tv Nightly Business Report PBS August 27, 2019 5:00pm-5:30pm PDT
♪ this is "nightly business report" with bill griffeth and su♪herera. ♪ opioidt. settlem oxycontin maker purdue pharma is reportedly in talks to settle thousands of lsuits against that company for billions of dollars. . reunited. philip morris and altria are in talks to merge. ou deal that bring back together two companies facing declining demand. tu , why more drivers are turning off the very features designed to keep them safe. those stories and more tonight on "nightly business report" for tuesday, august 27th. ♪ and we do bid you a good evening, everybody,nd welcome. we begin tonight with something a little different, something that has held tf attention the whole country for a while and something that we have been reporting on for quite sometime, that is the opioid epidemic.
nbc news reported late this afternoon that purduea pha is offering between $10 and $12 billion to settle mor than 2,000 lawsuits connected to its role in the crisis. purdue pharma, you may know, is the maker of oxycontin, the powerful pain killer that has been at the center of the opioid epidemic. the reportede offer to set come one day after a landmark ruling against j & j which, as we reported last night, was ordered to pay half a "big tettle lies" dolla-- half a bil dollars to the sf oklahoma for helping to ignite one of the biggest epidemics in his. ylan moiy has the details from >> reporter: purdue pharma and the family are negotiating to settle the lawsuit between them. about 2,000 cases were consolidated cn federrt in ohio, accusing the company of starting and susining the
ioid crisis. nbc reports purdue has proposed fili bankruptcy and restructuring into a for-profit trust. that trust would p out between $8 and $8 billion, including about $4 billion of in-kind drugs to localgovernment, including medications that help rescue users from overdoses. they would then pay an additional 3 to $4.5 billion dollars. it could be a step in rching settlements for other companies as well, similar to the tobac ttlement in 1998. in a statement, purdue said it sees lintle good c from years of wasteful litigation and appeal and a constructive global resolution is the best p forward. the stafford family did not provide a comment to nbc. i'm ylan mui in washington. >> later in our program, meg terrell will look at t opioid litigation still pending and explain the importance.
onl street, stocks bopped and inverted, a phenomenon we'ven telling you about that has preceded recessionsn thes past. that sent bank shares lower and if you add in concerns over trade you have a down day for stocks. the dow jes industrial fell to 25,727. the s&p 500 slid nine. let's turn to mike ryan to talk more about the stock and the bond market. he is chief investment officer at ubs global management americas. mike, welcome. nice to have you here. >> thanks. >> you do not see a recession coming. you think the u.s. can avoid a recession, but you are paring back some of your equity positions? >> we are.on again, we see a recession, at least not over the course of loe next six to twelve months. certainly thel economy has decelerated, but you balance it ket with strong labor m conditions in the u.s. and a healthy consumer sector as well.
the risk of recession are still fairly lown our estimate. that deent mean we don't want to pare our risks back a bit because of the uncertainty around trade. we have taken some of our risk exposure with regard to equity markets.an >> mike, i to ask you about something that happened today. it is only the second time it has happened in the last 40-plu years, and that is the yield on the 30-yearur tre bond dipped below the yield of the s&p 500 index. now, what we are looking a chart that takes us back to the late '70s, and you see that the sprea between the two has years, andwing for now the 30-year yield is less than the stock market. what does that y mean to and the outlook for stocks? >> well, bill, i think we have to be careful here because i'm not sure it tellsou a lot. it is really coincidence than a cause and effect. there were periods in the past where we had recessions and bear markets where the 30-year bond
was materially higher than what we had the s&p yield. the notionomehow because it has dropped below a technical level it is suggestive of o recessio bear market, we somewhere to be careful not to terpret it. that said -- >> i would point out the only time it happened was in march of '09 and a it was major bottom for the stock mart. >> that's true. but remember there were other bonds in the stock market when you are the yield on the 30-year when it was materially gher. the notion that the spread between the 30-year bond and the yield that exists on s&p 500 that it is a forecast vehicle or somehow going to indicate recession or bear market, we haveo be careful not to overinterpret it. what it is, is a sign that there's concerns about global growth and concerns about the fed'so abilityenerate inflation in line with the target of 2%. >> that was going to be my question but you answered it. thanks, mike. mike ryan with ubs globalell it management americas. to the economy now and a new
report on consumer confidence, which showed optimism dipping slightly in august, but it does rein historically high. and when confidence is high, consumers are more likely to buy big ticket ims like houses. the latest read on home prices still shows that the market is cooling off, but as diana olick reports that may be about to change. >> iould take this in a second. >> reporter: home buyers out shopping this spring finally started to get the upper hand, at least in terms of prices. the supply of homes for sale is still very low, but prices started to ease. up prices nationally wer just 3.1% annually in june accordinghe to s&p k shiller index. that is half the gain they were seeing a year ago. in some markets like san francisco, new york city, chicago andos angeles, they were barely higher. and seattle prices were actuall% lower. but kay shiller is based on a th ree-month average ending in june, so it does not take into account the huge rop in mortgage rates since may.
