tv Nightly Business Report PBS October 12, 2016 1:00am-1:31am PDT
♪ this is "nightly busine" wi. not much green. the dow tumbles 200 points as investors fin little to get excited about. ouch, alcoa. earnings season starts on a sour note, dashing some hope that the profit recession is coming to an end. > lasting damage? from the pinto to tylenol. is this different for samsung? those stories and more tonight on "nightly busine" r tuesday, october 11th. good evening, everyone. and welcome. one of those days on wall street. oil fell, rates rose, the dollar climbed, health care, which had been a market leader, retreated. and the earnings reporting season got off to a lousy start.
taketogether, it was a recipe for a down day, and that is exactly what we got. the mainly indexes all falling 1% or more. the dow jones industrial average off 200 points to 18,128. the nasdaq declined 81, and the s&p 500 was off 26. a shadow was cast over the broader market when alcoa reported weaker than expected results to kick off earnings season. the stock fell 11%. its worst day in more than seven years. and this was the last report for alcoa before it splits into two. morgan bre dives deeper into the metal company's results. > while alcoa reported higher quarterly profits, revenue slipped as the commodity busine continued to face pricing headwinds. but the higher-performin value-added s that supply the aerospace and automotive industries also came under pressure. we have to admit that we are seeing in some of the markets
some new challenges. on the aerospace side, we're seeing there is huge demand there, and there are problems on the engine side, particularly, and some destocking on the arrest owe structures. this morning's report is alcoa's last as a single company. novem 1st, the 128-year-o metals giant will split into two. a mining and smelting operation that will keep the alcoa name and arrest conic, which will claim th value-added businesses that supply manufacts with aluminum and titanium alloys. while earnings weren't that big of a miss, it's the results in those segments concerning investors the most today. since 2016 revenue targets were lowered for all three. thanks to challenges in aerospace and weakness in transporta what we think of alcoa with commodit andl alu and aluminum t assumes there could be a pricing support in those
markets. the real problem, as you pointed out, was on arconic, where the aerospac businesses where the value resides in the split. if there is going to be softness there and you have new industri investors coming to the na they're going to be concerned is what that 2017 outlook looks like. >> seaport global josh sullivan has a neutral rating on the stock. as earning gets under way, alcoas results set the stage for a bumpy hide, includin united technologies, which already warrants that its engine product target won't and honeywell, which reports on friday, also warned of lower sales. du largely to weakness in business jet engines. for "nightly businereport," morgan brennan. > many had hoped this would be the quarter that saw the end of the so-called profit recession. bob pisani takes a look at whether that's likely to happen. >> earnings season is upon us and there is a lot the stake. this is the quarter we're supposed to kill the earnings
recession, supposed to reverse five straight quarters of earning because top line growth revenues are improving. revenues are expected to increase 2.5%. that would be the first increase in revenues in the last six quarters, and the fourth quarter is supposed to be even better. but several big names have warned that full-year earnings will not be as strong as expected, including honeywell and dover, and today alcoa said revenues in its growing aerospace and automotive combinatn dwigs will not be as strong as expected in the fourth quarter. w global growth is definitely a problem, but it's not clear it will derail earnings improvement. that's because several sectors are expected to increase earnings. for example, tech stocks are strong, because of strong demand. fo chips and cell phones and other persona devices. health care is expected to do well, because earnings for drug stocks and hmos are stronger. financials are also expected to do better, particularly in the fourth quarte as interest rates have been rising. and finally, even energy companies are also finally
expected to do better in the fourth quarter, with oil over $50. you put it all together, analysts are still fairly optimistic. see if that optimism is justified as we get more guidance. for "nightly busine" i'm bob pisani at the n. christine short joins us to talk more about what to expect this earnings season, an earnings et a senior vice prest at stimmize. nice to have you here. welcome back. >> thank you. great to be here. >> let's start -- what kind of a season are you expecting? >> i think the overall theme for the third quarter's earning season is more of the same. expect to be the same low but steady growth rates you have during the first half of the year. also expect to see some of the same concerns crop up this slow and global growth. you know, strengthening dollar. issues with energy prices. all of these themes are going to resurface aga when we start to get more of these earnings press releases coming out in the next few weeks.
