tv Nightly Business Report PBS April 25, 2011 7:00pm-7:30pm PDT
>> susie: a busy week for investors with a slew of earnings reports, higher gasoline prices and an unprecedented news conference at the federal reserve. >> tom: it's a lot to throw at the market as stocks sit close to their highest levels in three years. can the bull run continue? you're watching "nightly business report" for monday, april 25. 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 >> tom: good evening and thanks for joining us. a bumpy start to a busy week for investors. stocks zig-zagged after the long holiday weekend and, susie, trading volume was the lightest for the year. >> susie: tom, investors stayed on the sidelines as they wait to size up all the headlines coming out in the next few days, hoping for a clearer picture of the market and the economy. >> tom: from corporate america to the federal reserve in washington, there will be lots of new information in the days head. suzanne pratt looks at what's ahead for investors and what it could mean for stocks. >> reporter: if ever there were a week for the market to lose its teflon status, some experts say this could be it. from ford motor to exxon mobil,
corporate earnings will flood wall street all week long. on top of that, the federal reserve holds its first ever news conference following its regular policy meeting-- a big break with tradition for ben bernanke and company. finally thursday, investors get their first peek at first- quarter g.d.p. estimates for that are getting trimmed daily. still, market pro nick colas says don't worry. earnings will be good enough to underpin the market. >> my thought right now on stocks is that there is still some upside in the stock market because u.s. corporations have become so brutally efficient at making money even in tough economic times. we've seen that very consistently in the last two years. >> reporter: with a third of the s&p 500 having already reported results, analysts now expect to see profit growth at a respectable 15.5% for q1. that's a bit better than earlier forecasts. nevertheless, the market will face rather blustery headwinds in the coming weeks, and that has experts questioning its ability to move higher. some worry about what will
happen to stocks when the fed ends its easy money program, known as qe2. for others, oil prices pose the biggest threat. the average cost of gasoline is now $3.86 a gallon-- a dollar more than a year ago. crude oil futures ended slightly lower today at $112 a barrel. >> any movement above $120, $130 a barrel put a real crimp in the u.s. consumer in the back half of the year. and, if the stock market discounts what's going to happen in six months time, we're beginning to think about christmas time 2011. >> reporter: others are stressed about the calendar, particularly because of the old wall street adage: sell in may and go away. investment strategist sam stovall says investors shouldn't sell, but should lower their expectations for stocks. >> what worries me is we probably are on the leeward side of earnings growth of g.d.p. growth. if the u.s. government does start to embrace an austerity program, then we could see the u.s. economy grow a little slower.
>> reporter: here's another statistical tidbit for worried investors. according to s&p, since 1945, no major stock market correction has started in the month of may. suzanne pratt, "nightly business report," new york. >> susie: joining us now for more analysis on the fed and the economy? bruce kasman, chief economist at j.p. morgan. hi, bruce, nice to you have with us. >> nice to be here, susie. >> susie: all right, so i you know, you heard our report. what are the chances of any new policy signals from the fed at that important first news conference on wednesday? >> i don't think we're going to get anything very surprising. i think the fed will basically stay the course, stay the course on ending the qe 2 policies in june, stay the course on long on interest rates, it will express some disappointment on the economy being slow at the beginning of the year. disappointments and certainly vigilance watching the inflation news which is
highment but i don't think they will signal anything new than they have already told us about policy. >> susie: all right, but you know, not a day goes by that there isn't some fed policymaker giving a speech somewhere and there is all this debate whether we are talking about what to do about the bond buying program you refer to, the qe 12, the economy, interest-- qe 2, the economy, interest rates, inflation. how is this all going to play out? what is the next step? >> well, i think right now patience. we have inflation going up because of commodities, energy and food. that both is raising price pressures but also putting a crimp into growth. the fed sees the unemployment rate as high it doesn't see the economy anywhere close to having underlying price pressures from labor markets or finished goods prices. i think they're going to stay the course here, patient. but recognize that if we do see problems more fundamentally on inflation, then they will have to change course later this year. but it will be awhile before they make any new assessments. >> as we just reported, the government is expected to announce the first quarter
