tv Nightly Business Report PBS February 16, 2012 7:00pm-7:30pm EST
>> tom: good news on jobs and housing leads to a really good day for stocks-- the dow jumps to its highest level in more than two years. >> reporter: this is erika miller at the big board, where the big gains in the market have not been in big stocks. i'll explain. >> susie: general motors helping drive wall street's gains with record 2011 earnings. we look at the road ahead for the auto maker. it's "nightly business report" for thursday, february 16. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
captioning sponsored by wpbt >> tom: good evening and thanks for joining us. the dow hasn't been this high since the spring of 2008, susie. the gains were powered by fresh signs of improvement in the u.s. economy. >> susie: it was a winning day on wall street, tom, thanks to good news about housing and the job market. jobless claims fell by a bigger than expected 13,000 in the past week to the lowest point in four years. housing starts rose more than expected, up 1.5% in january. investors focused on this upbeat news on the u.s. economy and shrugged off worries about greece.
the dow surged 123 points, moving closer to the key 13,000 level. the nasdaq added 44, closing at its highest level in 11 years, and the s&p rose 15. >> tom: as impressive as these gains are, it's the riskiest part of the stock market that has seen the biggest rewards. erika miller reports from new york. >> reporter: investors have been cranking up the risk in their portfolios this year as they see signs the u.s. recovery is picking up steam. the s&p 600, a small-cap index, has risen twice as much as the dow jones industrial average this year, and is trading near all-time highs. >> to the extent that the investment world sees the economy in the united states improving, and liquidity improving, and earnings improving, that helps smaller cap stocks because they are more exposed to the u.s. >> reporter: most of the major market benchmarks have gone up virtually in a straight line for two months now. as great as it sounds, it has some analysts concerned that the rally has gotten ahead of itself.
jonathan corpina is a floor trader and believes a short-term pullback is coming, probably in the spring. >> i think we are going to see a nice little pause in our market because of two factors-- one is, normally during the middle of the year, things do start to slow down; and two is we are in an election year. as we get closer to that, i think investors are going to be pretty happy about the returns they've had this year, they are going to take significant risk off the table. >> reporter: but longer term, he and others think the market will move higher on the back of good earnings news. the big risk, of course, is what happens in europe and whether greece's debt problems spread. >> europe is the biggest source of risk that we see on the investment horizon. we are in the hands of european politicians and the best efforts of european politicians. so that, by definition, it's a risky environment. >> reporter: there's something else that troubles even bullish analysts-- low trading volume, which typically means heightened volatility. fortunately for investors, the big swings in the market lately have been to the upside. erika miller, "nightly business report," at the new york stock exchange
>> susie: our next guest believes the stock market will "pause, rest and consolidate" at current levels. he's carter worth, chief market technician at oppenheimer asset management. carter, nice to have you back on the program. >> thank you, thank you very much. >> since you studied charts let's gotraight to the charts. we've got here a chart for the s&p and looking at it we see a big sell-off last summer and then a rally since december. and moving along looking at this chart of the dow's performance, pretty of the same story as it is kraeping into the 13,000 level. so tell us why you think that the rally is going to pause at this point with all this momentum? >> sure. so just as the previous part of the program was citing the economic news is better, the housing, the jobs and so forth. but there's wisdom in price. the price action started moving up in october. october 4th was the lull, before any of this good data was out, meaning the greatest leading indicator of all is price. so price moves first and we've now moved from 1075
october 4 low to 1360 where we are now. some 30%. and just as you cited, when in principal you recover all the lost ground of a proceeding plunge, and people who lost a lot of money then have that money returned to them, they become interested sellers. which is to say that's where memory kicks in. so all the people without bought in may, june and july just before last summer's wipeout, and now having been made whole, the human condition is to do just that, take one's money back. >> so when, after you get through that phase, when dow make the next move up on these indexes. and where do you see the target on the s&p and the dow over the next few months. >> sure. so the principal is that you get to the where we are now, then respond to it, which is that backing and filling, coding process, as people from before sell. and then that takes place over a course of two to three months. and this is a fairly well defined time frame when you
have this circumstances that we have now. after if you can consolidate, pause, rest, and then you exceed the past having responded to the past. the indication would be something on the order of 1425, for the s&p 500, and 13,500 that kind of thing, 13,600 for the dow. >> susie: you know, carter, stocks have been so unloved for so long by investors but if we look here at this chart and look at these statistics of investor sent from the american association of individual investors, we see that 42% of individual investors are now bullish. 26 are bearish. what is your analysis of these statistics, are investigator its really confident about buying stocks? >> well, what's interesting, those figures basically 2 to 1 bulls to bears were exactly the opposite, just four months ago so in october, you had 40, 45% bearish and only 20, 25% bullish. so it is the exact reciprocal of the mirror image of where we are were