overall, i think the bright spot and bob pisani mentioned this, is the fact that revenue growth is set to come back. so after six consecutive quarters of s&p 500 sales growth on the decline, we are expecting 2.5% growth to return, and yes, bottom line growth is still under pressure. we're expecting about negative 1% for earnings growth. however, we have actually seen that improve just over the last week, as more companies have reported. it' potentially that numb is going to get better as we get more of these earnings reports. >> obviously, the different sectors will perform differentl are the likely winners going to be in this new sort of sector whirl where there is an 11th sector called real estate or reits, basically? >> it's not going to be the reits. it's not going to be the real esta sector, but it is nice to see that broken out and not the financials either, where the reits were formerly integrated. it's going to be two of the same sectors we have seen strickened for the last six quarters, and that's health and consumer
discretion difference, it's not for the same reasons we have seen for the last several quarters. and what i mean by that is health care, for instance, has been driven by the biotechnology name really for the last year-and-a quarter, biotech is actually the laggard within that sector, expecting 4% earnings growth. 's really going to be driven by the health care providers and phrma. and when you look at why that is, we have a larger insured population thanks to the affordabact. we also have an aging u.s. population those are two of the reaches you're seeing those names come to the forefront now and within consumer discretion autos had a great run, ford is really killing that in the third quarter, because they are expecting year over year declines. so i would be looking at the internet retailers, auto components, as well as household durables. christine, thank you. christe short our guest with estimatize> the decline in the oil may played a role in the stock m decline. crude off more than 1%, but did
stay above $50 a barrel and that may be because of skepticism around a possible deal that cut production. words, that little slide there today. steve sedgewick reports tonight from a major meeting of oil exporters in istanbu >> reporte another fascinating day at the world of energy congress tuesday. a whole host of contributions, sending oil price one way and the other, as well. i was speaking to the secretary general of opec, who said to me that actually any skepticism about a deal coming from algiers cut production from within opec is misplaced and that all members of opec, all 14 members, we on board. listen to go what he had to say about the all-important contribu. >> after meeting the minister, as well the president, rouhani, all assured me that at the end of the day, despite the
fact that every member country is there to protect each national sovereign right, but iran will join in a consensus to re-establi market balance on a sustainable basis. >> that was the secretary general over peck, just confirmi to me that all members -- of opec were on board leasting up to the meeting in november in vienna. there is skepticism on this deal and that's been sending markets easier on the oil price on tuesday. we saw skepticism from the likes of goldman sac who said actually they didn't believe that saudi could push through across all members of the group. and a very important man, the boss in russia. russia, of course, the worlds biggest oil producer. represes 40% of that country's production. and he said his company would not be taking part in any
produc cuts d is, of course, that's a very important contribution, especial given the fact that mr. putin, the president has said russia may freeze and get involved in conduct price action. of course, which would lead to a nonopec and opec agreement. so a lot of interesting headlines coming out from the major players here at the world energy cs in istanbul. for "nightly busine" i'm steve sedgewick. > still ahead, are consumers thinking twice before buying a samsung product? ♪ samsung is halting producti of its galaxy note 7 smartpho reports the
device and its replacement . this follows safety warnings from both the consumer product safe commin and the federal aviation administration ab the use of that smartphone is all of this making consumer have second thoughts about buying a samsung product? we took our cameras out to find >> doesn't discredit the brand at all. >> okay. >> things happen. >> not going to say problems with the device. samsung is the best. >> i actually ordered the new pixel, you know, just having too many issues with samsung. i can't ri it. >> i think this could be a serious marketing problem for them. i mean, especially the more publicit >> some samsung consumers are sticking by the brand. others are not. but will the botched recall of the company's exploding flagship phone have any long-lasting impact on the company? let's turn to bill george, former ceo of medtronic and now a professor of management at the harvard business school to discuss whether he thinks the company
you know, bill, i heard an interestg com today from a dartmouth bus schl who said that perhaps the culture at samsung, it being a south korean company, very deliberate like to study before they . slowed down their response to this, which seemed very slo >> well, tyler, i think they have just committed the cardinal sin for placing one defective product with anoth defective product. on. they have not gotten to the root cause of the problem, so they took a very superficial solution and didn't really fix the problem, just replaced one with another. d i d consumers are going to forgive them very s i'm not sure it's a culture so slow, it's an engineer culture, quality culture. they have don reall well until this. i th what it is, tyler, they're out of touch with the u.s. market.
