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tv   Nightly Business Report  PBS  April 25, 2017 4:59pm-5:29pm PDT

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>> announcer: this is "nightly business report," with tyler mathisen and sue her profit powers strong earnings from iconic american companies, fuels big gains on wall street, sending the nasdaq past 6,000. trade tensions. the trump administration slaps tariffs on canadian lumber. will the housing market pay the price? losing patience? find out what happens when one of our reporters tries to get near a still mill in china. tonight on "nightly business report" for tuesday, april 25th. good evening, everyone, welcome. nasdaq powers past 6,000 for the first time ever. the dow reclaims 21,000. the small cap russell index hit a record. what you will street once again
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seeing super sized gains for the second day in a row as some of the biggest companies in america crush earnings expectations. and all of this came on the same day that the u.s. threatened tariffs on canadian lumber imports. that is a form of protectionism, something the market historically does not like. today it didn't seem to matter. the dow jones industrial average advanced 232 points to 20,996. the nasdaq climbed 41 to a record. and the s&p 500 added 14. the nasdaq's march to 6,000 comes more than 17 years after it first hit 5,000. bertha coombs takes a look at what powered the index which is home to many of the world's biggest tech companies. >> reporter: the nasdaq's historic milestone above 6,000 marks a 20% move in just eight months, when the composite regained the 5,000 level for good. the nasdaq is a market cap weighted index. more than half of the gains have
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been driven by the four tech giants that are now at record highs, the highest evaluations in the stock market. apple, amazon, facebook, and microsoft. apple riding record sales of iphones, has gained nearly 50% over the last eight months, far outperforming old guard tech peers that first led the nasdaq to 5,000 years ago like intel, cisco, microsoft and yahoo!. ironically, tech stocks were hit hard following the election. but fundamentals have helped drive gains in recent months. the chip sector has worked off high inventories and demand for new chip memory is driving growth. amd and micron have doubled over the last eight months. lab research is at all-time highs. with tech giant amazon on deck to report earnings this week, the nasdaq may see more momentum on its record run.
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bertha coombs, "nightly business report," at the nasdaq. so what's next for the nasdaq now that it has crossed that 6,000 mark? david leibovitz is global market strategist at jpmorgan asset management. welcome, david. one of your thoughts is the market, you think, will continue to sort of move higher, but in fits and starts. i'm going to pose a question to you sort of flippantly. what's next, or what's more likely, nasdaq 7,000 or nasdaq 5,000? >> so i would say that broadly speaking, nasdaq 7,000 is probably more likely. you're seeing large tech companies post strong earnings. the broader environment is unchanged from where we've been over the past few years. investors have been willing to reward these companies despite the economic backdrop. the past of least resistance is
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probably up rather than down. >> bertha pointed out in her report that we just ran that the big cap tech is what has been powering this market. are you worried that maybe this advance is too narrow? >> you know, it's a tough thing to say, because these are market cap weighted indices. when the companies outperform, the index does well. my view is this should broaden out over the course of the year. i said this market would move in fits and starts, it's going to entail some of the companies outperforming for periods of time and then smaller companies outperforming for periods of time. it may be a little bit of both. i do think this market can continue to rise, primarily on the back of stronger fundamentals. we're seeing earnings growth for the third consecutive quarter. >> when you say earnings growth, that would suggest you would tilt more towards growth names rather than value names right now? >> that's absolutely correct. i think that barring a significant change in u.s. government policy, barring a significant acceleration in the
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u.s. economy, there's still more potential in these growth names. but if we see things like broad based tax reform or, more importantly, we see the global economy, places like europe and emerging markets continue to accelerate, it could power higher, the way we saw them move into the end of last year. >> a lot of people, david, say that given the run we've had in the stock market, they find more value and more growth for that matter overseas. they point to europe, they point to japan and the like. do you find those areas attractive, or not? >> the u.s. has had quite a run here of over 250% from the market low in 2009. we still think, as i mentioned earlier, there's further upside in u.s. equities on the back of return in earnings growth. at the same time, we can't ignore that both the economic and the corporate fundamentals are improving in places like europe and emerging markets. i would add on top of that that the u.s. dollar which has been a headwind for u.s.-based investors we believe is going to
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start cooling off. that could be more of a tailwind. we like europe, we like e.m. we think japan is a play on the currency, so we're staying with europe and the e.m. rather than the japanese market. >> david, thank you so much. david leibovitz is with jpmorgan asset management. markets were driven in large part by upbeat earnings reports from 5 dow components. much of the gains were driven by two stocks in particular. caterpillar crushed earnings estimates and raised its forecast for the year. mcdonald's also reported better than expected results, making these two names the top performers on the blue chip index. dominic chu has more. >> reporter: make it two days in a row. big gains for the dow repeated themselves on tuesday, thanks in large part to a slate of positive earnings reports. the bulk of the upside move in large cap blue chip index came from just two stocks. first it was the biggest construction equipment maker of them all, think bulldozer,
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backhoes and dump trucks. caterpillar stocks reported better than expected sales and profits and boosted its full year profit forecast as well, thanks in part to improving markets in areas like energy and transportation. so who is in the mood for a big mac and some fries? mickey d's, mcdonald's, whatever you want to call it, topped profit and sales expectations. and it recorded better sales at established restaurants thanks to things like lower costs, all day breakfasts and big macs in different sizes. and shares of the company formerly known as minnesota mining and manufacturing or 3m as it's known today. the maker of everything from post-it notes to automotive filters posted better than expected profits.
