Skip to main content

tv   Nightly Business Report  PBS  May 31, 2018 5:00pm-5:31pm PDT

5:00 pm
. this is "nightly business report" with bill griffeth and sue herera. trade tensions. the trump administration imposes steel and aluminum tariffs on imports from some of our biggest trading partners and our closest allies, and they are hitting back hard. stocks tumble. trade retaliation does send chills through the market, and investors look for answers as uncertainty grows. on the waterfront. how increasingly severe weather is creating a new risk to real estate. the launch of our series takes us to boston. those stories and more tonight on "nightly business report" for thursday, may 31st. and we do bid you good evening, everybody. investors did not exactly like what they heard when the white
5:01 pm
house said today that it is making good on its threat to impose tariffs on some of our largest trading partners and closest allies. starting at midnight tonight canada, mexico, and the european union will no longer be exempt from levies on steel and aluminum. the tariff on steel will be 25% and 10% on aluminum. the specter of a trade war made wall street very nervous today. stocks fell to close out the month of may. the dow fell by 251 points, 24,415. the nasdaq was down 20 and the s&p 500 lost 18. and the response from the country's affected was quick and it was stern. eamon javers is covering this story for us tonight from washington. >> these tariffs are totally unacceptable. >> reporter: the response from allies was swift. canadian prime minister justin trudeau condemned the move. >> these tariffs will harm industry and workers on both sides of the canada/u.s. border disrupting linked supply chains
5:02 pm
that have made north american steel and aluminum more competitive all around the world. >> reporter: canada will retaliate with tariffs on up to more than $16 billion in imports of steel, aluminum and more. the european commission says it's ready with tariffs on $7.5 billion on imports on products from makeup, to motorcycles and motor boats. mexico will also retaliate from tariffs on steel, pipe, cheese and pork. the trump administration says the president has the ability to remove them at any time and commerce secretary ross dismissed the damage to the relationship with allies. >> these are blips on the radar screen. i don't think they change the fundamentals of the relationship. everybody has spatz every now and again. >> reporter: trudeau made clear to him that to him these are real issues, not blips. >> this is perhaps more
5:03 pm
significant than the administration realizes. >> reporter: ross also dismissed the cost of tariffs on the u.s. economy. >> it's a tiny, tiny fraction of 1%. >> reporter: former secretary larry summers says that's a miscalculation. >> it doesn't take into account anyone who is using input. >> reporter: it's not just global allies, some of the president's political allies are critical as well. some business leaders are calling the tariff a costly mistake. kevin brady, the chair of the house ways and means committee, says the tariffs are hitting the wrong target. he called on the administration to continue to exempt our national security partners. for "nightly business report," i'm eamon javers in washington. moody's says those tariffs will hurt the economy and it added that certain u.s. exporters could be hurt by the retaliatory measures though the tariffs may help some domestic metal companies.
5:04 pm
let's talk more about this brewing trade war and what it could mean for investors. joining us tonight, jeff bush who's a partner at the washington yun date. welcome back. >> thank you, bill. >> you're not exactly ee no, ma'am marched of this strategy, are you? >> i think it's an interesting strategy. it's certainly a heavy-handed strategy. i think the president is showing a firm hand to our allies as a way of showing his focus on the international issues with iran, iraq, so forth. i think this is a much broader issue than simply a trade scenario. >> in what way? >> well, i think both trade and foreign relations are actively being negotiated right now. i think the president sees them really two feathers of the same bird and his negotiating style is to, again, show our allies a firm hand to show our resolve to our enemies. all of this -- both of these issues, foreign relations and trade, are standing on the same
5:05 pm
balancing point and that is where does the faith in our negotiating partners that president trump will deal with them consistently and fairly, and i think that's what we need to see from the trump administration heading into all of these negotiations is do we see a consistent, fair approach? and how is that received by those people on the other side of that table? >> for investors at a minimum, jeff, this could be inflationary as it raises prices on these things that are being imported or exported, but at the worst it could mean a loss of jobs for those companies that are being squeezed out, can't afford the tariffs and they laypeople off. what are investors to make people of this do you think? >> well, i think from an investor perspective there are two things to focus on. yes, inflation is certainly an aspect of that, but also volatility. and from an investor perspective, volatility is not necessarily bad but it does change your approach to your investing profile. generally speaking in a more volatile environment an active strategy is going to do better
5:06 pm