and having moved up 30% this is again the human condition, people are typically pessimistic at the bottom where things are poor and then when things are quite good, and euphoric they want to be more involved. so at this point that is also as a contrarian indicator a negative. >> uh-huh. and talking about euphoria there has been a lot of euphoria about shares of apple. you have a sell on the stock. let's take a look at this chart too which closed above the 500 level today but it has been hovering back and forth in that area. was's your technical analysis on app snell. >> all right, so we went out with that yesterday, after the close which is to say when you have what's called a key reversal day, where a stock has been in a long-term trend, that then on the day in question has yet euphoric new highs, almost incredibly so where people cannot believe it's not stopping. it's not stopping and then in that very day that session it closes on the absolute low which is also the case yesterday, down on the day and very, ver heavy turnover. volume at or near a record
it reflects intermediate top that is likely to stand for many, many months. so that high of 526 yesterday and we closed down at 490 or thereabouts. that should set the top for months. >> for months, all right, you've given us a lot to think about. do you own apple, any disclosures to make. >> no disclosures. >> susie: carter, thanks so much. fascinating information. >> thank you. >> susie: we've been speaking with carter worth, chief market technician at oppenheimer asset management. >> tom: news out of europe today also encourages u.s. investors, as a second bailout for greece appeared more likely. german officials today dropped their plan to hold back some of that bailout money after reassurances from greek politicians that they will implement the agreed-to spending cuts and austerity measures. the german, dutch and finnish governments had floated a two- part payment idea because of worries giving the entire $170 billion at once would lead to trouble. >> susie: there's a bipartisan
deal in congress to extend the payroll tax cut, and a vote is expected in the house tomorrow. still, house speaker john boehner said, while americans will benefit from the tax cut, the cut itself won't create any new jobs. also on the hill, treasury secretary timothy geithner told lawmakers he hopes the new-found spirit of bipartisanship can continue. he thinks both sides can come together on investments in transportation infrastructure, home refinancing, and foreclosure prevention efforts. but the secretary admitted, a major deficit reduction package or overhaul of the tax code are likely out of reach. still ahead, microsoft shares are on the march to a four-year high. we'll look at what's behind the rally in tonight's "market focus." >> tom: general motors got a yellow caution flag in the final lap of last year. the company's fourth-quarter earnings came in at 39 cents a share. that was two cents below wall street estimates, and down 13 cents compared to the same period a year earlier. the company blamed its disappointing performance on problems in europe and south america.
diane eastabrook has more from chicago. >> reporter: it wasn't all bad news for g.m. today. the company's 2011 profits increased more than 60% to $7.6 billion. last year was g.m.'s first full year operating as a public company since emerging from bankruptcy. beyond that, the news for the world's largest auto company gets darker. while north america seems to be finally firing on most cylinders, both europe and south america are flagging. and europe is the biggest problem. the region's debt crisis and stagnant economy have stalled vehicle sales. morningstar auto analyst david whiston says g.m.'s options are limited. >> really, your only options are to close plants and/or amend the labor contracts with the unions. but i think the really, really hard part is how are you going to get the unions to play ball when their contracts don't expire until 2014, and unions in europe are very, very militant. >> reporter: g.m. also acknowledged possible headwinds in north america. the company is selling more
cars, especially small ones, than pricier pickups and sport utilities. whiston says the company needs to carefully manage supply and demand of those products without offering steep incentives. >> in other words, have a great product, produce to meet demand rather than overproducing, and then you'd have to put up a ton of cash, which kills residual values. and you get in a horrible spiral that we saw when detroit went into bankruptcy, but we're not going down that road again. >> tom: joining us now from the c.m.e. group in chicago, our midwest bureau chief and auto expert, diane eastabrook. when looking at these two big regions europe and the u.s., let's tackle the u.s. first with general motors, what is tell-- selling, consumer demachined and profit margin, how much of that is under gm's control. >> not a lot unless they can control oil prices. we've seen this phenomenon, tom, over the past faw years when we see prices at the pump go up. people migrate into small cars and hybrids. we see pump price goes down. they start buying suvs and pickups again. and income analysts are talking about the possibility of $5 gasoline
