tv Nightly Business Report PBS February 2, 2018 5:00pm-5:30pm PST
>> announcer: this isssnightly busieport," with tyler mathisen, and sue here. stocks pounded. the dow plunges more than 650 points. f the biggest point declines for the blue chip index ever. inflation threat. b jobs ang created, wages are growing. but good news on main street is bad news on wall street. rising rates. as yieldsupo , how should you in st? our market monitor has some advice. those stories and more tonight on "nightly business report" for friday, february 2nd. good evening, everyone, and welcome. sit back, relax, enjoy the flight. beca de the's turbulence is over, at least for now. and what a day it was. for t first timn a very long time,tocks hit some serious air pockets. t was, to be blunt, the worst selloff in years, fueled by
concerns about rising interest rates and some nitpicking about selected corporate profit reports. the dow jones industrial average plunged 665 points to 25,520 or about 2.5%. the nasdaq dropped 145. and the s&p 500 dipped 59. all 30 of the dow components were lower. a day of rumrs. and of all the 500 stocks in the s&p 500, only a handful were in the green and higher. today concluded the worst week for the major afternoons since 2016nd >> selling starting with the release of the january jobs report. employers added 200,000 jobs last month, which was more than expected. e remainedoyment r steady at 4.1%. and wage growth accelerated. average hourly earnings jumped 2.9% from a year earlier, the y strongestr over year gain since 2009. investors are concerned veho that that could trigger higher
inflation, and so bond yields a rose stocks fell. bob pisani has more on the selloff from the new york stock exchange. >> reporter: stocks gave up about one third of january's strong gains. the dow and the s&p 500 both suffered their worst week in two years. volakelity sto a is a-month high, and trading volume pretty substantial. now we are halfway through earnings season and it's been a great quarter. earnings are up nearly 14% from the same time a year ago. butil now they have kept going up. rising interest rates are clearly posing a threat to the stock market.an today'sry jobs report showed that wages through 3% year over year, the strongest since 2009. that's good newsri for acan workers but it has investors on edge because a pick up in inflation could mean the federal reserve raises rates four times this year instead of three. when the ten-year hit 2.85he
dow hit its bowest point. keep in mind the major amples are hovering where they were about two weeks agond down 4% from their all-time highs. 's hardly a correction but it has investors wdering if we are in for an even steeper drop in the coming weeks. bob pisani at the new yorktock exching. a 600-plus point on the dow has onl happened a handful of other times. in percentage terms it was 2.5%. that's a lot less than past 600-point drops. as you can see the last big point decline that big was 2016, when the dow was trang at 17,000. that resulted in a 3% fall. the selloffs in 2008, resulted in declines of around 7%. asat's because the dow trading at levels much lower than it was today. tall right now back that jobs
report that teed so much of what happened today. hampton pearson takes a closer look at america's strengthening labor market. >> reporter: january saw a rebound in hiring, with worker pay rising at the fastest rate since the end of the recession eight years ago.rl average h earnings are up 2.9% in theon last ths to just under $27. an hour economists say pay hes stemming from republican tax cuts plus increases in the minimum wage in 18 states were key factors. >> the employment figures are kind of right where they ha always been. what we have been waiting for is wage growth. today we saw wage growth that's healthy, trending in the right direction. eporter: job growth was broad based. construction led the way, adding 36,000 new workers t meet depends for new housing and remodelling. health care engine of job growth with 26,000 new workers. they were 23,000 high wage new hires at business service firms needing engineers and
accountants. both small and large bring competing for a shrinking pool of workers. for earth fair, which runs chain of 45 natural organic food stores in ten states business is booming. it's n hiring 1300 new employees to work this the ten new ores opening this year. its ceo says competition for qualified workers often pivots on pay and benefits. >> we are constantly benchmarking and making sure that we have the mostet coive remuneration for our team members, depending on which area of the business that they work in. there has been some upward dy tmic that in -- very recently. >> reporter: higher wages may be good newsn main street. but markets see inflation red flag and concerns the federal reserve may raise key short-term interest rates at the faster pace in the come months.
