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tv   Nightly Business Report  PBS  February 9, 2018 5:00pm-5:31pm PST

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business report," with tyler mathisen and sue herera. >> thank goodness it's friday. you deserve a weekend after what the market put you through the past five days. two 1,000-point drops, and toda 0 point gain to cap it off. we examine what could be next. center of the storms. why the intense volatility is turning attentn to an obscure corner of the market. going global. overseas markets have been rocked as well. but our market monitor senses opportunity. those stories and moreonight on "nightly business report" for friday, february 9th. good evening, everyone. and welcome. this week was one for t history books. the volatility on wall street was ecunented. the selloffs were intense. the moves higher were just as
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dramatic. and the speed as which they were happening was once unthinkable. the dow travelled 20,000 points during the f paste trading sessions. today, it rose 500 points. then it fell 500 points before closing with a gain of more than 1%. the dow jones industrial average rose 330points, to finish at 24,190. no longer in correctio territory. the nasdaq added 97. the s&p00 climb 38. but for the week, the major indexes each saw declines more than 5%. in one of the craziest stretches since the financial isis. >> the dow's sudden drop a week ag today had global markets reeling by monday. >> it's allbout market psychology. and it is changing as we speak. >> reporter: by the final harrowing hour of trading the dow was setting records, but not the kind anyone wants to hear about. >> now we are talking min
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stretch. >> it's changing by the second here. >> the dow jonesndustrial average is currently down just under 1600 points. m everybody thought theket was going to keep going up, going up, it was never going to go so days like this catch people off guard. >> reporter: in just ten minutes the dow lost almost p1,000nts and finished with its biggest one-day point drop ever. the big gains in january, gone. and it got worse from there. after the 560 drop tuesday which put the dow briefly into correctioner to, down 10% from its high for the first timen two yeahe dow finished upped aly also by 560 ints. on wednesday the violent swings continued. up400 at one point. the dow finishing down 19. oat rockeday the some more. >> we are talking about a nasty stretch here. >> we are belowtu day's intraday low.
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>> reporter: finishing down more than 1,000points, for the second time in a week. the wild ride continuing today. down more than 1%, then finishing up 1.4%. >> thiis going to go down in the history books. >> reporter: this week, the dow, the nasd s, and the all hit correction levels. the fifth correction for the s&p 500 since the bull market began in 2009. and ehn w the wild moves, it's actually the leastevere of the five. after two years of unusual calm, investors are nowondering how more than half of last year's big market gains got wiped out. some are pointing at the fed, with interest rate hikes and fears that bonds with improving returns will take money out of the stock market. >> i think that the low rate, low volatility environment is probably over. >>clearly,ates are rising. th tightening policy. and tha has to have an effect
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on equity markets. but it's not the end of therl by any measure. >> while interest rates may have been cause for some concern in the , others say little known volatility funds are what triggered the spasms of milling. santoli explains what they e, ar and why they are suddenly getting so much attention. >> reporter: wall street's slide er the past two weeks has cast a harsh light on an obscure corner of the market, funds that invest in or bet against volatility itself. volatilityys simpl how much and how fast stock prices change. for decades, ethough, volatility index, known as the vix has provided a gauge of traders' expectation of future volatility. in the past seven years investment firms have ha concentrated ee traded products whose volume the bas whether this volility measure rises or falls during a given day. the most populare to v on volatility staying low, issued
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by credit swiss under the symbol ixvt l all of its value on monday's market route. for example, if the vix falls 10% in theday, the xiv goes up 10%. 17 as stocks rallied in a steady calm way, it delivered a 187% return. but when the vix surged by more than 100% on monday from 18 to 38, the xiv was effectively wiped out. not before, though, the managers of the xiv and many other investors using similar strategies were forced to buy futures contracts on the vix to o offset their losses. this activity has been blamed for the contigeed s in the volatility index. in turn it has driven other big investmentors who use the vix has a signal of stock market risk to slash their stock holdings. there is no way to know for sure how important this activity has been in the messyke stock m selloff this week but one thing
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is undisputed. thesetrelatively new ients exasser baited some of the selling and introduced a source of mket stress thatany investors never saw coming. for "nightly business report" i'm mike santoli. just today, fidelity told clients they can no longer buys ed in leveraged exchange traded funds that bet on the direction of vix fear gauge. the firm says the goal is to protect investors from outside risk. this tumultuous week saw a record $24 billion get are drawn from funds. according to lipper the turmoil turned investors away from equities and in favor m ofey market funds which are perceived to be saferhaynes. outflow from efts accounted for most withdrawals. it's possible even more money was pulled out yesterday. speaking of bad weeks it was the worst week for oil in two years. rising production and increase in active rigs and a strong
