tv Nightly Business Report PBS August 2, 2013 1:00am-1:31am PDT
this is "nightly business report" with tyler mathisen and susie gharib brought to you by. >> sailing through the heart of historic cities and landscapes on a river, you get close to iconic landmarks, to local life, to cultural treasures, viking river cruises, exploring the world in comfort. record breaker, the dow and s&p 500 close at record highs but will tomorrow's employment report change that? verdict, the goldman sachs trader that is a symbol of wall street greet is found liable of defrauding investors. and long-term care insurance the industry is shrinking, premiums soaring. is any there fix? find out in part two of the special series, how to navigate
long-term care. we have that and more tonight on "nightly business report" for thursday, august 1st. good evening everyone and welcome. stand back, get out of the way, stocks are on a roll. unstoppable, of course not but moving nonetheless into pricey new neighborhoods closing highs today for the dow. the s&p 500, the s&p 400. the small cap shares and dow transports and nasdaqs to levels not hit since september of 200. at the close, the dow ended 128 higher and the nasdaq 49 and the s&p 500 added 21 closing above the 1700 mark for the first time ever. crude prices shot up today seeing their third best gains so far this year up nearly $3 a barrel to close just below $108. positive economic data from china, europe and here in the u.s. set the table for today's stock market feast.
with more on what drove stocks to the record highs today, we turn to bob passani at the new york stock exchange. >> reporter: for a good part of this earning season, we heard comments from companies that lackluster earnings in the first half should improve in the second half. today the bulls got i'm nation as a july manufacturing report came in stronger than expected with strong showings for new orders and employment. manufacturing reports in europe and china were a bit better than expected. the major industries reacted by moving to historic highs. that's a bit of a surprise considering that interest rates yields on this ten-year treasury bond moved up, as well. in the past higher rates have rattled stocks but maybe that's changing. >> the interesting thing about interest rates going up a bit, doesn't seem to be scaring the market. sometimes when interest rates move higher, that can actually be a catalyst for increased
economic activity. >> the bottom line, there is a lot riding on the jobs report tomorrow if it's stronger than expected, say, over 200,000 jobs created interest rates are likely to raise more. if the stock market holds up, traders will believe stocks are becoming increasingly comfortable with slightly higher rates. investors will be watching those jobs numbers but here are other stats wall street pros are talking about. seven stocks in the s&p are trading at prices higher than $400. that's only seven of the 500 companies in the index. here is a look at the five highest price shares. as you can see, they are up between 28 to 50%. the other two are this elite $400 club, auto zone and chipotle and apple, the only one in the group that's down so far this year. well, susie those investors
that sent stocks to records tomorrow will have more to chew on tomorrow when the labor department releases the non-farm job report for july. what numbers will wall street look for and what is driving the recent rise in hiring? hampton pearson takes a look ahead to friday's report. >> reporter: ahead of friday's government employment report, there is all kinds of data showing the job market gaining strength. weekly jobless claims falling to a 5.5 year low and private sectors adding jobs last month according to adp, even the face of the layoffs is slowing down. just under 38,000 down 4.2% according to challenger gray and christmas. manufacturing accounts for 12% of the economy expanded at the fastest pace in two years. fueled by demand for new autos and materials needed for the housing recovery. for traders and market watchers, the sweet spot jobs number is the consensus forecast of around
185,000 jobs added to july payroll. >> we need to see at least, if not better, if we want to continue to believe that the economy, in fact, has rounded that corner, that we're moving in the right direction and, you know, everything the government tells us is happening is in fact happening. >> reporter: a july jobs number north of 220,000 would be viewed by markets as a green light for the fed to move up the timetable for tapering the economic stimulus. >> it's going to give another reason for people to speculate and ben bernanke to say we're independently, we're creating the jobs and look at the pace and it will give them the leverage to say to have an out to start the taper. >> reporter: market watchers and economists will scrutinize the report to show the impact of sequester on job growth. i'm hampton pearson in washington. it's a new month with new records, so now what pps?
