporate earnings here in the u.s. pushed stocks lower. the dow fell 166 points, the nasdaq lost 68 and the s&p 500 off 23. big board volume climbed above 1.3 billion shares, its heaviest
of the week while nasdaq volume weighed in at 2.4 billion shares. american workers on average got a small boost in wages and benefits last year. the labor department says employment costs rose 2% in 2010. it's the second worst year for wage gains in nearly 30 years. sara lee is splitting into two publicly traded companies: one will focus on its retail and food service business; the other-- baked goods and drinks. the change comes after weeks of takeover speculation. sara lee will also pay shareholders a special one time dividend of $3 a share. and the federal communications commission wants a federal court to throw out challenges to its net neutrality rules. verizon and metro p.c.s. sued to stop the rules requiring providers to treat all content equally on their networks. the f.c.c. says the companies jumped the gun, because the rules have yet to be formally published.
still ahead, ringing in a new lease on life bank united returns as a publicly traded company less than two years after being taken over by regulators. we talk with the man behind the turnaround c.e.o. john kanas. >> tom: ford motor's run of better than expected quarterly earnings grinded to a halt in the fourth quarter. the disappointment led to a stiff sell-off in ford shares today, dropping over 13% to a six week low. ford earned 30 cents per share in q-4-- well below analyst estimates and down from a year ago. among the reasons for the miss, higher production and advertising costs for new vehicles. c.e.o. alan mulally says expect those higher expenses to continue as it does more business. >> our costs will increase through 2011 because we are increasing production and we're bringing new products to the market. but the most important thing is not the cost but also the margins. to see the revenue increases in addition to the productivity.
despite the fourth quarter earnings miss, 2010 was a big year for ford's turnaround story. it was the first time in five years that ford has posted positive per share earnings numbers for the full year. and while mulally isn't putting a number on it, he thinks this year will be even better. ford's sharing its 2010 success cutting profit sharing checks to more than 40,000 hourly workers in the u.s. those checks will average $5,000 each. the checks come at an important time. ford will begin negotiating a new united auto workers union contract later this year. mulally calls the environment for those talks very positive. >> we are growing the business and we are working on every element of competitiveness and everybody knows now that if we keep on improving our competitiveness that we're going to have a chance to grow and add fabulous jobs and careers. we've already announced over the next two years, we're going to be including 7,000 new employees on our ford team. >> reporter: the union talks will be closely watched for many reasons, including ford's improving financial situation.
ford has almost cut its debt in half in the past year to $19 billion. and credit rating agency moody's called the u.a.w. talks quote "the most significant challenge facing ford, as it works to regain investment grade status for its bonds." >> tom: next week we'll see the final report on the 2010 u.s. auto industry.
>> tom: the combination of the protests in egypt, earnings and >> tom: the combination of the protests in egypt, earnings and the major indices hitting more than two year highs this week. we ended the week with some selling that erased any of the gains earlier in the week. the dow fell 0.4% this week, pushed down by today's selling. the nasdaq saw the biggest drop today, but for the week only lost 0.1%. and the s&p 500 shed 0.6% after briefing touching a 29-month high on thursday. the turmoil and uncertainty in egypt was felt in the broad market with worries about mid- east peace and global trade routes, especially for oil. those worries fed a rally in shippers.
we'll start with oil tanker frontline. shares jumped almost 8% on the egypt worries and volume jumped six fold. the stock clearly has been trending lower since may, falling from its high of more than $38. just last week was its most recent low. meantime, energy producer apache fell on heavy volume. trading volume was eight times normal. shares closed down just 1%, but its a six week low. the egyptian connection is apache gets about a quarter of its production from fields in egypt. the company tried to ease concerns, saying operations continue and their fields are in a remote part of the country. another place hit by selling was emerging markets. this emerging market e.t.f. dropped 3% on heavy volume.
emerging markets have been a hot trade as the global economy recovers. tonight, the fund is at its lowest price since november. even before egypt heated up, the tech sector was a drag thanks to earnings and guidance last night. microsoft led the dow losers, falling almost 4%. amazon.com shed 7%. job recruitment website monster led the tech sector down, losing a quarter of its value. disappointing earnings and outlook, management changes and the possible i.p.o. of professional networking website linked-in get the blame. speaking of initial public offerings, this week saw the first ones of the year. earlier susie spoke with the chief at bank united on its first day of trading. it wasn't alone this week. adeco-agro is a south american agricultural conglomerate. it cut its initial asking price and saw a nice pop today.