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dollar put pressure on crude prices. domestic crude prices fl six raight days, about 10% this week to settle below $60 a barrel for the first time this duries of upheaval it tar. is not unusual for executives to step up and buy stock. we saw ihe during financial crisis when during the darkest hours warren buft poured billions of dollars into goldman sachs and general electric.ot he is n the only example but now the question is will someone step into thismarket. dominic chu takes a look. >> the last time we saw a pullback the likes of we have seen, was may 20, 2015 to february 11, 2016. that was when concerns about china and global growth drove stocks better. en the s&p 500 fell by 15%. that's bigger than the pullback we are seeing right now. a lot of facto went into the market bottoming out then. onef the more notable market
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calls came not from a market technician or a investment rategist. it came from the ceo of jp morgan chase.di jamin. in a regulatory filing we learned h bought half a million worth of his company's own stock. it was $27 million. jp morgan hit aigh on january 29th this year, more than adubling his investment capital in that one we are days away from the two year anniversary of that market call. will a ceo this year step up and make the same kinds of call on their stock that jimmy diamond did. >> it could be a psychological boost for those worried about valuations or whether it is too late to get in on the bull market one. one of the things to wat the coming days and weeks, depending how the markett plays ill be whether there is any notable insider buying or maybe selling. we are still in earningsreeason
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so t may not be anable for executives to make moves i their o stocks. but will we look back askand enp calling the bottom the name of another big company ceo. let'srap up this week on wall street and see what may be next fortos with liz saunders from charles schwab. mommy, when is this all going to be over? or is it? [ laughter ] >> i have an 18-year-d and a 21-year-old. so they are old enough not to whine like that. but young enough not to really know what's going on. i jus have to answer to our clients at this point. >> did you see anythg in today's action that tells you that this spasm may be playing out? or can you tell? >> not necessarily. i think you want to see more than just one day that has this kind of reversal. and think you would like to see maybe a string of them or at least a couplem of t that
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happens in conjunction with a an easing back in the volatility index. even then, i don't think anybody would be so silly as to say all the clear. but i would like the see a little bit more of a pattern develop before we t start take some breaths. >> what are you hearing from clients? are they staying invested in thisrket? how nervous are they? >> it's interesting. our investors who have what we call an advised approach, a disciplined asset allocation plan that is strategic in nature and it's set up and allocated based on their time horizon and risk tolerance -- folks that have taken that discipline approach all along are unbelievably calm during this period of time. that's the reason they have applied that discipline approach. i think the trading oriented folks, particularly trading oriented folks that only recently got into the market -- i think -- we had an interesting phe that's now maybe working
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into another phase here, which was started with the fomo phase, fear of missing out. you had a woosh of new into the market, poorly timed in hindsight. and now we have to see whether maybe we are in the lifo phase of the rket, last in, first and w may have already seen a capitulation of new investors. >> a lot of people have been pointed at the levered inverse volatility efts or whatever t ey can they are. i know you can't answer this but i'm going to ask anyway. it seals like wall street often comes up with products that often explode or implode. why doeset wall st invent these things, the products that nobody really needs? >> everything isbout profits. but i will pat our own corporation on the back a bit with these, because frohe outset of the creation of these things, we have been very vocal
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ery proactive in talking about the danger of these things. fact, our financial consultants are not allowed to recommend them. and as recently as december, we looked to see which of our clients might have some in their portfolios and we sent warning letter about the risks of them. >> very interesting. >> so we ve not bee fans from the get-go. and i'm talking specificay about t leveraged and the traded exchange products. >> fascinating. >> but it is -- you know, we do haveon history of his esoteric products being created. at some point, and almost always you look back and say what were tey thinking? it's unfortunate fhe average investor. >> get some rest this weekend. it is been a busy week for you. time to look at some of today's upades and down grades. we ooin begin with united technologies. upgraded to buy at argus. the analyst said they are taking
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a lead positionings in number of key industries. the price target$1 . shares fell in this market down 2% to 125.03. viacom's ratg was upgraded rbc.ector perform by they see them following through on its turn around strategy and sites the possibly merger with cbs. shares rose to 32.47. wynn resorts saw a downgrade to equ weight at morgan stanley saying near term risks oueneigh any pal reward. they site concerns about earnings expectations. not a win/win. shares fell nearly 2% to 166.32. >> expedia changed to a buy foowing the company's weaker than expected earnings and outlook. the analyst said the stock is overvalued relative to its growth prospects.