let's get some answers from michael ryan, chief investment strategist. mike, nice to have you. this has been a phenomenal year for the stock market. are we seeing the second leg of the bull market? what is your outlook? >> i actually think stocks continue to hire. you kind of have this rerating of stocks driven by an absence of talent. not a lot of bad news. a lot of things memting down or blowing up. in the second half we have revenue growth, corporate earnings and improving and the expectations about better growth. we need to see that validated in the second half of the year. >> are you expecting that better growth to kick in or what do you think? >> i think what you will see is i think it was evidenced by economic data. the ism report was encouraging not only in terms of the
headline number but if you look at the forward components, that's the most constructive part that the growth over the course of the next couple months will be constructive. i would argue, of usually, tomorrow's employment report will be important in terms of setting a tone because we are starting to see this business improvement picking up in terms of hiring. >> let's talk more about the jobs report. i mean, talk us through that if the number comes in on the high end or if it comes in on the lower end, what impact will that have on the market? >> first of all, i kind of -- we have to move away from the notion that bad news is good news. i think, actually, you nope, good news is good news and that if we get an employment report that comes in at or below expectations that can extend the gains we've seen. it will be really important. number one, we have to see the rate of employment growth is still in that, let's say, 185 to 215 range. secondly, we have to see improvement in terms of the unemployment rate coming down
and has to be in an environment where we don't see people leaking out of the labor force. it has to be one where the labor force remains static. >> rising interest rates a lot of times show rising stock prices but are investors comfortable with the idea raids are up and probably likely to move higher. the ten-year was at 270 today. >> it depends a large extent why. if rates are rising because there is a fear inflation is accelerating and may force a tightening of policy, that's one thing. if rates are beginning to move higher because we're seeing a normalization of the cycle, improvement macro conditions, that's healthy for stocks. in fact, we argue that we're entering sort of a sweet spot with regard to rates when you look at stocks because when rates are very, very low it's a sign of stress. when rates are very, very high it's a sign price pressures are picking up. so we're entering the period that should be constructive for
stocks. >> mike, when you said investors shouldn't get carried away by today's rally and records. so should investors sale into the rallies, get into position and take the best they have gotten so far, take the process now? >> no, i wouldn't say you want to sell them but i think you need to continue to reposition during the market. for example, what had worked earlier in the year is not likely to work for the balance and then gravitation, we continue to see a rotation throughout the balance this year away from those sectors that performed really well in the early part of the year against the other sectors because we think that's where you get better opportunity for earnings growth and evaluations more attractive. >> sound ps good. thank you so much. >> thank you. >> michael ryan of ubs. if you were bringing a company public, wouldn't you like to do it on a record-breaking day for stocks? two companies did start trading today but one caught the wave. shares of sprouts farmers market an organic grocer with 160
storms across the u.s. shot up or sprouted a staggering 122% on the first day trading at nasdaq. different story, though, for american homes for rent. a california based real estate investment trust that rents out single family homes. shares there ended 2.5% lower. cars and trucks were rolling out of showrooms in july. it was a bonanza month. they reported double digit gains as consumers continue to buy new cars. pickup trucks and smaller more fuel efficient models were the big drivers last month. general motors topped detroit's big three in sales growth with a 16% increase and as you can see they are ford and chrysler posed sales increases of 11%. >> and ford motors in the meantime agreed to pay a top fine to settle a fight. ford will pay the government 7.35 million to settle allegations it was slow to
recall nearly a half million ford escapes last year to fix sticking gas peddles. ford knew about the problem, back in may of 2011 but failed to take action until the agency began the investigation a year later. the billionaire investor carl icon is suing dell in an attempt to stop proposed rule changes for tomorrow's scheduled shareholder vote on michael dell's 24 billion-dollar off. it is aimed at stopping dell from rescheduling the vote and changing the record date. mr. icon believes changing the record date could color the outlook outcome but letting more recent shareholders vote. the international trade commission is delaying the decision until august 9th whether to ban certain samsung phones.