it could spook the fed into adding another rate increase that said, what we haven't seen in this economy is we growth mapping on to price growth. >> the fed has to be patient. i think they are going to let the economy groh. we are seeg global owth. >> the pick up in wages while long overdue for workers in the coming months will test the patients of both the fed and the markets. for "nightly business report," i'm hpton pearson in washington. >> let's dig a little bit deeper into the january jobs report and also talk about why we sawuch dramatic selloff in stocks today. joining us to talk about the jobs report is john o'sullivan from my frequency economics. and here nancy ietensionler, investment officer at heartland financial. welce to you both. nancy, what did the market tell you today? or whatin is it t to tell us? >> hi sue.
thanks so much for having me. listen, none of us like this. but we know we need f. thinkt as a garden you need to prune back so you can clear out the excess andet the grot you need going forward. the stock market got a little bit ahead of earnings. we had beenng talbout a correction as early as late july. we thought we needed to see one. we have gone 16 months without a that's probably the longest period in history. and markets just don't g straight up. this will -- it may take a little bittif . we may get additional selloff in the early part of next we. an investor i think that's good news because it allows you to go in at lower prices and buy th high quality prices that have delivered -- 80% of b companies havt their estimates from an earnings standpoint. that's predented in my my career. >> jimmo sullivan, there is a curious alice in wonderland qualit to what happened toda we have been waiting a long time
for wage growth to pick up in this country. today we got indication that it did, up 2.9%. that's great for american workers. how worrisome is wage growth that is that bust? or is it an unmitigated good thing? >> tyler, 2.9% or so on wage is not a problem. it's not the average earlyrn gs number. the point i think here more is there is acceleration underway and the message is the unemployment rate is lownough to put inflation growth. it's consistent with the feds goal of 2% over time. i think the issue here that's being raised is employment rowth at even $175,000 a month is more than strong enough to keep the unemployment rate
coming down. i think thesa m to the fed here is yes inflation is not a real problem at this point but they have got to loo ahead and stop the down trend in the unemployment rate and do that they have to normalize monetary policy. >> nancy, if you had money to put to work and you had the stomach to do it as an individual investor, where would you be looking to add to ioe market pos that you hold next week? >> well, surk we will be putting some money to work next week. one of the areas that we like a lot is -- or one of the stocks is federal expres i th a company that benefits from e-commerce and has already done all the capital investment to improve their productiomty. we likenies that benefit from technology and can show sustainable growth. work in some money to verizon as a defensive play, a company with a high tividend yielt grows over time and is in a pretty low valuation level by historicaled is. and then i can'telieve i
saying this, but i actually am going to take a fresh look at apple. we had been selling into the strength last year. and i thoht the earnings report wasn't terrible. average selling prices went up. we are going to do a little mor work and that might be an area where we add to some of our holdings next week. >> you said the phrase noizere in rates. i think that's econo speak for raising intert tes. how many times do you think the fed will raise interest rates over the next year, year and a half, how high will they go, and what will it mean for bond holders, for mortgage folks, for people who have a home equity line. >> no my own forecast, i have got them going once a quarter. 100 basis points in the next year, 150 basis points in the next year and a half. if that's the case, that's more than the p markets acing in. in turn i would expect yields to keep rising. the ten-year jumped from 240 to
208 280 thi year. i would see it at 3 or 3.5% next years ago. mortgage rates will go up as owll. they are at levels historically, there is a lot of room here for rites rates to go up. >> thank you both for joining us. going to be an interesting week ahead. jim o'sullivan and nancy tensionler. merck reported profits that topped analyst expectations thanks to a lower tax bill but sales for the quarter were not as strong as expected in light of increased competition some of its product. merck along with the restma of e et fell today, down 2%. exxonmobil and chevron, the country's two biggest oil companies reported profits that miss expectations despite a climb in crude prices in the middle east recent quarter. xon's business in the u.s. continues to struggle losing money for the 12th consecutive rt qurer.