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the shares are down. still ahead, interest rates, deficits, and perhaps the return of the bond vigilantes. as of the close today 70% of the s&p 500 is down more than ro 10% its most recent highs. and here's a look at the sectors that are in correction. the federal government went into shutdown mode just after mitt nig last night but it was short lived. before dawn lawmakers passed a package to keep the government funded. kayla tausche is in washington her us tonight. >> reporter: second shutdown in a month lasted just nine hours after congress missed a midnight t deadline keep the government funded a series of votes in the senate and then the house in theda wee hours f
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morning. >> the motion to reconsider is laidpon the table. >> reporter: 67 republicansst voted agahe bill's high spending and debt levels, the house psing the measure by just two dozen votes, hse speaker paul ryan promising to bring up iigration after the spending bill is passed. >> once we get the budget agreement done, and we will get it done no matter how long it takes us to stay here. we will bring that debate to this floor and find a solution. but we cannot do that unless we pass this bget agreement. >> reporter: the senate passing the measure handily, one emin, rand paul dragged out deliberations beyond the adline because of similar spending concerns. >> if you were against president obama's deficits and now you are for the republican deficits, isn't that the very definition of hypocrisy. >> reporter: the budget deal raises the debt limit until march 20 after midterm elections. the u.s. borrowing ability
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would have otherwise run out at the end of this month. in all,he deal costs $320 billion, including interest, $420 billion. republicans had tried to keep a lid on domestic or monday military spending but in order to get democrats votes they ended up raising it $131 n. bill the president tweeting, those costs will never come down if we do not ect moreepublicans in 2018. though calling the compromise itself a victory, and just before the federal workday began at 9:00 a.m. confirming he signed it. the deal keeps the governmentou funded t march 23rd, giving lawmakers until then to finish the finer details of the comprehensive spending for "nightly business report" i'm kayla tausche, washington. the bd market now has to contend with renewed talk of those higher m deficitse spending, fear of inflation. and that has some peopleer wog if we are witnessing the return of the so-called bond vigilantes. michelle caruso-cabrera explains. >> reporter: with the recent
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little spike in interest rates once again there is talk about the possibility of the returnndf vigil antes. what is a bond vigil a bond market investor who protests inflationary fiscal policy, in other words too much government spending by selling bonds. therefore increasingyields. the price of a bond and its yield is always an inverse retionship. anhe word vigilante is used because it highlights the ability of bond mashttle to restrain government spending. when interest rates on government bonds go up, government has the divert more and more money to paying for its debt and away from the the projects andie pol for which they had borrowed the money in the first place. the term was coined by ed var ndeti. he says there is a good chance they are coming back. >> when you look at the defit situation, it just got worse. that can't possibly be a good thing for the bond market. so it is a negative. i think what the stock market is
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starting t worst case scenario is that the deficit does increase and interest rates go up. >> reporter: there are three reasons why talk of the bond vigilantes returning is here. first the federal reserve and other major central banks are reducing how many bonds buy. the tax cut, at least in the short-term means less revenue for the government. and this week, very important, the decision by congress to did a very big spending package agreed to by many in both parties, which means deficits of more than $1ll tn a year in the coming years. the bond vigilantes haven't reared their ugly head in the u.s. since bill clinton. however they were in europert ularly in countries like greece, italy and portugal. the power of theond market often surprises politicians who are unfamiliar with it. there is a funny kpoet from the advise or to bill cl he told the "wall street journal" in 199, i used to think if there wasreincarnation i wanted to come back as the
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president the pope or a .400 baseball hitter. now i want to come back as the bond market. you can intimidate everybody. in bob woodward's book, the agenda, hent quotes presi bill clinton, quote, you mean the tell me that the success of the economic condition and my re-election hinges on a bunch of expletive bondtr ers? for "nightly business report" "nightly business report" i'm michelle caruso-cabrera. therapy puttics halts a drug trial. that's where me begin tonight's focus. regulators required it to suspend its experiment for a muscular dystrophy treatment after a patient developed a ndition where muscle breaks down rapidly. the company noted an independent committee did give the okay to move forward but they need government approval to continue the testing.
