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tv   Nightly Business Report  PBS  January 20, 2012 7:00pm-7:30pm EST

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>> susie: the g.o.p. >> susie: the g.o.p. presidential race comes down to its last day in south carolina and much like the rest of the country there's one key issue. >> it's jobs, jobs, jobs. that's what matters here in south carolina. >> tom: and with the blue chip stocks at six month highs, we look at stock buybacks and how some companies are using them to boost their bottom line. it's "nightly business report" for friday, january 20. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by: this program is made possible
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>> susie: good evening, everyone. it's three for three in january: all of the major stock averages closed higher for three weeks in a row. tom, tonight, the dow sits at it's highest level since last summer. >> tom: susie, wall street is off to a good start for 2012. stocks have been moving higher thanks to some strong results this earnings season and progress toward a deal to restructure greece's debt. let's look at today's closing numbers. the dow rose 96 points, but the nasdaq and s&p 500 were weaker. the nasdaq slipped by one and a half and the s&p 500 added almost a point. on the week, the dow added nearly 300 points or almost 2.5% in a slow and steady climb. the nasdaq also about 3% higher, up 76 points for the week. and the s&p 500 tacked on 2% or
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26 points. >> susie: also giving stocks a lift: stock buybacks. u.s. companies are buying back their shares at the fastest pace in four years and doing fewer stock offerings. erika miller takes a closer look at what's behind this trend. >> reporter: you're probably wondering what i'm doing at a pizza parlor, when we're talking about stock buybacks. but an easy way to understand why they are growing in popularity is to use pizza as an example. imagine this pizza is a company and it's sliced into eight shares of stock. if a firm retires one of those shares, the remaining investors will own a bigger percentage of the firm. so, each share becomes more valuable. >> it helps the earnings per share, and makes up for some of the some of the growth they can't do on the top line. by reducing the share count, the earnings per share goes up. >> reporter: powered by nearly a trillion dollars of cash on
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hand, corporate america bought $118 billion of its own stock in the third quarter of last year. that's up about 50% from year- ago levels. and that may be a bullish sign for the stock market. >> companies respond to the market, when they see their share prices severely undervalued. they see the shares as a good investment. so you may seen an elevated level of repurchases due to that. >> reporter: roughly one out of every five s&p 500 firms has at least 4% fewer shares now, than it did a year ago. and that could help goose earnings this season. >> that means the earnings will be 4% higher than if you used the same number of shares as you had last year. that changes a company that is doing flat growth to a 4% increase number on there. and when we look at each penny on earnings, that 4% can make a difference. >> reporter: share buybacks are often controversial. many investors would prefer dividend hikes, because that's cash in their pocket.
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and occasionally, companies will announce buybacks and never actually buy a single share. but experts say that's relatively rare. >> the data here in the us is hard to assess, but on the surface it does appear that companies tend to be pretty straightforward and pretty transparent in their desire to repurchase shares. >> reporter: corporations are expected to continue to gobble up their shares in the coming year. given the tough economic environment, many firms are looking for ways to boost earnings and whet investor appetite for the stock. erika miller, "nightly business report," new york. >> tom: the housing market saw more activity as last year came to an end. existing home sales rose 5% in december according to the national association of realtors. inventories are nearing a more normal level of around six months. but median prices continue falling down another 2.5% to almost $165,000.
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meanwhile, more homeowners plan on sprucing up those houses this year. research firm i.h.s. global predicts a pickup in home renovations, another sign of a strengthening housing market. the firm says annual spending on home improvements is up for the first time since the housing market went bust in 2006. >> susie: the clock is ticking to the south carolina presidential primary. the four surviving republican candidates were crisscrossing the state today, scrambling to drum up support, ahead of saturday's critical vote. the latest polls show that a last minute surge by newt gingrich could put him over the top ahead of mitt romney. south carolina republicans say the economy, unemployment and the deficit are the most important issues facing the nation. >> reporter: the palmetto state has come a long way from it's roots in textiles and agriculture. south carolina is now home to a large and growing international manufacturing base. exports play a large role in this state, which is home to
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almost a dozen chinese manufacturers. china is one of south carolina's largest markets, taking in close to $1 billion in exports. newt gingrich has called china a threat and mitt romney has pledged to brand china a currency manipulator. that tough talk may play well in this conservative state, but it may also worry workers who depend on trade for a paycheck. south carolina has also been hit hard by the recession. unemployment is still higher than the national average at just under 10%. on the state level, south carolina republicans remain deeply concerned about education. one in ten republicans consider it the top issue facing the state. business leaders worry the state is not producing and attracting enough workers with the skills to run an increasingly advanced manufacturing economy. >> susie: so what is the top economic issue for south carolina voters? that's what i asked douglas woodward economics professor at the university of south carolina.