gdp numbers. what will they tell us about how weak or how strong the economy is growing? what do you think? >> i think the gdp will be very weak. we're looking for 1.3% annualized but it's a quarter which looks very strange and contrast it was a quarter in which we saw the fastest gain in industrial production in 14 years. the as ifest gain in private payrolls in five years. gdp is very weak. it is, i think, a reflek of the fact that we had a couple of powerful, temporary drags in the construction sector, weather, and the energy price increases, alongside some very weak public spending that took us down. we think it's temporary but no doubt it's a disappointment the gdp print we're going to see. >> susie: we've been getting a lot of reports out of corporate america, mixed but many of them beading to the upside. c.e.o.s giving upbeat reports about the outlook for the future. as you pars through all that information, what does it tell you about the outlook for the rest of the year? >> i think we're going to
have solid but not by any means boomy growth. we're looking for 3% growth here with corporate profits running five to ten percent sequentially here. it's a solid performance but i think we lost something as we started the air with energy prices going up. i think we are were on track for maybe getting growth close to 4% much we've lost that percentage point. that's going to be some what disappointing get considering the problems we have had in getting jobs going and getting our budget deficits down. >> susie: now over the weekend there were a number of polls came out showing that the american public doesn't think that the economy is getting better. so for people listening to our conversation and getting all this new data about the economy, and about inflation, and about gasoline prices, what is the take away here? >> well, i think there's a plus and a minus. i think the minus is that people are depressed. they're very cautious. it's very unlikely we're going to see the consumer look through all of the problems with higher energy prices and i think we're
going to have a subdued consumer through the spring. on the other hand we don't see a fall in confidence that we've often seen when things like energy prices are going up and economic uncertain rises. and i think it's hard for us to see a significant pullback unless the shocks here, energy prices and other things really start to intensify in the coming months. >> real quick because we just have a few seconds. people want to know how much longer do we have to go through this pain. what is the unemployment rate going to come down. when is the economy going to grow faster. you can give us a quick peek into the future? >> well, i think we're going to do okay but i don't think okay is very good in a world in which the healing is going to be painfully slow. i think we're healing but it's painfully slow. unemployment comes down but very slowly. it's going to be a long while, years before we get back to what we thought was acceptable levels of unemployment. >> all right, we'll leave it there. bruce, thank you so much for coming on tonight. >> thank you. >> tom: here are the stories in
tonight's n.b.r. newswheel: stocks end the day mixed as disappointing earnings reports weighed on the major indexes. the dow lost 26 points, the nasdaq gained almost six and the s&p 500 off two points. trading volumes on the big board and the nasdaq were among the lowest of the year as both european and asian markets were closed. under 700 million shares traded on the big board, under 1.5 billion on the nasdaq. the u.s. supreme court rejected a request by virginia to fast track a challenge to president obama's health care reform. the justices said they'd consider the validity of the law only after it goes through that state's lower courts. so this means the nation's top court probably won't hear the case until the summer of next year. by then, federal and state governments will have put into place parts of the law that change medicare payment rates. it will also let children up to age 26 stay on their parents' health insurance policies. still ahead, video rental company netflix reported higher-
than expected earnings and now has more subscribers than any other video service in the u.s., but shares were down after the close. find out why in tonight's "market focus." >> susie: new home sales aren't collapsing, but they aren't growing much either. that's the consensus of analysts reacting to today's report from the commerce department. new home sales rose 11% to an annual rate of 300,000 in march. basically, that means new home sales continue to bounce along the basement. the reason, as you might have guessed, is that there are still so many existing homes on the market it's hard to convince buyers to pay more for a new home. and, as lawrence yun, the chief economist of the national association of realtors, notes, builders are also facing higher costs as commodity prices rise. >> they go not want to do it and lose money on it. so they have to look at the construction costs, the labor costs to price it appropriately to at least have some profit margin. but as long as there is an a
bundance of distress, existing home inventory they cannot compete at that level. as for home prices, the median sales price for a new home is now $213,000. that's down nearly 5% from a year ago and $54,000 more than the median price of a previously owned home. >> tom: after seven weeks of testimony, the biggest insider trading case in two decades is now in the hands of a jury. the panel began deliberating the future of raj rajaratnam just after noon today. the founder of the galleon group hedge fund is charged with securities fraud and conspiracy, accused of using high level insiders to funnel him confidential information to trade on. the government's case included hours of wiretapped conversations played for the jurors. rajaratnam did not take the stand to defend himself. his lawyers say he was an aggressive money manager who traded on information that was publicly available.