the t worst performing stocks by the way on the dow. jackie deangelis has more on big results.ggy >> reporter: even with crude oil over $60 a barrel, big oil is struggling. those higher price were unable to offset weakness overseas for exxon and chevron. theirs earnings misseare troubling. energy was an underperformer last year. this year the thought it would be different because oil prices are on the rise but that might no enough by itself. on the bright side both companies saw benefits from the new tax laws. exxon is expected to increase spending by $50 billion over the next five years, toevels not seen since owas over $150 a barrel. conoco phillips attempted to focus onnd marginseturns for shareholders. exxon and chevron could continue to benefit from higher prices. this week, goldman sachs raised
its oil forecast. while the road to recovery may be slow some fee there could be a light at the end of the tunnel. for "nightly business report" i'm jackie deangelis. time to look at some of today's upgrades and down grades. apple's rating was cut to market. perform to outperform at ei bern the firm says demand for the iphone x dinpped dramatic september and the price target dropped are to 170 from 195. the stock dropped into correction territory, n 10% ble its all-time high. -- google's cloud market share, mazon and regulatory risk are reasons why this stock was downgraded. shares fell 5% to $1119. >> hp taken down a notch to neutral from buy at mazuho. the firm sites limited upside to earnings over the near riterm. the target says where it
is, $23. shares fell 3.5% to $22.48. te pharmaceuticals downgraded to sell fmeutral thechlt cited declines in the u.s. generic drug markethend h borrowing costs. price down. >> still ahead, market monitor, thes you may want to buy in a rising rate environment. first a look at some of th biggest decliners in trading today.
on a day when investors were worried about risin rates a federal reserve official appeared to down play those concerns. san francisco's president john williams says the fed should stick to its plan of grad interest rates hikes this year. some thinks he implied the bank should not overeact. >> sprint post as surprise profit. the telom reportedarnings and sales that beelt expectations as the recent tax cuts and anup ck in new subscribers helped results. sprint is also raising its free cash flow and operating income ok forecast for the 2017 fiscal year. sprint shares rose 5% to $5.36. >> honda motors up its profit forecast for the year because os stroes in china. the automaker said the asian market was the only region that saw sales growth during the quarter. in factas demand so strong
that honda expects that region now toecome its largest market, a designation the u.s. currently holds. profits also beat expectations. honda up 3% on this down day to 36.16. >> estai laweder said there was strong demand for its newly added brands touring the holidays. robust sales forts two-faced, and becca products helped them top a expectations also raise guidance for the full year. laweder shares off a fraction at $134.39. >> operating income surged in the latest quarter at sony, thanks in part to strong sales of playstation. stronger sales prompted the company to raise earnings guidance for the year. sony announced the ceo will step own in april and the current cfo will take over. shares rose almost 6% to $51.99. astrazeneca said it has entered into partnerships with chinese tech giants alley bap baba and
send cent. ey said the deals will focus on artificial intelligence to helpreith patientments and also combatting counterfeit drug sales. shares were up 2% to 35.90. andi ystem said it's being investigated by the securities and exchange commission regarding its compliance with the foreign corrupt practices act. the investigation was prompted by a report by a short seller who alleged that di u bribery tactics to win foreign contracts. separately the company reported earnings and sales that grew. but the shares plunged. down 18% to 54.60. tonight's market monitor has three picks she says will do well in a rising interest rate environment. st time she was on she picked a stock up 62%. jp morgan up 16%.
and aelectionian farm cuticles, 4% higher. mayor any, welcome back. let'shtet a quick tho if we might on this big of 65-point decline on the dow today. how nervous should we be? or not nervous at all? >> i don't think we should be all that nervous given the gains we had in we have been calling for a pullback in the market because that's a normal for probably the last five months. and it's finally here. i don't think that the data that came out today supports this kind of decline in the markplplace. but p are taking some profits and giving us some ying opportunities. >> speaking of buying opportunities let's get to your stock picks. the first is pinnacle financial partners. it's about a $5 billion market cap. why do you like it? >> right. this is a bank based in nashville, which is a growing -- it is a one of the top growing
metropolitan areas in the entire country. the growth just doesn't stop. and they have been growing their loans at about a 10% rate. that compares to more like a 3 or 4% rate across the rest of the country. we think that the tax reform, you know accelerated depreciation, more expensing on the part of the companyill only accelerate that rate of growth. but recentlyy tnd of stumbled with an acquisition and that's given us a buying tune here. we think we can -- we have owned it before. another 1e can make to 20% on pinnacle. >> air lease corp is in the l aircraftsing business as its name suggests. why is this good play if rates rise? >> well, i think the stock hasn't ris as much as it should have based on fears of rising interest rates. and this is a company that's a specialty banking, you know,
leonnile they take their capital cost of spread. rising that e spread is higher dollars. they are matching their cost of capital, plus the spread. and they are participating in that whole arena of raising international travel. about two thirds of their business is outde t u.s. about 46% is in asia alone,eo wheree are flying more than they ever have before. we think it' a great business. the company is only selling at one time its growth te and at about a 35% discount to the market. weth think this is a probably 20% up side to the country. >> quickly. sun trust another bank here n the southeast region. >> right. again, the southeast is an area of superior growth versus the rest of the country. we think the tax reform will on assist their loan growth ce ration. the management has been very cautious about upcoming rate
hikes thinking there will be only two. we really don't ow. th federal reserve is going to be completely different down the road as trump has three more appointments on the board and we have the new chair that just came in. so two, four, whichever the rate hikes would be. it's going to help all the banks. >> right. >> but we think this one has been conservative. they pay a the.4% dividend deal. the only one of these stocks dividend.as and we are expecting a butch, to 15% in the dividend this summer. >> that would be a nice bump. marian, have fun wit the super bowl in your town of minneapolis. >> it is the bowl north up here. >> you can read more about marian marianne's bowl picks on our website. still ahead, drilling down. you will meet the entrepreneur who had the bright idea to heat whole homes by digging a hole.