the average rate on the 30-year fixed is now a full percentage point lower than it was a year ago. lower ratesive consumer's more purchasing power which helps boost sales and in c turn push prices higher again. >> i do think now with the pickup in home buyin activity spurred by low mortgage rates, we're going to see that turnd around we'll probably see some quickening in home price growth over the nmot 12 hs. >> reporter: more recent home price reads have, in fact, shown home price heating up again. sales of both new and existing homes are now showing improvement after a slower than expected spring, f and whilel is not usually a busy as spring is for housing there could be some pent-up demand ready to erunce thanks to those l rates. the wild card, as always, is supply. there are far too few homes for sale on lower end of the market, and that's where buyers depend most on even the smallest moves in mortgage rates. if rates should tick up again, all bets are off. for "nightly business report",
i'm diana olick in washington. joining us to talk more about the housing market, deputy chief economist at the first american financial. welcome, odetta. niles to see you again. >> great to syou. >> i think you believe or agree rather with what diana just mentioned, healthy -- pretty healthy housing market and maybe a o longer period time where consumers are going to be competing for homes. >> absolutely. onsumers are in a great position. they have lower mortgage rates. the labor market continues tbe at 50-year bests, and you know we're seeing house appreciation kind o moderate. so affordability is really on the consumer side right now, w d expect to see a little bit of an extended summer selling season, maybe into the fall, but that could ld to some higher house price appreciation. as we know, empent-upd against limited supply means faster house appreciation. >> what about the limited supply we talked about last time you were here? i mean homebuilders have been shy about building much more
with the uncertainty in the markets here. do you expect that to pick upalt at some point? >> so we're seeing that builder collidence is act quite high and a lot of that is due to the lower mortgage rates, ande di see single family housing starts were higher this month compared to last year. so we're anticipating that building will pickup in response to the lower mortgage rates, which will be a huge relief for the housing market. >> we have lower mortgage rates certainly, b there are those out there saying what the bond market is doing, which is driving rat lowe is telling us that there may be some underlying concerns with the all economy. what do you think about that and could all of the volatility we've been seeingecently affect home buyers? >> certainlyen consumerment is a big part of making one of the biggest financial decisions you will ever make in your life, but i think it is important to net that the economic fundamentals are there. consumers do have mor equity than they've ever had in history, and, again, af hrdability ish. so ultimately that may work to
kind ofhe trump some of dampening in consumer confence. >> odetta cushy with first american financial. thank you very much. time to look at some of today's upgrades and down grades. we begin with shares of verizon. they were upgraded from out perform from perform at oppenheimer. the analyst says verizon should be early and ccessful with its 5g network. the price target, $70. thatetock r a fraction today to 57.18. but oppenheimer downgraded verizon's smaller rifle t-mobile to perform from out perform. -mobile tot expects have a difficult time as it merges with sprint. in fact, the firm pulled its price target on that stock. shares fell 1% today to 77.12. zenga was added to webb bush's out perform rating. it represents 20% gains in six months. the analyst saying zenga's new releases could push results pasa
ess. price target is $9. the stock rose 2% t 5.72. red robin was downgraded to neutral. the analyst believes earnings growth will materially miss consensus expectations next year. the price target is $30. the stock fell more than 7.5% to 31.70. still ahead, a decade after being apart, altria a phili morris may be looking to get back together. ♪ ♪ ♪ a former google employee has
been charged wit stealing trade secrets from google and then taking them to uber. cording to the complaint, the former employee downloaded more ilan 14,000 related to google's autonomous car project before resigning from the company. he then created start-up that was acquired by uber. both uber andoogle cooperated with the government officials in that investigation. lta and philip morris are in talks to merge. such a deal wouldeunite them after more than a decade apart, and it comes as both see sales fall. investors weren't too enthusiastic about the idea. both stocks fell in trading today. frank holland has more. >> reporter: as cigarette sales continue to fall globally, tobacco companies are looking for newroducts such as e-cigarettes and heated tobacco tohe reignite industry. now a potrtial merge between philip morris and c altriaould reunite these companies after a split in 2008, bringing march borough, jule and the newly
approved icos heated tobacco property under one roof. philip morris sells marlboroid ou of the u.s. icos was approved for u.s. sale by the fda in april. tria will handle the marketing and distribution. in december altria bought a 35% stake in juul, the market leading for e-cigarettesn the u.s. analyst bonnie herzog forecast a possible deal ahead of the news, citingit ben of scale. better cash flow for the combined company. jeffreys analyst brian tompkins said there are sizable opportunities and a merger would createetter internation distribution for juul and better rollout for icos. it would create the bigger tobacco company in the world heth the two fastest selling products in industry and the mostib extensive distrution network according to analysts.