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3m shares also hit a record high today. thanks to today's gains, the dow is just about a percent away from setting its own record high. for "nightly business report," i'm dominic chu. fellow dow component dupont also reported better than expected results helped by sales from its agriculture unit which accounts for half the company's revenue. dupont ismerging with dow chemical and expects the deal to close in august. koch recorded a double digit drop in quarterly profit. the company plans to eliminate 1200 jobs. but coke's incoming ceo sees a path back to growth. >> second quarter will reflect the completion of our chinese bottling transaction on the 1st of april as well. that will change the numbers. '17 will continue messy. it will get cleaner into '18 and '19 and you'll start to see robust growth coming through
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from the new, future smaller company. >> shares fell as the broader market rallied today. trade tensions are rising, and the country involved is canada, america's second largest trading partner after that other "c" country, china. the trump administration plans to impose a tariff on softwood lumber imported from our northern neighbor. the dispute is not new, and the u.s. timber industry has long complained that canada subsidizes its lumber industry. canada objected to the decision, which comes as the two countries get ready to renegotiate the north america free trade agreement, which of course the president has criticized. much of the lumber imported into the u.s. is used to build homes. concerns that the tariff will raise costs for homebuilders sent shares of those stocks lower in trading today, including pulte group, which
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recorded weak quarterly results. diana olick takes a look at the potential ripple through the housing market. >> reporter: it takes a lot of lumber to build a home. and the price of that lumber is going up. the trump administration's new duty on canadian lumber has already increased lumber costs for builders. and that will be passed on to buyers. >> above all, the losers in the softwood lumber dispute are middle class americans who want to buy an affordable home. >> reporter: fully one-third of lumber used in the u.s. last year was imported. the vast majority from canada. lumber makes up 10 to 15% of the construction cost of the average home. that goes to framing, molding, flooring. commerce secretary wilbur ross says he does not expect costs for lumber to rise much. >> we don't think that the price of lumber will go up anything like the 20%. but there may be some small increase in the price of lumber for the house. >> reporter: lumber prices were already up 22% so far this year,
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just from the uncertainty surrounding a possible tariff. estimates are that increased lumber costs will add about $1200 to the sale price of a newly built home. this at a time when builders are already struggling with a labor shortage. you're tight on land, you're tight on labor. your material costs are going up. do you expect things to get better or worse under the trump administration? >> well, i don't see how things are going to get better, to be honest with you. >> reporter: we spoke to jean meyer, the denver homebuilder, earlier this month. he said he could be building far more homes if his costs were lower. >> most of the materials we use are global commodities. so anything that affects the free flow of those commodities across borders will have a price effect. >> reporter: the u.s. housing market is already seeing a severe shortage of new and existing homes for sale. that alone is pushing prices higher far faster than income. builders are bracing for even
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more cost increases, if the trump administration institutes a border adjustment tax. other building products like cement and drywall are also imported to the u.s. if they fall under any new border tax, it will increase construction costs even further, which will limit the supply of homes for sale even more. for "nightly business report," i'm diana olick in washington. a separate report from the commerce department today shows new home sales climbs to an eight-month high. sales are running 10% higher than in 2016. inventories are low, demands are high, and the sales gains come despite rising prices. still ahead, watch what happens when one of our reporters tries to go inside a chinese steel mill.