than a passive strategy. the risk is gain is significantly higher but harder to find. and the risk of a down side loss is generally a little bit larger. on the inflationary side, yes, prices are going up, would go up in a trade war scenario. as long as corporations can pass that along to consumers, then we won't really see any impact to the corporate earnings scenario. what my concern is, you can only pass those costs on if there's wage growth and we haven't seen a lot of wage growth in this recovery period. >> jeff, you know, there were a lot of people who were talking about what the long-term ramifications are from the move from the administration today. yes, it may be a negotiating tactic. yes, it may get rocked back or changed, but it's the uncertainty of that. they worry that with key trading partners like canada and mexico, that there are long-term ramifications in terms of lack of trust. do you agree with that or not? >> i absolutely agree with that, sue. i think this is a very high
5:07 pm
risk, high gain type of negotiating strategy, but in fairness a low risk, low gain strategy over the past several administrations hasn't really moved the needle either. so i think it is a different approach and i do believe in the long term we'll move back towards a free trade environment with our closest allies, but your point is exactly correct. what damage has been done in that interim process? >> jeff bush with the washington update. once again, thanks for joining us, jeff. >> thank you very much. and with geo politics in focus, investors paid attention to the meeting between secretary of state pompeo and a north korean official. the secretary says there's still a lot of work to do before summit between the two countries can take place, but he is optimistic. >> we've made real progress in the last 72 hours towards setting the conditions. the conditions are putting president trump and chairman kim jong-un in a place where they
5:08 pm
can be placed together. we've made real progress towards that in the last 72 hours. >> north korean officials will deliver a letter from their leader, kim jong-un, to president trump tomorrow. he will be in washington. more positive reports on the economy today. spending strengthened further in april as incomes rose. personal consumption expenditures, that's a measure of just about everything that households spend their money on. that rose .6% last month. that was the biggest increase in five months. economists say the report is a sign that consumers could drive even stronger economic growth in the current quarter. >> citing the economy's strength, a federal reserve official says a gradual interest rate increase remains appropriate. they say the recent tax cuts in higher federal spending will reinforce above trend economic growth. time to take a look at some of today's upgrades and downgrades. we begin with micron technology. their rating was lowered to equal weight from over weight at
5:09 pm
morgan stanley. the analyst cites storm clouds on the horizon. price target now, $65. that stock has been the best performing chip name in the s&p 500 this year but today it fell nearly 8% to $57.59. meanwhile, ubs is reaffirming its sell rating on tesla. the analyst is predicting that the company is going to need to raise capital by the end of the year. price target now $195, and that stock fell more than 2% to $284.73. still ahead, the milk market runs dry for some american dairy farmers. i'm contessa brewer in smithfield, kentucky, at more than 100 dairy farms facing a loomi ining deadline tonight. are there anymore buyers for the american dairy farms? coming up on "nightly business report."
5:10 pm
the federal reserve has reportedly labeled deutsch bank's u.s. operations as troubled. in fact, according to "the wall street journal," this rare designation by the fed actually took place about a year ago. that means that germany's biggest bank has been subject to operational constraints, like having to seek approval before hiring and firing senior managers. the central bank has also influenced moves by deutsch bank to reduce risk. stock hit an all time low today. it fell 4%. uber's ceo says his ride sharing company is on track to start trading its shares next year. speaking at the rico conference, the head of the company says the company is in a good position but a couple of things need to happen before it can go public.
5:11 pm
>> the management team has to be filled out. i am looking for a cfo and that's a pretty important person as part of an ipo. we are very much now rebuilding the brand and what uber represents, and i think we're making terrific progress. >> separately, the company's ceo confirmed that he had been in talks with berkshire hathaway's warren buffet, and he said the talks perhaps will resume one day. general motors driverless car unit is getting a $2 billion investment from soft bank, and once that deal closes the automaker itself will also make a billion dollar investment in the unit. i think it's a big recognition and validation on the progress we made over the last couple of years to get to this point, but i think it's a big recognition of the opportunity that lays ahead as we look to commercialize this technology on really big scale. it requires capital to do that. this obviously is a new source
5:12 pm
of capital for us as we look to grow this business and realize what we think is a very, very large opportunity around autonomous technology. >> in fact, that investment sent shares up nearly 13%, its biggest one day gain since the company relisted back in 2010 after its bankruptcy in 2009. fiat chrysler is also pushing further into the self-driving car business. that automaker is expanding its partnership with alphabet's a autonomous driving unit waymo. fiat chrysler is adding tens of thousands of mini vans to its autonomous fleet of self driving cars and that sent the stock up. and from cars to planes, there's a big battle brewing at los angeles international airport. airlines are pouring billions into that airport into a costly but critical fight to win other those traveling through the country's second biggest airport. phil lebeau is at lax for us tonight.