this summer, so that really doesn't bode too well for those pickup and sport utilities. >> tom: close to $4 here in south florida and i am sure are you over that in someplaces in chicago already. in europe, meantime, how realistic are these ideas of actually closing plants are laying off european autoworkers? >> well, it sounds like it's a really tough sell but there are some things that gm can do in europe, talking about cutting costs. it's talking about possibly consolidating some back-office operations, in voxal and opal. one of the things mentioned today which is interesting, is possibly moving some chevy manufacturing from south korea over to europe where they have excess capacity so that's one option that they mate be able to pursue. >> tom: soak up some of that production in europe. let's talk about the stock, shares of gm. it went public at 33 dollars per share h a nice 9% rally today but it is still trading well below its ipo price. what is the company telling investors it look forward to this year? >> you know, they didn't
give a whole lot of guidance on that today, tom. the only thing they did mention was here in the united states they are talking about u.s. auto sales reaching between 13.5 million and 14 million this year. and that's about in line with what the company was looking at at the end of 2011. >> tom: any idea why not a whole lot of financial guidance for the year s that a change in direction? >> you know, i think rate now there's just a lot of uncertainty in europe and latin america. and you know, it's dicey. i don't think they really want to speculate on what's going to happen the remainder of the year. >> tom: what about government ownership, meantime, uncle sam still owns more than a quarter of this can. whs's next for the government part of it? >> well, earlier this week or last week mitt romney was talking about the government unloading that stock. but i don't know if that is maybe the best idea. the government and taxpayer was take a lot. you might want to see the government hang on to that stock until it reaches maybe about $50 a share. >> tom: at that point maybe taxpayers will get a bit of
a premium, a bit of a profit. always great to catch up with you, our midwest bureau chief from chicago dian dianestabrook. >> susie: on that earnings call today, g.m. executives also discussed their plan to freeze existing pensions for salaried workers and to offer 401(k)s instead. the move is aimed at easing the strain on the auto maker's pension fund-- it is under- funded by more than 10%. as darren gersh reports, g.m.'s move reflects what is shaping up to be a very tough year for pensions plans and the people who rely on them. >> reporter: the word of the day at g.m. was "de-risking"-- "de-risking," as in reducing the financial risk posed by the car maker's huge pension liability. g.m. has already frozen it's plan. but it still expects lower investment returns on its pension fund will cost the company $800 million this year. >> there's no question-- for many companies, it's going to be an extraordinarily challenging environment over the next year. >> reporter: analysts call the
difference between the pension assets a company has and the pension promises the company has made the "pension gap." for g.m., the gap is $24 billion and for all u.s. companies, it's somewhere between $335 billion and $431 billion. >> the hole's gotten pretty deep over the last few years. unless you see a real turnaround in interest rates, and a real turnaround in the stock market and alternative investments, the hole's not going to be filled only through investment returns. that means its going to have to be filled through stepped up contributions. >> reporter: like any savings account, pension plans are squeezed by the low interest rates engineered by the federal reserve. but low interest rates also have a big impact in the formulas used to estimate pension liabilities. in general, when interest rates are low, companies crunching their pension numbers find they owe a lot more, and that means they have less money to put to work creating jobs. >> there are many companies that are holding back on capital
projects because of this exorbitant liability, which is a result of holding down interest rates-- good for the economy, bad for pension plans. >> reporter: already this year, companies ranging from boeing to verizon have pledged to make billion-dollar-plus contributions to their pension plans. but companies in declining industries like defense may have the hardest time closing the gap. >> defined benefit plans have been under-funded for so long, and they are facing such challenges that i sincerely doubt that many of them will be able to pull out. >> reporter: when companies can't keep their pension promises, the government often steps in. but the fund that backstops pension promises has it's own gap. it's under-funded by $26 billion. darren gersh, "nightly business report," washington. >> well, come, it was green, green, green here on wall street, no complaints, all of the 10 s&p sectors were up and i don't know if it's's going continue
tomorrow, nobody knows f you listen our guest he was saying that it might take a pause but for today everybody was feeling good. >> tom: perhapses that the best we ask:ask for, just a pause and continue to maintain these levels. we'll go ahead and get things roll and tell you what it looks like today with tonight's market focus. "big and broad" describes today's market gains. strong economic data coupled with optimism out of europe unpinned today's stock and commodity buying. while the dow broke out to more than two-year highs, the s&p 500 sits five points below its april high of last spring. the index has shot up 23% since its october low. all ten of the major sectors were higher, led by materials, financials, and technology. those three moved up by more than 1.5% each. and among the stand out tech stocks-- microsoft. shares shot up 4%, leading the dow gainers. volume was heavy with shares breaking out to a four year high.