commission ruled apple violated some samsung patents and the ban on some iphones will start on monday unless president obama intervenes. a huge fine to tell you about from one of the nation's largest banks. citi group will pay a $590 million dollar settlement accused of hides tens of thousands of bad mortgage securities. the shareholder lawsuit sited citi group's $27 billion on losses in 2008 after shares went from $48 a share in 2007 to under $3 a share by 2009. a historic victory for wall street regulators today in the first big civil fraud case tied at the 2008 financial crisis. a trader find liable in six out of seven counts in a fraud case. marry thompson was in the
courtroom and they are criticized the fcc for not being tough enough and others for striking out in high-profile cases like this. what this z this victory mean? >> reporter: it's a big win for the fcc. lawyers say this will bolden the agency to be aggressive in the future and go after entities and suing claims. basically, since the financial crisis, three of the fcc's cases have gone to trial. it's score card is essentially one loss, one split and today's victory and this would give the scc i guess you could say swagger to the steps when it goes out and pursues additional actions. per the financial crisis, of course, in 2008. but in the civil cases such as those brought by the fcc they can pursue the cases and seek penalties from whatever entities
individuals they charge. they just can't seek a lifetime ban from the security's industry i have. >> speaking of the penalties, what does this mean for them? what kind of fines of penalties is he facing? >> reporter: well, susie that will be termed in the future. within three weeks they need to present propels for penalties before the judge. the problem is the judge kathryn flores could be a trial so it could be months before she decides on penalties and at that point, mr. torrez team if they decide to do so, can appeal that decision. quite likely. back to you. the enemy within a top security expert says the next edward snowden could come from a company like yahoo, google or facebook, one that already knows a lot about you. but first, a look at some of the stocks that hit all-time highs today.
worries about cyberr attacks are back. a posting on chat forum past bin warns of a wave of cyber attacks against big american banks. the message from a group that says the attacks will be hit in the coming months. so far one bank, regions financial has been attacked. the group targeted nearly two dozen financial institutions over the past year freezing web siepts and mobile apps so customers could get access to them. banks like jp morgan are
pledging for resources to build technology to prevent it. it's a reminder why the annual black hat conference is bringing thousands of computer hackers and experts together to show off skills and technology to fort such a tax. much of the talk this year is about admitted nsa leaker edward snowden was who given temporary asylum in russia today and where the next edward snowden may come from. the answer may surprise you. we may have more. >> reporter: tyler, normally here at black hat government security expert and independent hackers and private company executives who focus on cybersecurity work well together. this year, however, a lot of tension in the room, a much different story, the number one top pick of decision as you have said is the revelations about snowden about what the nsa is up to. >> people in the community are
very, fairly skeptical. they are professional skeptics. >> reporter: the nsa's surveillance programs are a big top pick at the black hat conference since edward snowden leaked information in june. how much data the government is collecting, some say the biggest treat comes from an unexpected source. >> maybe edward snowden is the tip of the iceberg but i'm waiting for facebook leaker, amazon, some other search engine, somebody that has more data than we understand they have. >> reporter: jeff moss is the founder of black hat and death cobb and the current advisor to the department of homeland security. he says people would be surprised to discover how much these companies know about us. according to the wall street journal google has credit card information on more than 200 million android owners and facing push back in europe.