5:13 pm
>> reporter: this is ground zero in the airline war to win over customers. l.a.x., considered a hub by three major airlines, is being remade by those carriers. the latest investment, $1.9 billion by delta to renovate two terminals. >> we're the fastest growing airline here in l.a. over the last ten years, over the last 5 years we've grown 60%. we're out of capacity. we can't bring anymore customers in and through until we redesign the terminals. >> reporter: delta is in a dog fight with american, united and southwest, all using the airport to grow their bottom lines. l.a.x. is lucrative to airlines for a couple of reasons. first, it has a huge number of international flights and, secretary, it's a hub for high end travelers coming to and from southern california. >> they're fighting it out for the long haul customers and the people who pay the big bucks to sit at the pointy end.
5:14 pm
>> reporter: america has invested more than a billion dollars investing its operations in l.a. including a redesigned admir admiral's club. they're offering high end travelers at l.a.x. a personal suite when they check in and rides to their suite in a bmw. delta is focusing on giving their customers a better experience. >> we need to make certain that at airports whether it be security, check in, the boarding process is the same hassle free experience. >> reporter: a battle at the tarmac and the gates at america's second busiest airport. phil lebeau, "nightly business report," los angeles. sears is closing more stores. that's where we begin tonight's market focus. after reporting a wider than expected loss and a decline in same-store sales, the struggling retailer said it was planning to shut down 72 unprofitable locations and it added that it is still open to considering third party partnerships with its brands in a move to drive profits. shares fell more than 12%.
5:15 pm
they finished the day at $2.81. dollar general blamed its disappointing quarterly sales on an unseasonably cold spring. the discount retailer said fewer customers shopped at its stores and added that higher costs in that period pressured margins and overall earnings. shares finished down 9% to $87.48 and its rival dollar tree also said the weather had a negative impact on results. the retailer's same store sales came in below expectations and it's lowered its annual profit forecast. the company also took a hit from higher freight costs. shares were off 14%. investors had their first chance to guess at what the company had reported a quarterly loss that was pretty much in line with expectations. investors punished the stock today sending it down 19% to $19.60. then after the bell tonight,
5:16 pm
gamestop reported earnings that topped expectations even as they suffered declines in the core business. revenue came in a little light at the video game retailer. shares of gamestop were initially under pressure in the extended session. they finished the regular day down more than 1.5%. after the bell tonight lululemon delivered a solid quarter reporting same store sales that blew past estimates and a higher than expected rise in profitability. they also gave upbeat earnings and revenue guidance for the current quarter. shares were initially higher after hours but finished the regular session down half a percent at $105.05. the big retailers like walmart and kroger are getting into the milk business, and that is spelling trouble for dairy farmers across the country. their business is becoming increasingly squeezed by the changing dairy landscape. contessa brewer reports tonight from a family-run dairy farm in smithfield, kentucky.
5:17 pm
>> reporter: when dawn breaks in the countryside outside louisville, kentucky, the work starts. three generations have milked cows at jericho acres dairy, and a fourth generation is getting an early introduction. it's a small farm but the foundation for some big dreams. >> it was all about continuing the family business, doing continuous improvements to our facilities and growing our herd to include better genetics and better cows. >> reporter: those dreams were unexpectedly disrupted by a letter from dean foods which buys all of their milk. >> i regret to notify you, we must cease purchasing milk from your dairy farm. >> reporter: more than 100 farmers in eight states got the same letter canceling their milk supply contracts in 90 days. dean foods blames in part competition. a new milk processing plant opening in the region. walmart is entering the processing business with a new plant in fort wayne, indiana. it will bottle milk for its own
5:18 pm
great value store brand sourcing milk mainly bely from three nearby co-ops and a handful of independent farmers. dean foods facing falling sales and profits says it is right sizing its network to better match volume. it will continue to process milk for walmart in other regions but is likely to face other competition as other big grocers like krogers are already in the processing game. walmart tells us in a statement, while many of the farms that received letters from dean foods were far outside the service area of our plant, others have signed contracts with the co-op perfect rative. milk prices are lower now than they were plus americans are moving on from milk. consumption is taking a steady dive with overall sales dropping almost 15% since 2012. >> we knew that we would have to do something a little bit different, whether that be value
5:19 pm
added or agri tourism or bottling our own product. >> reporter: but those plans all included building their herd significantly. instead, with no new buyer on the horizon, the cohn's are culling their herd. >> after the cows left, he said, all the cows are gone. i said, yeah. he said, i'll go find them for you. >> reporter: of the 20 kentucky farms that had their contracts canceled by dean foods, 14 still have found no new buyer for their milk. the other 6 have already sold out. >> we didn't do anything wrong. like it wasn't bad management, it wasn't not managing our finances correctly or our cattle correctly. we produced good quality milk here. >> reporter: for now jericho acres dairy has been given a
5:20 pm