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>> had has been four years since the recession started and it still feels like a recession to many people because the johns just haven't come back to where they were in 2006 and 2007. so it is job, jobs, jobs, that's what matters here in south carolina. >> susie: and doug, as we reported, the unemployment rate in south carolina is higher than the national average. so which candidate do voters think will create more jobs for the state? >> i think the candidate who has addressed the job issue as it is relevant to south carolina is rick santorum. because he's talking about manufacturing. he wants to bring blue collar factory jobs back to the united states. we're already seeing manufacturing expand for the first time in a long time in south carolina. it grew 5% last year. we want to keep that momentum going. and it's rick santorum that is really addressing that
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issue. >> susie: i want to talk to you a little about china base some republicans have been talking in this campaign about getting tough on china. we know that suth carolina is a big trading partner with china. if he, how big of an impact would a crackdown on china have on your state's economy? >> south carolina is an internationally oriented state. we depend on exports. our auto manufacturers export from this state, bmw 70% of its production. so we don't want to see a trade war. we depend on exports or to some degree we benefit from imports because we have a large port in charleston. and that creates jobs and sports the charleston economy and inn a myriad of ways. >> susie: so when it comes to the economy, which one of these republican candidates do you think would do the most to boost the south carolina economy and be the most electable presidential candidate? once know, they all have, i think, their own strengths in terms of how, you know, where they put their focus. and again, i have to go back
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to santorum, though. he's the only one that is talking about restoring blue collar work, you know, factory jobs in the united states. so the rest of them don't address that specifically and that has the biggest impact of anything i think that we could see in this state. >> susie: let's go back to you what said earlier that this is an economy, the u.s. economy that has been dragging along in recession mode for a couple years now. let's say a republican does win the race in november. how long do you think it will take for that president to turn things around in the u.s. economy? >> once the election occurs, we should have growth already going in the employment base. even then it's going to take three years for us in this state, and this is true across the country to get back to the level of jobs that we had in 2006 and 2007. so even in the best-case scenario with any candidate, with anyone in the white house, it's going to be awhile before we are really out of the recession fully
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and into a vigorous expansion. >> certainly a lot of important issues for the economy. doug, thank you so much for coming on the program. we really appreciate it. >> thank you, my pleasure. >> we spent the last year or so trying to find a store format that worked for our customers. >> tom: still ahead, office depot president kevin peters tell us why he's thinking small. >> susie: congress said late today it's going back to the drawing board to rework two controversial internet piracy laws. the decision came after a massive protest this week as some big websites shutdown. wikipedia, google and nearly 7,000 other websites, mounted a one-day protest wednesday and over seven million people in the united states signed an online petition protesting the bills. senate majority leader harry reid said he was optimistic a compromise could soon be reached. both the senate's "protect i.p. act" and the house's "stop online piracy act" are intended to crack down on illegal downloads of movies and music.
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>> here on wall street tom it was a pretty good day but still looking ahead to next week a lot of worries about what's going on in greece and europe and still it is early in evening season to know how it will play out. too soon to say the worst is behind us. >> tom: we've still got two peek weaks of-- weeks of corporate earningses. we have 1 week behind us and as we mentioned, we are at six month high force a koichl the major indices. let's get rolling with tonight's market focus. as we mentioned, six month highs tonight for the dow industrials and s&p 500, but only barely for the latter. the s&p 500 spent almost the entire session in the red, weighed down by last night's disappointing earnings from google. but the index poked its way to positive territory less than ten minutes before the closing bell. but thanks to strong earnings from a couple of the dow industrial's technology stocks,
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that index rallied throughout the day. one of those dow tech stocks is microsoft, jumping more than 5.5%. volume was more than three times average. this is microsoft's highest close in a year after reporting better than expected earnings last night. i.b.m. was the second best dow stock, up almost 4.5% and also on heavy volume. solid earnings and a strong outlook for 2012 helped fuel the buying. and i mentioned, google was the big drag, falling eight percent, below $600 per share for the first time since november. it's quarterly results came in way short of estimates. across the market, the financial sector led the way followed by the technology and utility sectors. each were up less than 1%. many of the big banks reported earnings this week. today, we heard from two
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regional banks. both saw stronger demand for loans and better credit quality, but their stocks reacted much differently. shares of the atlanta based suntrust jumped 5% after better than predicted earrings. a temporary freeze on its pension plan helped as did more business and corporate loans. meantime, the ohio-based fifth third slipped almost 3% after its earnings were shy of estimates. it's loan portfolio grew but expenses were higher. general electric has a record $200 billion backlog of orders, but in the fourth quarter, its profit margins were squeezed by competitors. general electric earned 39 cents per share, one penny better than estimates. the company has been seeing pricing pressures in its energy business, especially the market for power generators, but it said it is seeing more stabilization in prices. g.e. closed flat today, after dropping below $18 per share.