also helping the dow, bank of america, up 4%. financial stocks were able to move higher, despite credit ratings agency moody's warning about the risks of investment banking. moody's put the ratings of 17 banks under review, including b-of-a. today's latest evidence of a strengthening economy helped fuel the rally of energy commodities. check out gasoline futures. with crude oil settling over $102 per barrel, pump prices look to go higher. gasoline futures are over $3 per gallon, their highest since the middle of last year. higher gasoline prices haven't hurt auto stocks, regardless if they concentrate on gasoline engines or batteries. we mentioned g.m.'s rally earlier. ford gained 3%. electric car maker tesla found buyers, too, moving higher by almost 2%. the biggest loser among the s&p
500 was jelly maker j.m. smucker. a disappointing quarter and outlook hit the stock. shares slid 8%. volume was almost ten times average, with shares sinking to their lowest since october. higher prices of its jif peanut butter and folgers coffee hurt its sales, and margins are getting pinched by higher costs. meantime, amazon.com also missed out on the rally today. shares fell 2.5%, and they've been trending lower since october. morgan stanley cut its rating to equal-weight over concerns that sales of iphones and ipads could hurt amazon's electronic book selling business. but there was also an industry report showing amazon's own kindle fire tablet has cut into the market share of the ipad. and a couple of specialty retailers saw big stock losses. build-a-bear workshop fell apart, losing more than a quarter of its value. earnings came in shy of estimates and its store sales dropped.
online jewelry retailer blue nile was tarnished after missing estimates and a disappointing forecast. shares fell 10%. finally tonight, bonds. despite the stronger economic data and stock rally, bond yields remain in a tight trading range. the interest rate on a government ten-year note has been hovering around 2% since november. and that's tonight's "market focus."
>> susie: next time you put your car in gear, you may also be turning off all those high-tech gadgets and gizmos on your dashboard. the government today asked car makers to find a way to limit the use of all in-vehicle devices that could distract a driver when the car is moving. gps, text messaging, internet browsing, and hands-free dialing are some of the options named. distracted driving is deadly-- in 2010 alone, 3,100 people were killed. the national highway traffic safety administration plans public hearings on the matter in march. >> tom: here's what we're watching for tomorrow: more news on the economy. we'll see january's reports on consumer prices and leading indicators, plus earnings from campbell soup. also tomorrow, a new "market monitor" guest joins us. brian lazorishak, portfolio manager at chase investment counsel of charlottesville, virginia.
and he has a unique stock pick in the energy business. >> susie: billionaire deal maker ron perelman can cross off another painful legal battle. he settled a dispute with his former business partner and one- time best friend donald drapkin. the deal comes less than a month after a federal jury awarded $16 million to drapkin for unpaid compensation. now, the court says both parties have agreed that there was a substantial error in the judgement and that it should be vacated. over the past two decades, the men collaborated on many deals involving revlon, marvel comics, and others. >> tom: 50 cent stamps, five delivery days, and layoffs of 150,000 employees-- all are part of a new business plan submitted to congress today by the head of the u.s. post office. in a letter to congress, the postmaster general said, without these changes, the service would continue to be a burden to taxpayers. the agency owes the u.s. treasury almost $13 billion and posted a $3.3 billion loss last
quarter. >> susie: when people launch a business, they spend a lot of time making a game plan and thinking about who their customer will be. but tonight's commentator says it's crucial for new business owners to design a tech plan. here's alfred edmond, jr., senior vice president and editor-at-large at "black enterprise."
>> every entrepreneur has heard that technology is key to the competitiveness of their business. however, if you ask them just what that means, too many would be at a loss to explain their approach to technology and its role in their businesses. well, according to marcia wade talbert, "black enterprise's" multimedia content producer in charge of the magazine's tech coverage, no matter what kind of business you own, your technology planning should focus on four main areas: social media, security, storage, and mobility. your business needs a social media strategy to engage, listen to, and respond to customers, and to help them to become willing evangelists for your business. you need a technology security plan to protect your company's most valuable assets, its data, ranging from financial records and contracts to customer emails and sales records. you also need a plan for safely backing up and storing the files and data that are the lifeblood of your business. storage, whether on remote servers or on the cloud, is critical. and you need mobility. with wireless mobile devices,
including tablets and smart phones, you and your employees are now expected to do business on the go from practically anywhere in the world. without an on-purpose plan to integrate social media, security, storage, and mobility, your company will operate at a technological disadvantage against the competition. i'm alfred edmond, jr. >> susie: and finally tonight, it's the end of an era. after 20 years in new orleans, the mardi gras museum has closed its doors. the museum suffered from a drop in attendance and a cut in city funding. all the memorabilia will be put on the auction block march 8. bidders will have the chance to acquire costumes and other festival items. tom, any interest in a 1974 gremlin automobile completely covered with mardi gras beads? >> sus yooerx i would not lose that in the airport parking lot, i tell you that. >> susie: one thing it doesn't v it doesn't have an engine, i just wanted to let you know. >> tom: plenty of beads but no engine, thank you.
>> susie: that's "nightly business report" for thursday, february 16. i'm susie gharib. good night, everyone, and good night to you, too, tom. >> tom: good night, susie. i'm tom hudson. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org