>> tom we have been reporting this could be a critical week for the markets but in the meantime t was a mixed close on wall street. >> tom: it was, a peek week of earnings. the loss of anticipation about the other headlines, also anticipation about those rising commodity prices. let's go ahead and take a look at this evening's market focus. the major stock indices didn't see much movement by the time the closing bell rang, but
those commodity prices continue to be in focus with their rally. let's start by looking at the u.s. dollar index. this is the greenback against a basket of six global currencies. it was just a fraction stronger today, but look at this move down, ahead of this week's two- day federal reserve meeting. that begins tomorrow. this is the index since june of 2008. we're almost back at these levels. it's close to breaking below its 2009 lows, which would send it on its way to re-test its pre- financial collapse lows. the weaker dollar has helped give fuel to the rally across several commodities. gold hit another new high, over $1,500 an ounce. gasoline futures are at their highest price in almost three years. expectations are that supplies will continue to drop as they have for the past month. and corn prices resumed their rally today, although traders point out that more to wet, cool weather in the mid-west delaying planting.
consumer products maker kimberly clark help set the tone for stocks, taking some of their cue from commodities. of course, kimberly clark makes kleenex, huggie diapers and lots of other household items. shares fell almost 3% on heavy volume. 2.75%. earnings came in short of estimates as the company pointed to rising raw material prices offsetting a pick-up in sales volumes and, taking advantage of the weaker dollar, the company then lowered its guidance too. leading to today's selling. after the close, the focus fell on netflix. the on-demand movie company beat the street by three cents per share. its costs to get new customers fell sharply, helping increase its margins. that's good news. it came into this report just down a fraction today, as we see, but volume was heavy and it did hit a new 52-week high during the trading day. but shares fell as much as 5% after the close thanks to a weak outlook. if the after-hours selling holds through tomorrow's opening bell, shares would still remain above their lows of just last week.
the material sector led the way lower for the broad market and that sector was hit by newmont mining shedding 2.5%. down $1.44. volume was light on this move. and despite the record high in gold, mining stocks were down generally speaking. the biggest gold miner, barrick, fell almost 7%. we were just at a 52-week high, slipping considerably. volume quadrupled as it announced plans to use its cash to grow. barrick wants to spend $7.7 billion to buy australian miner equinox. barrick's offer tops that of a hostile bid for equinox by a chinese miner. if barrick is successful, it will double its position in copper thanks to a big west african mine. technology was the best sector today. lexmark led the way, up 3.7%. intel led the dow industrials with its 2.2% gain. and memory maker sandisk gained 1.6% thanks to stronger-than- expected earnings. one tech to watch tomorrow may be oracle.
after hitting a new high, shares fell as much as 1%. its chief financial officer resigned and president of oracle safra catz will take over the duties permanently. and that's tonight's "market focus." >> susie: late today, a victory for professional football players. a federal judge ruled in favor of the n.f.l. players, lifting the owners' lockout. the owners are expected to appeal, but if the lockout lift
stands, it could force n.f.l. owners to reopen for business within days. >> tom: tonight's "beyond the scoreboard" looks at collateral damage if there's no n.f.l. season. rick horrow is a sports business analyst and c.e.o. of horrow sports ventures. >> tom: i want to tackle underarmour, big athletic maker, does official footwear for the nfl. and if has been a nice bit of business for t. >> what is at risk. >> credibility t is the fastest growing retailer. they are just about put the take in the sand internationally as well. and the bottom line is they paid a pretty penny to wrest the deal away from nike e adidas and now it's theirs. it will start next year if it doesn't start this year. so the numbers aren't as important but the credibility certainly is. >> but the share price doesn't reflect any of this concern can. it's at near all-time highs. is that a nice rally ahead of earnings due out tomorrow. off the field the company is going after the consumer shoe business against nike,
seemingly ready to pay off dividends. >> you look at the chart and realize it is a good investment by kevin plank and the people at under ar pour but realize that the glass ceiling is nowhere near where they are. they will break through t the nfl being that $9 billion business will take under armour along with it if they don't play. they are just chomping at the bit. >> tom: under armour not alone, electronic arts video game maker has a lot of acing riding on the season. the draft is thursday. is it jumping the gun because look at this video cover for the college ncaa football 12 video game offer that is coming out in weeks. that is all balance bama mark ingram likely to be among the number one if not the number one top draft choices. if there is no season he is on the cover-of-ea. is there a risk? >> the riggs something not only no season or partial season, but the risk is every draft class over the last 20 years only a third of those first rounders make the pro bowl. the others are labeled as
disappointment because the expectation is so high. now he is not going to be drafted as high as reggie bush was when he picked up his megasubway eni-- endorsement and the expectations will be a lot higher. probably the first runningback drafted so you always expect those numbers. so does the season start and does he have a big season,. >> tom: ea is willing to make those bets. shareholders have been profiting. the stock hitting all-time highs. it raised its girdance back in february. again,-- its guidance back in february, again how much of it this could be at risk in for shareholders if the season doesn't happen and he may have a poor one? >> ea is now known as the kind of face of the emerging and also suspect athlete. take a look at tiger woods. john madden transcended. he's coaching. he ain't going any where. and the bottom line is there is always that next best athlete on the cover. sometimes it works. sometimes it doesn't. the bottom line is it is always a risk. >> tom: with that can come reward.