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new details tonight on what the president may outline on taxes tomorrow. "the wall street journal" reports the proposal will include cutting the top tax rate on owner operated business to 15%. he's also called for a 15% top corporate tax rate. the blueprint will reportedly include a tax break for childcare expenses, a priority of the president's daughter ivanka. >> president trump has repeatedly criticized china for dumping cheap steel into u.s. markets. he's vowed to put an end to it in order to protect american
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companies. beijing says it will cut production but so far that hasn't happened. eunice eun reports from china. >> reporter: china's excess steel is raising tensions overseas. it's also raising sensitivities back home. we came to this town, two hours from beijing, in a northern province which makes more steel than the entire united states. washington has accused china of flooding global markets with cheap steel. beijing has repeatedly issued plans to reduce production but those efforts haven't gone far enough. analysts estimate that operating capacity in china actually increased last year, as local officials, investors, and banks keep mills open so workers can stay employed. behind me is the local steel mill. the townspeople say the authorities here have repeatedly over years instructed the steel mill to scale back capacity. but last year officials found that it expanded capacity.
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and that's a problem here in china. it quickly became a problem for us too. we've only been to the steel mill for a couple of minutes but the police have already stopped us from filming. they aren't letting us leave. it goes to show how sensitive the issue of steel and excess capacity has become in china. factories producing steel or steel-related products here are struggling to find new places to sell, both in china and abroad. the government has closed some factories but production levels haven't dropped off. washington is losing patience. u.s. president donald trump has vowed to take action against cheap imported steel, which means china half's. force their hand. "the government has its own proper and reasonable agenda to
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cut capacity at its own pace," he says. but it doesn't want the cameras to show just how slow that pace is. for "nightly business report," i'm eunice eun in china. eli lily lowered its adjusted profit forecast for the year. the drug maker says severance costs would hurt its results. earnings are ahead of expectations. the company's ceo says lily's strategy is working. >> we grew 9% for the pharma business, and more than all of it was attributed to the new products. it was a solid operating quarter for the company. >> eli lily shares fell to $81.20. ibm raised its guidance. it signed with abb to create and
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develop new industrial products. ibm shares fell 36 cents to $160.39. rite aid says the ongoing merger process with walgreen's negatively impacted its quarterly. still, it managed to top earnings and estimates and says it's working with the federal trade commission to wrap up its merger with walgreen's by mid-summer. shares of rite aid popped 6% to $3.97. lockheed martin posted a rise in sales but missed estimates due to charges that the company booked related to its foreign contracts. but it did raise its revenue forecast for the year. as for profit, the company beat expectations but said it was lowering its outlook for 2017. the shares were off 2% to $270.02. the mining company freeport turned a profit and recorded higher sales, but results fell short of estimates. the company said it will resume operations at its indonesia line for at least six months while it works with that country's
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government to negotiate a new agreement. freeport shares surged 7% to $13.10. at&t posted lower than expected revenues citing weak equipment sales. earnings met estimates, and the telecom giant noted that post-paid phone churn is the lowest it's been. shares rose in after hours but finished the regular session down marginally to $39.94. chipotle reported profit and revenue topping expectations, as the burrito chain benefitted from an increase in customer traffic and spending. same store sales also scratched out a gain that beat the street targets. shares of chipotle initially rose in extended hours trading and also ended the regular day up just a fraction to $471.76. what if you could steer a self-driving car with sound waves? it may not be that far-fetched. a team from the university of michigan found that sensors in things like self-driving cars could be vulnerable to hacking by sound waves. andrea day reports.