it's run entirely by people from korea. do they ha enough americans in korea that really understand what this means to u.s. consumers, 300 million people? they have been extremely successful here. and they're risking their entire franchise. i have a huge big-box tv from samse peopl going to start to question other samsung products? i think they're risking a great de by inaction. i have not seen the ceo of samsung from korea on the usairways, on your show or flying over here to apologize. and get engaged and talk to the folks about this crisis. and they're in a huge crisis, putting the entire samsung brand at risk. >> you've given us a couple points you think, bill, samsung needs to do. one, make sure no one uses the note 7, and consumers get 100% refunds. but also, strengthen the internal quali c >> well, obviously, you need to do that. and they started to blame it on the supplier. which, by the way, is a samsung
subsidia that makes batteries. e not testing. actually, when verizon said hear not seeing a recall like this in a very long time, he's a very conserva man. for him to speak out at a major conferen -- and they do their own testing at verizon. why should they have to? samsung has got to ensure us of the quality of that product coming in. how would if somebody on the plane next to you has a samsung note 7 and they're using it and it could catch on fire? i mean, it wouldn't make you feel very good. >> no, certainly calls into question. t youe concerned that not just their cell phone business is at risk here. but that americans' acceptance of their other products -- i have samsung -- televisions. you ask people about the tvs and people say samsung is the best. i ha appliances. say the whole portfolio co >> yep. one brand name, and when you tarnish brand name, you could tarnish across the board.
i worry about this add met electronic i was there. one product that as a recall -- if you don't handle that well and the ceo doesn't jump in and get personally on the line and apologize to people who have been harmed and do the right thing, tyler, and you know, we have seen ceos do that and seen them fail. i think it could hurt their entire -- they have a great franchise, by thway. it's a great company. but they -- i'm not sure they know how to handle the consumer when they have a crisis. >> very interestinho emphasis -- we have to leave it there, bill, but how much emphas you put on the personal involvemen of ceo, and we remember mr. burke at j & j who can just that, and successfully in the tylenol case. bill, thanks. >> exactly. thanks, tyler. former medtronic ceo. and samsung is also having its day in the smartphon maker and apple squared off at the the issue? patents and how much samsung should pay apple after jurors found samsung infringed a
patented iphone design. hampton pea >> reporte samsu has been earned from 11 older profits smartpho models for ill legally copying patented designs from apple's iphone. $399 milli so far, a judgment wants the supreme court to and 1887 law requires patent infringe to pay total profit. apple believe the law is on their side. >> the legislative history shows congress wanted above all else to deter copyists and knockoff artists by requiring them to discourage what congress called the total profit from the article of manufactur that i. >> it's the first time in more than 120 years the high court has taken up a product design with the majority of the justices willing to consider limits on profits tied to
specific components. a potential win for s. >> we think the court gave a very careful and serious hearing to samsung's argument that a rule that gives all the profits on a product for a design patent on a narrow portion of the appe of the product is ban bad for business, devals the other pa product and is bad for consumers. >> of a high court ruling expected next spring could have ripple effects across high-tech. justices might balance protection for lucrative design patents while not stifling innovation, as smartphones become almost indispensable worldwide, generating enormous profits for their muf even if samsung gets a win from the high court, in a dispute over patent profits from previous products, it pales in comparis to samsung's current problems with this generation of smartphone for "nightly busine"
i'm hampton pearson at the >> yum brands. tonight's mart focus. the fast food operator said the spinoff of its china division later this month will allow the company to add more restaurants around the world with a goal to increase franchise ownership to 98% by 2018. the owner of the restaurant's kfc and taco bell also said it expects to return up to $13.5 bin to shareholders by 2019. shares of yum finished at 18825. st. jude medical will recall some of its defibrillators bee their batteries could run out early and cause the device to stop working. the battery depletion issue affects about 400,000 devices and has been linked to two deaths. st. jude is currently in the prs of being taken over by
abbott laboratories in a $25 billion deal. the news sent shares down 3.5% to 78.41. >> rent a center said third quar profit will fall below estimate while same store sales are expected to be down. an unsuccessful transition to a new sales operating system impacted its results. they punished the shares today. they fell nearly 29% to 9.18. lpl financial may be considering a sale. reuters says the broker/deal is in talks with goldman sachs regardin a sales process that has garnered interest from other comp and private equity firms. shares popped to 33.01. some of the biggest names are at the annual conference in silicon and one topic in particul at top of mind for industry execs. julia boorstin is in menlo park, califo