interxion operates computer data centers. it also saw some continued interest up 6%. earlier in the week, t.v. ratings company nielsen can public. it remains above its i.p.o. price tonight. and internet content firm demand media also remains above its initial price. and that's tonight's market focus. >> susie: a new ticker symbol trading here at the nyse: b.k.u. bank united went public today raising $786 million.
its top executives marked the occasion by ringing the opening bell at the big board. today's i.p.o. marks a dramatic turnaround for the miami-based bank. it was shut down by regulators in 2009, after collapsing under a pile of bad mortgage loans. private equity investors including wilbur ross, the carlyle group, and blackstone bought it for $1 billion. it now has $11 billion in assets and its profitable. so why should investors take a fresh look at bankunited? that's what i asked the bank's c.e.o. john kanas. >> we've completely restructured the company. it is-- it is structured today with new employees and new technology and new products and services geared almost exclusively to small business people and local consumers in the florida market. so it's, in our view, a far more profitable strategy, a far safer
strategy. >> susie: john, what time of bank do you want b.k.u. to be? >> if you're running a small business in the outskirts of miami and you need to borrow $300,000 to run your business or a commercial mortgage on your property, you would bank at b.k.u.. >> susie: you are operating in the miami area, which still is struggling with a weak economy, high unemployment. so who are you going to be lending to? who are going to be your borrowers? >> surprisingly embedded in that there are companies that made it through the recent downstubborn that may in fact be dealing with banks who fared worse than they are. judging by the early returns and by the growth that we've had so far, we are able to unearth a tremendous amount, a tremendous number of small-business opportunities and commercial opportunities in the middle market that portend a lot of growth in the future. >> susie: will you expand outside of florida? >> yes. we've had casual conversations
with people in contiguous states-- georgia, and alabama, in particular-- and have sort of our secondary eye on that market. and we will branch b.k.u. into the new york market in august of 2012. >> susie: you did that when you were running norfolk. that was your strategy. what is the attraction of new york city? >> there are lots of connections between new york city and miami. lots of our customers share residences in both locations. many have business in both locations. there's great synergy between new york and southern florida. >> susie: what about any other acquisitions? there are distressed banks out there that could present opportunities. are you interested? >> yes, there are a couple of hundred bank, unfortunately, in florida, laboring along, who had fallen victim to the consequences the last couple of years. and that is really driving a consensus opinion among most pundit to the industry that
there will be. consolidation and we're very interested in being part of that. >> susie: your stock got off to a good start today. you have an ambitious ambitious agenda. where do you think the stock will be trading the next couple of months? >> investors who chose to make this move today and supported us and got us off to such a strong start, see bank united as a growth opportunity. they also see it as a very safe investment. most of our loans are guaranteed by the fdic, because we bought the company out of the fdic's hands. on a go-forward basis the risk in the country is very limited and the growth opportunities are substantial. >> susie:,000 that bank united has a second chance, what are the lessons learned so the bank doesn't get into trouble again? >> mind your own business. understand what you're good at and what you're not good at and don't be-- don't expand beyond your kpaublts. >> susie: john, thank you so much. great talking to you. >> thank you. >> tom: here's what we're
watching for next week. john dorfman is back as our market monitor guest. he's chairman of thunderstorm capital. we'll also see the january reports on employment, auto sales and factory orders. monday, beyond the scoreboard looks at finances in professional football seen through the bottom line of the superbowl bound green bay packers. >> susie: taco bell is responding to a "where's the beef" lawsuit. the fast food chain ran full page ads in several national in huge letters the company says "thank you for suing us." it then outlines the meat's ingredients saying its 88% beef and the other 12% is made up of a secret recipe. a class action lawsuit claims the mix is about one-third beef. taco bells plans a countersuit. >> tom: a big legal victory today for starbucks in its ongoing battle with kraft. a federal judge denied kraft's request to stop starbucks from taking back its packaged coffee distribution and marketing business. starbucks will end its long