shareholders know that finally mlb has taken over operations of the los angeles dodgers before their current owner fell into trouble years ago, fox used to own it. the tribune company coned the chicago cubs, a long-suffering fans, one included here, for a long, long time. but corporate ownership, does make sense for shareholders, braves, flyers, the knicks among those under corporate ownership. is it good for shareholders. >> one of the few things i agree with tom hudson with is we are cub fans together. we will see it next. corporate oin means access to capital but now means quandary as to leadership, ownership style, $3 billion television deal with fox. with the dodgers, but where did that money go. the mccourts are in a major divorce situation and the bottom line is can:with corporate you always don't have that one line of spoiblt responsibility where the commissioner looks at you and says are you responsible here. that is the problem with corporate ownership. >> tom: thank you, rick horrow c.e.o. of rohr row sports.
>> susie: here's what we're watching for tomorrow: as we reported, federal reserve policymakers begin a two-day meeting on interest rates. their decision will be released on wednesday. we'll also see quarterly results from amazon.com, coca-cola, u.p.s. and ford. and speaking of ford, its c.e.o., alan mulally, joins us to talk about those results and the company's outlook for the rest of the year. >> susie: more fallout from the japanese earthquake for vehicle maker toyota. domestic production plummeted last month, falling by almost 63% due to plant and supply chain problems after the quake and tsunami. the slide has now put the world's largest automaker at risk of losing its top spot and falling to number three after general motors and volkswagen. >> tom: expect a new gaming system from nintendo some time next year. the company is working on a successor to its groundbreaking wii console, but it did not say what capabilities the new system would have. nintendo has dominated sales of video game consoles and sold 86 million wiis since launching it in 2006. plans for the new system were
many economists predict weaker growth. when it comes to the economic recovery, tonight's commentator sees a bumpy road ahead. he's bill rodgers, professor at rutgers university. >> this spring's pot holes are larger and more numerous. just the other day, i hit one that jarred me into thinking that were in a pot-hole recovery. economic growth has returned, but the growth isn't high enough to significantly narrow the nation's budget deficit. as a result, many pot holes will go unfilled. another potential outcome of the pot-hole recovery will be a slowdown in human priority investment-- a slowdown in spending on education, human and community services, recreation and culture, social benefits and social insurance. this will not be the first slowdown. during the 1980s and prior to the great recession, human investments slowed, leading to stagnation in family income. just as during previous slowdowns, today's republican
budget priorities undervalue the middle class contribution to economic growth and social cohesion. if implemented, their cuts will make it difficult for many americans to avoid today's pot holes. in fact, their cuts will have jarring effects that will be felt for years to come. i am bill rodgers. >> tom: just a reminder: you catch us online at n.b.r. on pbs.org. there you can comment on our blog or watch any programs that you may have missed. or you can follow us on twitter, @bizrpt, or my personal feed, @hudsonnbr. if tweeting isn't your thing, friend us on facebook at bizrpt. finally tonight, with gas prices above $4 a gallon in much of the country now, how about filling your tank with... algae? yes, algae. on tomorrow night's program, we'll tell you why that might be a reality. the "planet forward" social media project has been looking into using algae as a fuel and
has gotten a lot of ideas on its website. we'll explore some of them with planet forward's frank sesno and tell you how you can get involved in ideas you think will work the best for the environment and business. that's tomorrow night, right here on "nightly business report!" that's "nightly business report" for monday, april 25. i'm tom hudson. good night everyone, and good night to you too, susie. >> susie: good night tom. i'm susie gharib. good night everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you.