using the earth's heat to heat and cool your home is energy efficient. but using a geothermal system means drilg down hundreds of feet. that costs alo less than 1% of homes use geothermal wsystems,ch can cost $50,000. that's why one bright entr areneur had bright idea she hopes will make them more affordable. becky meyers new gentlemenio thermal and heating system is shaking up her home economics. >> no more oil bills. >> reporter: last september myer and her partner, bob conners stopped paying $3,000 or $4,000 a year for heating oil. some of the savings covers
higher electric bills.s some cover the monthly payments for the new system. the rest lands right in their pockets a. new furnace would have cost ,000 or $7,000. instead, myer paid about$20,000 for heat, air-conditioning, and two new hot watertanks. a lot lesshan she was quoted the year before. >> $37,000. it was too expensive. he>> reporter: t price dropped when bic becky meyer became dandelion energy customer number one. >> the experience of having geotrmal, very good. the process of getting it, not as good. >> reporr: kathiy's company aims to cost the cost of that process, which involves drifing hundredseet down to install a narrow u shaped pipe. water travels through the ground staysh the pipe where it 50 or 60 degrees. that water is piped up to a heat pump which uses vapor compression to take the heat
from the water, the heats it further, and then pushes hot air out to heat the house in winter. >> you can feel theat he >> reporter: when it's hot take hot air from the house and cooling it in the pump. the technology suspect new. it dates back some 70 years. but dandelion's prices are new. before dandelion, she worked at alphabet's r and d arm x, developing a product that converts sea water to. fu that project ended when x couldn't fine a commercial market for it. with geothermal, she sees a market and says the sky is the limit. >> fust people usingl oil in the northeast are spending tens of billions of dollars per year just buying fuel. you have to make it worth people's while. h, reporter: her pi new systems for no money downey nerntded bulk rates with a contractor to do 20 installs in upstate new york last summer.
dandelio pays the contractor, and homeowners pay dandeli $140 or $200 a month over 20 years. >> allowing a homeowner to switch without spending money immediately changes the game. >> reporter: the change the game, they are partnering with contractors, hoping to do 200 installs this year for roughly $25,000 each. contractors using dandelion's estimates indo minutes instead of hours. and dandelion developed a narrower, lighter drilling rig to fit into tight spaces this. year, dandelion rolls out its own heat pumps. the company says itsaing list has thousands of potential customers in all 50 states, allowing her to dream that dandelionms syste might some day spread like dandelions. >> we intendo expand from homes to service buildings like schools and commercial buildings and military bases. i mean, really, the
possibilities are endless. >> according to the american council onreyou this newible energy, 41 states have rebate programs that include hegeal heat pumps. before we go, here's another look at the selloff on wall street for you. the dow plunged 6 5 points. the nasdaq dropped 145. the s&p 500 dipped 59.se what next week holds. that's it for us on the to. i'm sue herr a. thank you ining us. >> i'm tyler mathisen. thanks from me as well. have a great weekend, everyb we'll see you back here, if you are brave enough, on monday.
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