sources say the two companies are actively dispossing the ible deal and the discussions are expected to continue for several moreon wee. question mark here is cannabis. altria purchased a 45% stake in cannabis producer cronos last year. it is not clear how that investment would be handled by a combined company. r "nightly business report", frank holland. er l prices hurt jm smuckers results. that's where we begin tonight's market focus with the food company missing earnings expectations as prices for two key products, coffee and peanut butter, fell. it is facing increased competition in its competiti food business for pets. the company cut its full-year forecast as a result and that sent shares lower by more than 103.69. astra zdenek au was granted fast track approval status by the fda by one of the drug drugs. the company attempted to get ito lar diabetes drug permitted
for use. the stockas up a fraction to 44.88. a report out today says revlon will reach out to potenti bidders next month as it looks for a buyer that it hopes can turn around the strgling cosmetics company. the company has been exploring either a sale of the entir company or of its major brands. shares rose nearly 1.5% today to 16.38. the pizza chain papa john's has named arby's president rob lynch as its new president and ceo. lifrmg wi cnch will replace the interim ceo. thpany is in the midst of a turn around, trying to change its image andhore up sales. shares jumped more than 9% to 48 even. taiwan semibeonductor is g sued for patent enfringement by ral chip maker global foundries. global foundries is looking to stop the customers which include apple from importing affected products to the u.s. and
germany. tie wa taiwan semi conductor stop was up a fraction. bp agreed to sell to privately-held hill corp. to li more than 5 b dollars. it is part of the plan to raise $10 billion over the next two years to strengthen its balance t. bp has operated in that region for about 50 years. >>e shares were up a fraction to 36.60. as reported at the top of the program, purdue pharma is reportly offering as much as $12 billion to settle opioid claims. now, this follows lastnight's ruling against johnson & johnson for its role in thi epidemic. as megll ter reports now from norman, oklahoma, there is still a lot more litigation ahead. ♪ >> reporter: au t >> austin box was 22 d a linebacker for the university of oklahoma. his dad craig said it was his dream. >> he s a tremendoustudent
and athlete. he graduated high school early. he was recruited heavily t play baseball and football at various colleges. >> after an injury austin took opioid pain killers prescribed for aituptured disk. as a shock to his parents when in 2011 he died and opioids rere found in his system. >> there were fou or five different kinds in his system at the time of his death. >> reporter: craig box testified c a landmark trial in oklahoma that reached itsclusion this week. a judge here ruled johnson & johnson was responsible for the state's opioid crisis. >> thosections compromised the health and safety of thousands of oklahomans. >> and ordered the company to pay $572el million to abate it. purdue pharma and teva settled bere the trial began. the oklahoma case was just the first to go to trial of thousands pending across the country, seeking to hold the drug industry accountable oor thoid epidemic. attention now turns to a massive set of federal cases, consolidated in ohio in what is known as a multi-district litigation or mdl, brought byou
nds of cities, counties and others. an attorney for j & j said theu oklahoma r should have no bearing on those cases. >> the cases that are consolidated in the mdl proceeding in cleveland, ohio, d are underferent law. they have different parties, different theories, and so we do believe that those are very different. >> reporter: yet stocks of companies involved in that litigation jumped last night on j & j's ruling, which was smaller than wall streetd. anticipa oklahoma's attorney general said that's the wrong take. >> the multiplier effect around the country is considerable.th e are 2,000 plaintiffs in the mdl and 50 other states. for thest ana to be characterizing this as a win, they need to go back to business >> reporter: that ohio case will bring scrutiny to more players in the opioid crisis, not just drugmakers but distributors and pharmacies as well. the sheer number of opioid pills that were dispensed and where.