partnership with kraft in march. but kraft wanted more time to make the transition. despite today's ruling, an arbitrator must still decide whether starbucks breached the agreement between the two companies. >> tom: don't get carried away with optimism, but don't be a worry-wort either when it comes
to the market. that's the opinion of tonight's market monitor. he's eric ristuben, chief investment officer for client investment strategies at russell investments. he joins us from seattle. eric, welcome back to "nightly business report." nice to see you. >> i'm glad to be here. a git of a goldilocks moment-- not too hot, not too cold, not to optimistic, not too pessimistic. why not? >> we spent a lot of our time in 2010, helping our client be a little more optimistic than they want to be about the economy as they began to worry heavily in the summer about a double dip. now we're seeing the sentiment change pretty rapidly, and a lot of our peers are getting much more optimistic about the economy, and i think potentially actually getting people to think that a growth rate north of 4%, well north of 4% is possible and even likely in 2011. we just don't see that as likely. we still see a mediocre recovery kind of in the 3% range for
g.d.p.. >> a mediocre economic recovery about average. what about an expected market return for 2011? >> our forecast for the s&p 500 is at about 1370. so you're looking for some reasonable growth from the equity market, a total return of about 11% on the s&p this year is what you-- would be the way to calculate that. so a strong year for equities in the u.s. and globally, those rushes are going to be driven by valuation and earnings, not so much actually the fact that stocks are really, really cheap anywhere, but we think earnings are go to continue to grow strongly in 2011 and drive performance. >> tom: certainly so far here in earnings seasons we've seen a mix of numbers early, a mix of outlooks for 2011. one of theew along with apache in the energy spate space. we mentioned it in the program in relation to some of the turmoil in egypt. it saw a big volume pop today.
it was at a multiweek low. what are your expect angzs for this stock? >> well, we look apache because we think they do a good job of getting all the wall they can out of the reserves. they have a track record of buying big oil company reserves and operating them more efficiently and extracting greater value than the large oil companies. they just did a big deal with b.p. the concern right now is the political unrest in egypt, about 27% of their ref news, a big deal for them. right now it's a long-term play because we're talking about the long-term value of the reserves. so short-term political risk needs to be a factor but it's probably not the one you want to value the stock on. >> tom: fair enough. you also like comcast in the news as it closes at midnight tonight as it closes on nbc universal. you're still looking to put money to work here, huh? >> yeah. i think if you look at comcast, i mean, obviously, it looks
like-- in retrospect that they bought nbc potentially at a very good time. you're seeing recovery as their g.e. subsidiary in the fourth quarter, and a combination of owning the pipe, the distribution pipe, and the content in an era where the consumer may be wounded but they're not dead. rumors of consumer death have been greatly exaggerated. they're still there. they're still spending. i think you're going to see strong demand. >> tom: september 11, 2009, is the last time you joined us. you liked a couple of financials. goldman sachs off since then. wells fargo saw a nice pop 16%. do you still like he's two financial juggernauts is this. >> we think that the firms that survived the financial crisis and were able to build out market share are going to benefit in the recovery and beyond. we think these-- those are two firms specifically well positioned to do so. >> tom: you also had two technology stocks back then and
they've been moving in opposite directions. qualcomm up 15%, dell down 21%. real quick, 10 seconds, eric, before we run out of time. do you like these? >> we do. we like qualcomm as a big weight in our portfolio but we still like dell. again air, consumer and replacement cycle for businesses. >> tom: how about disclosures for the shares we mentioned tonight? >> i don't own-- i don't own any individual shares of any individual company. i do have ownership positions in all those companies through my ownership of the russell funz. >> tom: we appreciate the goldilocks moment there with us. our market monitor on this friday evening, some new ideas with eric ristuben. >> president obama spoke with hosni mubarak by phone, and warned him to make-- urged him, rather, to make the reforms the egyptian people are calling for. president obama also called for an end to the violence. that is nightly business report on this friday evening, january 28.
have a great weekend, susie. >> susie: you, too, tom. i'm susie gharib. hope to see all of you again on monday. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org