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shares were off to 55.14. >> qualcomm turned down broad come's offer of $121 billion. despite broadheome saying bid was its best and final qualcomm said it is open to meeting with its rival. qualcomm was up. and broad come u to 235.50. >> moody's said strongow revenu helped earnings come in ahead of exceptionations and gave an upseat forecast for the year citing the new tax law and impring economic activity of the moody up to $154.64. zillow continued to fall today after the company gave weaker than expected guidanc r the current quarter after the bell yesterday. they matched expectations in the period. shares down 3% today at $44.95. this week's market monitor isinding opportunity overseas in europe. the last time he was on in march, our marketonitor picked a stock that's up 43%.
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marine harvest, which is 11% higher. and scorpio bulker down 8%. joining us, dad, marcus, the ceo of ever more global advisors. ni to have out here. you have had a busy week. >> absolutely. >> let's srt with your picks. gravendi. >> it is a media conglomerate. it's based in .fran but they have an asset, universal music group, the largest music company in the world. it is gng through a massive restructuring and exposing the music biness to the market a it's getting revalued. even though it was a great stock over the last year it's one of our top holdings. we absolutely love it. we have an aggressive value creator running the business and he's just creating so much value shere. >> youond pick has not been such a good stock. you picked it last time. scorpio bulkers, you are still ith it.d tell me why even though it is
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down since the point at which you chose it. >> yes. it is a dry bulk company. it's moving goods between the u.s. and china, back and forth. the fact is it has been tough over the last year. the fundamentals were very weak as china had sloweddown. but the reality is we have added to it throughout the whole year. today our funds own over 8% of the company because the fundamentals are just starting to pick up as you get globa growth, the pick up is just not ected in this stock at all. we love this company, the sector. >> and n group. >> it was once the insurance division inside ing bank. when they were bailed out by the dutch government it was kicked out to the market. i bought it in their cold ipo. we have been adding to it. it is a one of the cheapest insuranceompanies in europe. it's participating with the growth of europe. >> we have to let you go but you have been buying this week in europe, correct? >> yes, we have been getting to
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work between 3:00 and:00 in the morning to buy stocks as people were dumping them. >> davidmarcus, thanks for much for joining us. >> have a good get some . coming up, there are billions of reasons why amazon t wants take on ups and fedex. first a look at the very important yields in the bond market. delving n reportedly deeping into the delivery business, it's taking on ups and fedex directly. morgan brennan has more on what amazon might be up to. >> reporter: shipping with amazon may soon make its u.s debut. according to "wall street journal" amazon's long r ored delivery service will initially roll out in los angeles a first step toward allowing third party sellers to shim tir goods via amazon directly and eventually
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become a service that can be offered to other companies as well. azon saying, quote, we are always innovating and experimenting on behalf of customers and the businesses that sell and grow on amazon to create faster, lower cost delivery choices. according to a source, the program is still in the planning stages and atea lst several months out. bu d thatn't stop shares of ups and fedex from falling today even though industry experts arp cal. >> fedex and ups should not feel threatened by amazon rolling out its own delivery service because never a much better, much more dense network that sfreds the cost of each package dlifld out over many more packages and makes it much more efficient. >> reporter: in response,s saying it quote continues to pport amazon and many other comments and that it doesn't make comments about their business strategios or decisns regarding their utilization of ups services.x fesn't mincing words. quote, the headline in today's
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"wall street journal" demonstrates a lack of basic understanding of the full scale of the global transportation industry. fedex say no single customer makes up more than 3% of svenue. ups so one is more than 10%. >> inc. i don't think amazonal ac really wants to compete with fedex and ups. i think wha they want to do is provide some assistance to what they have already in place. if you look at every major retailer out there they have built out part of their own network. h walmar close to 8,000 trucks, dozens of distribution centers, yet they are still the largest custome of eve large trucking comompany out there. >> it all highlights a bigger trend, that e-commerce continues to grow faster than shipping companies can expand. as the rec record holiday season showed that rapid pace isn't likely to let up for anyone. amazon is building out its own network with 40 leased planesy b year's end.
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by comparison, fedex andps have jet pleats of hundreds, aning it may take years and tens of millions of dollars before the tech giant can deliver on such delivery threat. morganan bre on "nightly business report." na> the dow today was up 330 points. aq added 967. and the s&p 500 finished the week with a gain of 38. however, for the week, all the indexes were down more than 5%. >> that's it for us tonight. i'm sue herera. thank you for joining us. >> i'm tyler mathisen, have a great weekend, everyone. you deserve it. we'll see you on monday.
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