more than 70 million pain pills were supplied between 2006 and 2012,nd that's 41 pills per person forear. this wall gregreen's in norman received the highest number of pills, almost 4 million. the judge is pushing for a gttlement. crox says it would be the best outcome to make a dent in the epidemic. >> i hope that this is a message to thepioid companies. candidly, it maybe will force ttlement to some of t cases so the states can receive funds to address the problem quicker than having to go through a trial like this. >> reporter: j & j, though it went to trial in oklahoma, saidt it is open a potential settlement in the federal cases. the first trial i set to begin october 21st. for "ghtly business report", i'm meg tirrell in norman, oklahoma okllhoma. shead, amtrak's big
makeover. >> reporter: i'm seema mody. amtrak is looking to speed up its train and upgrade. the question is whether it will pay off. that story next on "nightly business report". ♪ ♪ ♪ a company has become the first boeing company to sue the plane maker over the groun ing 737 max. the company agreed to purchase 35 planes several years ago and alleges that boeing breached that contract by misrepresenting how safe t plane was to fly. it also claims that boeing put profits ahead of safety.
the jet, of course, as you know has been grounded sin mid-march, and regulators say that there is no timetable for its return.s from pla to trains. amtrak wants your next trip to be by rail, so it is making a lot of changes to attract new travelers, but there's one big challenge. seema mody is in newcastle delaware tonight. >> reporter: seeking to attract more business travelers, amtrak is spending offer $2 billion to modernize its fleet, with 28 new high-speed trains designed to operate at a faster speed of $160 miles per ho, up from 150 on the current. the next generatio trains are being built by a french manufacturer, but are being manufactured in i facilities upstate new york. in total, creating more than 1,300 jobs. they promise to accommodate more passengers and beor 20% me efficient thanks to new light-weight technology.
in this new factory in wanewcastle, de, we are getting a look at the new train which comes into service in 2021. amtrak will be rolling out features like updated wi-fi, usb ports, personal outletsndn adjustable reading light in every seat. amtrak says the goal is to make trains more competitive with planes, c and other forms of public transit, while also addressing safety concerns following several fatal accidents over the past five years. >> 75% of travelers between air and rail are choosing amtrak, and on the north end, which is between new york and boston, we are just over 50%. we see a lot ofni oppor for end.h on the north there's an awful lot of business that is growing in the boston area. >> reporter: amtrak is betting the new upgrade p will off. the northeastern corridor runs from boston to washington and currently carries roughly 12 millean passengers a y it accounts for nearly 40%f o the u.s. railroad's traffic, and amtrak is hoping a new non--stop
service between new york and d.c. will increase bookings. but experts say the future of american high-speed rail will be challenged by the agingtu infrastr. amtrak executives have been urging the white house and lawmakers to allocate more f federads to its railroads, bridges and tunnels, but president trump has p back, saying the individual states should make these >> there's absolutely a risk. e often say once the new trains enter service will have the highest generation, the fifth generation of high-speed rail technology operating on 19th ntury infrastructure in some places. for instance, we have tunnels, a tunnel in baltimore that dates back to the late 1800 is, and is safe, it is operable, but we have to operate at very slow speeds. >> reporter: and with no timeline on a u.s. infrastructure erll, e say lawmakers need to find a solution to ensure customers s remae and these new trains can operate smoothly.
for "nightly business report", seema mody, newcastle delaware. finally, from trains to cae. as automob makers add more features to keep drivers safe, a growing number of those drivers are turning them off.be why? use drivers are fed-up with the warning. phil lebeau has that story. >> reporter: if you have a new car or truck and have drifted out of your lane or failed to signal, you have seen the warning, stay in your lane. jdower says lane departure warning are built into almost two-thirds of the current models, and in survey of 20,000 owners almost a fourth of them said they don't like tho warning, and 30% have turned it off. >> what we're seeing is higher degree of consumers expressing their level of annoyance and bother some. being >> reporter: this is not what automakers had in mind when they started building vehiclesith technology to help drivers avoid collision, from automatic
emergency braking to adaptive cruise control. cars now make decisions to keep us safe before we do something wrong behind the wheel. all ofhese features sound great in the showroom, but out on the road, if a warning goes off or the sering wheel vibrates a lot of people don't like i >> we get the feedback from consumers saying that sometimes it feels like i'm fighting against thearehicle. thosthe elements where it really is not feeling like a driving -type of situation. >> reporter: it is not just lane departure systems drivers are turning off. ndey're aoisabling adaptive cruise control aear auto emergency bring, which raises the question, if drivers don't like the decisions their cars are making right now, will they get irritated i aweutonomous vehicles that may not drive or handle situations the way we would behind theheel.