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tonight's close is within pennies of its highs in july. while two of the major stock indices have rallied to six month highs, we've seen sellers in the bond market this week. the interest rate on the ten year government note is back over 2%. interest rates rise and bond prices fall. this is the highest closing yield this year. finally, an odd duo of commodities rallying. orange juice and silver were moving up. o.j. futures jumped 5%, settling close to a record high. while the f.d.a. has not found any orange juice testing positive for a banned chemical, there's speculation brazilian o.j. imports may be blocked. half of u.s. o.j. imports come from brazil. and silver closed back above $31 an ounce. physical demand for silver remains strong. the u.s. mint reports january silver sales are 50% above the average monthly sales from last year. and that's tonight's market focus.
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>> susie: if you're an office depot shareholder, the last few years have been rough. the stock has plummeted as the economy tumbled, particularly the environment for small businesses. but office depot has a new strategy to reinvent itself and improve its profitability. suzanne pratt explains. >> reporter: big is what you think of when it comes to office depot. most of the company's 1100 u.s. locations are 25,000 square
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feet. but, that's not true of one of office depot's newest stores, based in hoboken, new jersey. it's a fifth of the size of its larger brethren and part of company's new strategy to improve profitability. there are now eight mini stores like it in the u.s. north american president kevin peters says the big stores simply aren't working. >> customers were looking for a much smaller, more intimate shopping experience. most importantly a shopping experience that would allow them to get in, get what they need and get out. >> reporter: the small stores offer half the products found in the larger ones, but can do 90% of the sales. >> it's more profitable for two reasons. one, we're paying less in occupancy costs, and two are margins are a little bit higher because we have a full suite of services. >> reporter: other big box stores like staples and best buy are using the same strategy, opening smaller operations in urban centers like new york city. and, while the strategy may be
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working, some experts say it's this box that's really killing office supply retailers. after all, paper, pens and post- its are really just commodity items, easily bought online. still, analysts like joe feldman say the weak economy is the biggest threat to office depot, because of how its hurt small businesses. >> small business formation is really the crux of the story here in my opinion. and, until we get to that point, we're not going to see much strength in same store sales for the office supply guys. >> reporter: office depot's peters couldn't agree more. >> if you look at the things that our business, the office products business correlates with, it's white collar employment, it's consumer sentiment, and it's unemployment in general, and i guess probably a fourth is building permits. for our business to be successful, people have to be at work. >> reporter: office depot says it's extremely committed to the strategy of smaller stores. 100 of its large stores are up for lease renewal this year, and
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there's the possibility that many will be converted to small stores. suzanne pratt, "nightly business report," hoboken, new jersey. >> tom: here's what we're watching for next week: our friday market monitor is alan lancz of the lancz letter. the federal reserve meets tuesday and wraps up wednesday when ben bernanke holds a news conference. earnings on tap next week include: apple, a.t.&t. and caterpillar. and monday, the trial of alleged ponzi schemer allen stanford is expected to start. we'll have a report from houston. >> susie: a first for wal-mart stores: it named rosalind brewer president and chief executive of its warehouse chain sam's club. she's the first woman and first african-american to head one of wal-mart's three business units. on february 1, she'll take over running the sam's club division and its more than 600 stores. she's been working at wal-mart for nearly six years. >> tom: pinnacle airlines may be the next airline flying into
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bankruptcy. its is a regional carrier based in memphis. pinnacle's c.e.o. warned unless it can cut new deals with its partners and staff, it could be forced to seek bankruptcy protection. delta air lines accounts for about three-quarters of pinnacle's revenues. pinnacle stock trades below one dollar per share. it has been trying to renegotiate with its business partners and employees since early december.