facebook with over a billion accounts has access to even more data on users. >> there is no oversight committees. there is no congressional inquiry into what these giant search engines are dog. >> reporter: in a world more rer reliant than ever before, people have to get used to the fact privacy may be a hard thing to come by. not everyone here is a supporter of edward snowden. we talked to a number of folks that don't like what snowden did and there are a lot of people working for the government agencies in the department of homeland security there is divided opinion. none nonetheless, a strong under current. and to read more about the black hat hackers conference, log on nbr.com. let's turn now to the market focus and we begin with exxonmobil, the biggest drag on the dow today. they disappointed reporting a
19% drop in quarterly profits. the company said production down and refinery earnings fell. shares of xom were down more than 2% before making up some ground to close at $92.73 off more than one percent. a different story for conaco phillips. earnings fell but production gained and profits beat estimates. shares gained 2% to $66 touching a new high. another price to report, proctor and gamble's profit fell 4%, less than expected. the returning ceo said he's commented to making changes we know we need to make. investors were cheered by optimism and shares gained more than 1.5% closing at 1 $81.64. aig is paying a fine since the height of the financial crisis and announced a
billion-dollar buy back program. profits in the life insurance were strong, as well. investors anticipated a good earnings report, so they were bidding up shares nearly 3.5% to $47 and change and popped higher in after hours trading. natural resources led the s&p 500 winners today after swinging to a profit in the quarter. they drill for gas throughout the south west and benefit from oil and gas prices. investors piled sending it to a new high and a gain of 12.5% on more than four times the usual trading volume. linkdin increased again, as membership grows to 238 million. so another new high in a market that had a few linked in closing at $213. shares popped more than that after the bell. meanwhile, avon products said sales rose thanks to the biggest market latin america, but the department of justice
rejected the company's 12 million dollar offer to settle a bribery probe. ding dong avenon falling closin4 times normal volume. coming up, a perfect storm is hitting the long-term care insurance industry and now with baby boomer demand expected to rise, is there any fix in sight? the second part of special series how to navigate long-term care is next, but first, a look at how commodities, currencies and treasuries faired today. a day of rallies for
insurance stocks. they anticipate higher short-term interest rates from the federal reserve. lincoln national and metlife, the largest filed the biggest gains. pru terrible, aflac posed increases. the long-term care industry, many missed prices misjudging how expensive nursing home and in home care would get. the industry responded with new prices but some say the government now needs to step in to make it easier and more affordable for more ageing baby boomers to sign up for coverage. bertha coombs has the second in nbr series on how to navigate long-term care on an industry in transition. long-term care insurers paid out over $6.5 billion in benefits in 2012 to a quarter of a million customers according to an industry study with on going
claims topping seven figures. >> the largest claim that's still open is from a woman. she's been on claim for 15 years. her insurance policy has paid out 1. $8 million to date and continues to pay. she only paid $881 for three years before her claim began. >> reporter: it's an extreme case of unprofitable under writing but reflects the problems, which have rocked the industry over the last several years leading major plan providers to stop selling individual policies. >> there are a lot of reasons for these market exists. the most important of which is companies had a very difficult time hitting profit objectives. >> reporter: result income a virtual perfect storm with long-term care costs rising faster than expected, the rate of clients letting policies lapse much lower than estimated and investment expectations too aggressive. but conditions in the bond
market posed the biggest problem for insurers. record low interest rates over the last several years made it virtually impossible to generate enough goet from their investment and bonds to meet kpt spected growth in future claims. >> when interest rates start to rise again and they will, this business will return to heightened profitability or at least levels where it needs to be. so it is sustainable. >> reporter: the affordable care act had included plans for a voluntary national long-term care insurance market but scrapped when under writing proved too unwheeling. they are expected to have a massive surge in demand from coverage from 76 million ageing baby boomers. >> right now, we have 10,000 people that are retiring every day. we need more companies in the market to sell to meet that need.
he says it will take a combination of public and private sector initiatives with government reinsurance as a backstop for under writers and getting more employers to help workers save for long-term care as they do for retirement through 401 kss. >> taking advantage of the employer group market could be important. you know, less than 1% of employees in the united states are working in firms that offer private long-term care insurance. >> reporter: industry officials say with the obama health plan launching next year, the focus needs to be on private market solutions. >> i don't see americans ready to take on a new national program, a new taxpayer paid program, not in the foreseeable future. >> reporter: for "nightly business report," i'm bertha coombs. the series how to navigate long-term care wrapped up on what to do when insurance isn't an option and for more, log on
nbr.com. that's "nightly business report" for tonight. i'm susie gharib thanks for joining us. >> thanks for me, as well. i'm tyler mathisen v. a great evening everybody. see you back here tomorrow night. "nightly business report" has been brought to you by. >> sailing through the heart of historic cities and landscapes on a river, you get close to iconic landmarks, to local life, to cultural treasures, viking river cruises, exploring the world in comfort. blp
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