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>> reporter: keep your eye on the toy car. that sound just made it change directions. watch again. >> instead of the user controlling the car, i was controlling the car with the sound waves. >> reporter: it's the first time this team from the university of michigan has publicly demo'd their latest research, sponsored by the national science foundation. here's how it works. there's a tiny chip inside your smartphone called an accelerometer. that keeps the image on your screen displayed upright. certain apps use it to work, including this app driving a remote controlled car. >> because we can control sound waves to control what the phone thinks the orientation is, we can control the vehicle. >> reporter: colleagues in korea found a way to make drones fall out of the sky using sound waves. accelerometers are used in drones to keep the flight stable. >> we thought that's kind of
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cool, but what if you could take it and fly away? the difference between causing havoc and taking control of the system. >> reporter: and that led to controlling the toy car. there are billions of ack sexl acceleromete in use right now, from airbags to your car. >> my fear is that some day, five, ten years from now, if the manufacturers aren't taken the risks into account, there are systems that might fail across the entire globe simultaneously. >> reporter: his big concern, self-driving cars. >> they're inevitable. they'll be driving based on sensors, flying on instruments. this is where those sensor readings will be so much more important, because we need them to be trustworthy. >> reporter: that's why they were quick to share their findings with homeland security. >> because this is not just one company. these are thousands of companies. i would not be surprised if the underworld has already discovered this. we think the best way to solve these problems are doing it out
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in the open. >> reporter: the team has already figured out a way to control sensors in smartphones and fitness trackers. they're now checking out more critical systems like pace makers and aviation. for "nightly business report," i'm andrea day. next, follow the golden brick road. we take you to a street with more of america's priciest houses than any the other.
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labor tensions are rising in hollywood, where writers could be headed for the first writers strike in a decade. julia boorstin takes a look at where the negotiations stand. >> reporter: talks resumed today between the writers guild of america and the alliance of hollywood studios. last night, the writers guild voting to authorize a strike by a surprisingly large margin. 96%. the strike would start may 1st. if the two sides can't reach a compromise. >> about two weeks ago, the parties were $350 million apart. the writers wanted a $535 million package. the studios were looking something more like 180. the parties have moved since then. and what's interesting is that when you do it sort of point by point, what are the issues, look at where they are, they have come on a number of issues significantly closer. >> reporter: but it's unclear if the two sides will be able to make a deal in the next week. writers arguing that despite a surge in the number of tv shows,
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salaries have decreased an average of 23% over the last two years. that's due to the trend of shorter tv seasons, the fact that basic cable shows pay less than broadcast tv, and while shows on netflix may pay as much up front as broadcast shows, they play lower residuals or royalties over time than traditional tv shows do. >> one effect of a strike if there is one is that viewers would be driven off of broadcast platforms and further in the direction of netflix. the sell is very obvious from netflix's perspective. did you miss "breaking bad"? now is the time to discovery it. they have a depth of library content that's available on demand, obviously, at one streaming price per month, that no one else has. >> reporter: it's not just the hollywood studios watching but the whole los angeles economy.
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the last strike a decade ago, which lasted 100 days, cost the california economy $2.1 billion in lost output, and nearly 38,000 jobs. for "nightly business report," i'm julia boorstin in finally tonight, we talk a lot about rising home prices across the country. but you'll never believe what some houses are selling for on a single street in california. robert frank takes us there. >> reporter: it's a gold rush in the platinum triangle. prices and sales of mega homes in l.a.'s richest neighborhoods, beverly hills and bel air, are soaring. demand from young tech tycoons, middle east royals, and rich europeans led to hundreds of sales, over $10 million over the last two years, a record. the epicenter of the boom is a section of hillcrest road and beverly hills called billionaires' row, the most
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expensive street in america. the views are the best in los angeles. a mansion sold for $70 million to the founder of "mine craft." teardowns are going for $50 million. and a tiny plot of land, less than a quarter acre, sold for $32 million. now the biggest sale of them all has come onto the market. a newly-built mansion listed for $100 million. it's called opus. it's over 20,000 square feet. it comes with two pools, an infinity pool overlooking los angeles, with the other downstairs with a glass waterfall. it's got a champagne vault with 170 bottle of cristal. they all come with the house, along with a gold lamborghini and gold roll royce. the builder says the $100 million price tag is reasonable given recent sales on hillcrest. >> if you take the cost of everything that's sold, even the house next door that sold for $70 million two years ago, i think this house is priced well
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at a hundred. >> reporter: in nearby bel air is a house priced at $500 million. which means hillcrest may not hold its richest title for very long. for "nightly business report," i'm robert frank. here's another look at the rally on wall street. the dow advanced 232 points. the nasdaq climbed past 6,000. the s&p 500 added 14. i'm sue suherera. >> i'm tyler mathisen. see you back here tomorrow ni
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