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>> tom: u.s. investors should not obsess about europe. instead, tonight's market monitor says think big as in stocks of big companies. john dorfman is chairman of thunderstorm capital. he joins us from boston. ur are are great to see you and welcome back. >> great to he you again. >> tom: why shouldn't we be concerned about europe's problems being imported here to the u.s. for shareholders. >> people are pretty terrified about europe right now. i'm not saying they shouldn't be concerned. what i am saying is the concern is a bit excessive at this point. for example, lack at trade. our biggest trading partners are canada, china, mexico and japan in that order. and the next biggest is germany at 4% of our trade. europe all together is less than 20% of our trade. so the chances that we will
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import a recession in europe in 2012 i think are pretty small. >> tom: the worrywarts will say it is a globally interconnected world and about half of s&p 500 company earnings come from oversea, not just europe but all of overseas and what happens in europe could trickle down to china and that could certainly hurt the united states. >> yeah, there are a number of pathways of contagion that could happen. i just don't think they are really likely to happen. i think people underestimate the importance of asia nowadaysnd a little bit overestimate the importance of europe. >> tom: let's look at your stock picks with that as a strategy. beginning with general motors, gm. interesting pick for you. you usually like mid and small caps but here you've got a big cap at $25 per share. buying it now you get it at a bargain compared to the ipo price of last year when it was in the low 30s. what dow expect out of gm? >> not much u nor-- euphoria in gm's stock any more but here's a company that will benefit from an old-fashioned economic cyclical recovery that seems to me to be gathering some
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team here in the u.s. up to 14 million cars and trucks sold, that's the annual pace now. and that's really going to help gm. >> tom: so you are buying this really for the domestic exposure in the united states, to the necessarily the asia business. >> pramly the domestic exposure in the u.s. and i think those people have a legacy, bad feeling about gm, it's got a better balance sheet that solves some its problems. >> tom: i wouldn't have taken you for a fan of the sherk movie franchise but you like dreamworks at 18 per share b half the price it was a year ago. >> yes, are you kidding, i love shrek, but actually the price reflects the fact that investors think they will never have another shrek. pus n boots is not shrek and kung fu panda is not shrek but they will have another big hit and selling at low multiple of earnings. >> tom: and going overseas in hong kong, jarredi
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mathison a pink sheet stock jmhly the ticker sim ol. -- symbol, why international? >> well, i-- always have some of our clients money in international. and it's a diverse play on the asian economy where the populations are younger. the economies are growing faster. the government deficits are less there are several reasons to like asia and jardine is just all over the region in the businesses you named and quite a few other businesses as well. >> tom: real quick though, it's got some property exposure and there has been concern about asia property price, perhaps too high? >> there have been periodic concern about asia property prices but jardine has more than 20 consecutive years positive earnings and i think it will weather the ups and downs quite well tses last time we saw you was the first of july, last summer. you had four picks beginning with newmont mining, well done. cliff natural resources, this has been hit by about 24%. you also liked lieu cade ya, a conglomerate of sorts off
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by more than 20% an johnson & johnson down 3%. dow still like any of these four given their performance? >> i actually still like it each and every one of them. >> what about the previous trio we mentioned. you have positions in those as well? >> yes, we do. >> a sherk fan, receipt it be noted here tonight with our friday market monitor, john dorfman, he joins us from boston from thunderstorm capital. >> susie: speaking of general motors, one of the stocks that john dorfman just recommended got some good news today: a two-month government investigation into the safety of the chevrolet volt is over. the national highway traffic safety administration said g.m.'s battery powered hybrid poses no unusual risk of fire. the agency also said it was satisfied with steps g.m. took to address problems that triggered fires in the volt after a crash test. those steps include adding steel reinforcements around the battery to protect it in the event of a crash. >> susie: and finally tonight, even though the super bowl is
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more than two weeks away, there's already a front-runner for the best game-day ad. it's called the "bark side" and it's volkswagen's commercial for the upcoming super bowl. the choir of dogs dressed up as "star wars" characters already has over three million views on you-tube. tom, it's a follow up to v.w.'s superbowl ad last year that featured a mini darth vader. >> susie: remember that kid in the garth vader. >> tom: you can't go wrong with kids or dogs, when are you spending 3 million for 30 second you have to make it count. >> susie: so funny. anyway that's nightly business report for friday, january 20th. i'm susie gharib. goodnight everyone and have a great weekend-- you too tom.
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>> tom: good night, susie. i'm tom hudson. we hope to see all of you again next week. "nightly business report" is made possible by: captioning sponsored by wpbt captioned by media access group at wgbh
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