reprie reprieve. a contract extension of 30 days to try and find a home for their milk. in smithfield, kentucky, contessa brewer, "nightly business report." still ahead, the water's edge. this is a new series that takes us to boston tonight where that city's real estate is at risk from severe weather. mortgage rates have pulled back from their seven-year peak. according to the latest report from freddie mac, the average 30 year fixed rate declined to 4.56%. as you know, mortgage rates tend to move along with the benchmark ten-year treasury, and that has rallied on global concerns. well, don't look now, but
5:21 pm
hurricane season starts tomorrow. and if last year's any guide, storms in general are getting more dangerous and destructive. and today we start a new series looking at the rising risk to real estate, especially development that could sit directly in harm's way. diana olick reports tonight from boston with a look at what's being done there to safeguard buildings and billions of investment dollars. >> reporter: winter slammed hard into boston this year. back-to-back nor'easters sent water flooding into its historic streets and sea ports. it was what city planners predicted, just not yet. >> in boston we've spent a lot of time thinking that these impacts are 20, 30 years down the road. these storms are here now. they're happening more frequently. they're more severe. >> reporter: deanna moran studies the impact of climate change on boston real estate,
5:22 pm
especially its new development. >> the planning has been great, but we just aren't there yet. >> reporter: the planning started at the top in the mayor's office and its climate ready boston initiative headed by austin blackman. >> if you want to build a large building in the city of boston, not only do you have to take into account what the climate conditions are and the flood plain projections are now, but you have to look into the future. >> reporter: so far it's just conversations and recommendations, not rules and regulations. and data show the water is rising and the storms are intensifying. just as development is booming in the city's most vulnerable district according to experts, the seaport. when we picture rising tides and stronger storms, we tend to think of places like miami and the gulf coast, but with the exception of alaska, new england is expected to see greater warming than any other place in the u.s. because of its higher latitude and its proximity to the gulf of maine. the fastest warming body of water on earth according to the
5:23 pm
national oceanic and atmospheric administration. in the past decade nearly $8 billion worth of residential and commercial real estate has been built or approved for construction in the seaport. its inventory of properties doubling according to cdre. in fact, just the seaport has seen three times the amount of new buildings going up than in all the rest of boston's much larger downtown and financial district. and the seaport is ground zero for water. this is what the city predicts will happen in ten years, 20 years, 30 years. the booming district underwater. >> i think what scares me the most is the disconnect. we're relying on the historical past when we're building buildings for the future. >> reporter: why are we not changing the code in. >> the process is long and tedious. >> reporter: changing the code could drive away the precious influx of business to boston names like amazon and ge investing millions in boston
5:24 pm
real estate development and attracting thousands of new workers, especially to the seaport. >> this is 121 seaport, a building that i'm proud of. >> scamsca is recently selling one of its two new buildings for record prices. its latest is the center piece of seaport square. >> it's shaped like an ellipse. the wind on this building is far less than it would have been had it been a square or rectangle. >> reporter: i'm looking over water, water, water, water everywhere. no concerns? >> no concerns at all. this building is very well prepared to withstand any major storm event. >> reporter: the building's electrical infrastructure is 40 feet above the 100 year flood plain. the ground floor is elevated all of this at increased cost. while some developers are proactive, others are less so because they know the end game is to sell the building. >> what we are starting to see is that developers will not necessarily qualify for
5:25 pm
financing because the insurance companies are saying, hey, we're not going to insure this unless you take into account some of those climate challenges. >> reporter: why build? why develop the seaport? >> right now we've already got a significant number of buildings and assets that are already in harm's way. as we look at continuing to develop it, there's actually an opportunity for those developments to be part of those protection processes. >> reporter: like ge building its proposed $200 million headquarters in the seaport district and elevating the ground underneath to protect against rising tides, but the planning has to go further than individual buildings. what are the barriers? >> not having control over the building code as a city. >> there are guidelines that everything is ultimately voluntary. >> reporter: this is value right here, what you're looking at, the old with the new? >> absolutely. one thing is tried and true. they want to be by the water, but they want to be in a building that is very well prepared to withstand storm
5:26 pm
events in the future. >> rep for "nightly business report," i'm diana olick in boston. >> to read more about the storm risk to real estate you can head to our website at before we go, here's another look at the day on wall street. the dow fell 251 points. the nasdaq was down 20 and the s&p 500 lost 18. on to june. >> tomorrow's the day. >> tomorrow is the day and we'll be there for that. that's it for us tonight. i'm sue herera. thanks for joining us. >> i'm bill griffeth. have a great evening. we'll see you tomorrow.
5:27 pm
5:28 pm
5:29 pm
5:30 pm
>> this is "bbc world news america." >> funding of this presentation is made possible by the freeman foundation, kovler foundation, pursuing solutions for america's neglected needs, and purepoint financial. >> how do we shape our tomorrow? it starts with a vision. we see its ideal form in our mind, and then we begin to chisel. we strip away everything that stands in the way to reveal new possibilities.