>> reporte with less than a month before the election, the executive representing the 40 companies in the internet associatn are talking about which candida would b better . the ceo of the organization saying hillary clinton is clearly better for the internet in >> i think certainly the platform that hillary clinton s put out is a lot more comprehe and speaks to our issues in a very thoughtful way. we have not seen that from the trump campaign. >> reporte verizon ceo lowell mcadam agreed that a clinton presiden would offer more stability for internet giants. >> i think the way most business leaders think about this at this more of a continuous of the last eight years. and it's hard to know what a trump presidency would look like at this point. so, you know, i've had many friends say that they're trying to take steps to keep their
busi from being impacted by an election of donald trump. because it could be very unpredicta >> mcadams says he see the uncertaiy slowing down decision making of other businesses, as they wait to see taking a harsher tone, expedia chairman barry diller, a hillary n supporter, saying the fact that donald trump won the nominati is a, quote, evil miracle. >> this is the thing that just as sounds me is the idea that that clown, bad clown, could actually be president of the united states. it's so insulting to all of us. so, yes. she will win. >> pandora ceo, tim wester green, wout weigh in, but did say the heated contest is drawing a surge in ad dollars to his platform. >> we see a lot of this firsthand. we' talking about not just presidenti advertising, but to
local county supervisor elections. we see it on the pla the internet is clearly g a role in this election that it never has before. millions of people streaming the debates online. we'll have to see how that impacts turnout next mo for "nightly businereport," m julia boorstin in menlo . coming up, what small business think of a key talking point on the campaign wages. ♪ hedge billionaire, leon cooperman defended himself against s.e.c. charges of insider trading. as we reported, the s.e.c. alleges cooperman and his hedge fund made trades in a company called atlas pipeline with
nonpublic information. today in an interview, cooperman called those charges >> megan and i have always followed the law. anyone who has done their homework would understand omega was built on complying with the we could have settled with the s.e.c. for an amount that is far less, far less than i donate to charity on an annual basis. bu i refuse to do so, because i know that we acted appropriately an >> cooperman also said the amount of money the government is wasting, prosecuting his firm is shocking. small business confidence dipped in september. this according to the national federation of independent business. are unlikely to hire employees in part because of the presi it is so divisive that the top issues for business owners are not being addressed. and as kate rogers reports, one of those issues is wages
♪ small business owners are grappling wit the idea of higher wages. st. joseph equipment in lacrosse, wisconsin, pays workers well above minimum wage at between $14 and $15 an hour. but a hike in the federal minimum wage, which has been stagnant at 7 $.25 since 2009 would pressur her to increase pay even more to remain coiv >> living here in western wisconsin and in the midwest, our costs of living is much lower. housing is lower, education is lower, gas is lower. child care is lower. education, all these things are lower. we' not on par with the differen we ha on the west and east. we are middle america and anything that you do on west coast and try to bring here to the midwest, we have to scale up. >> reporte it's not just the wages. th cost of health care has increased each year, she says, nearly 30% in 2015 and 11% this year. a wage hike under the affordable would b damaging. >> it greatly increases our cost of doing business.
>> reporte in boulder, colorado, judy is hoping for wage increases at both the federal level and in her own state, which is one of four national voting on ballot initiati to increase the minimum wage to $12 and beyond. her product architects, incin stated a higher pay and found it was good for business. >> we found that all of a sudden people could get their car fixed when it broke down. they could get to work better. they could get daycare when their kid was sick. so we had employees who were a lot more productive. and our turnover pretty much disappeare >> reporte right now 29 states and washington, d.c., have wages above the federal floor of $7.25 an hour and momentum has steadily built for an increase in the yea major cities from new york to los angele and seattle have taken matters into their own hand face of a stagnant federal wage, hiking local pay to $15 an hour over the course of s. one thing is for sure. businesses should be bracing for higher wages. both major party candidates have
spoken out in support of higher pay. democratic nominee, hillary clinton, fs $12 an hour at the federal level, and higher in states and cities where $15 an hour is feasible. meanwhile, republin nominee, donald trump, has said he supports a $10 an hour federal wage. what happe post election remas to be seen. for "nightly busine" m k. and that is "nightly bu for tonight. m sue herera. thanks for watching. >> and thanks from me, as well. i'm tyler mathisen. have a great evening, everybody. and we'll see you back here . -"jacques pépin: heart & soul" is brought to you by...
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