tv First Business KICU July 11, 2013 4:00am-4:31am PDT
as political unrest continues to tear through egypt, how gas prices at home are reacting. in today's cover story, fed in focus: what traders and investors are taking away from ben bernanke's latest notes about the economy. plus, why agriculture is losing its clout in congress. and, is disney dealing with a flop - or not? first business starts now. you're watching first business: financial news, analysis, and today's investment ideas. good morning! it's thursday, july 11th. i'm angela miles. in today's first look: the market's mood has changed. following 4 days of rally
action, the dow fell 8 points, the nasdaq moved up 17, and the s&p closed up 1 point wednesday. stocks pulled back following the release of the fed's fomc minutes. gold gained $10, and oil surged more than $2 yum! brands reported earnings after the close that topped expectations, but overall sales were hit by kfc's chicken trouble in china. idc reports global sales of pcs took a double-digit decline in the second quarter. and, ford's sticker shocker: the auto-maker is slashing the price of the 2014 ford focus by 10% to push the plug-in cars out the door. joining us now for trader talk, todd horwitz of average joe options. good morning. - good morning, angie. - did the fed cause traders to hit the pause button? - the fed did absolutely nothing. yesterday's news was just a repeat of what they said six weeks ago. the markets broke six weeks ago, rallied all the way back, and now we're up
against a resistance level, which i would think would be a much better selling point, but the overall fanfare and buildup was a big nothing. - is china setting the tone for the market? - china is always a problem. the problem with china is you never get real straight information from them. but certainly if they start to have trouble and start to show it, that can certainly put a little bit of a fly in our ointment here. - coming up on friday we have earnings from j.p. morgan as well as wells fargo. will these be bankable profits? - you know, i think they are going to have real nice profits. throughout the entire process, what they had was the ability to borrow money at 0% and give it back to the u.s. government at 2 or 3%, so they've done very well throughout all this q/e, which, what the q is based on doing is to help the wealthy and help the banks. i think they're going to show probably pretty good reports. - thank you, todd. thank you. in our cover story, it's an exclusive club - the short list of candidates who may replace fed chairman ben bernanke
includes only one member of the current board of governors, vice chair janet yellen. but the fed made news on two fronts: a transcript of its latest meeting was released, and the chairman himself had some market-calming words at a speech that was supposed to be about the fed's history. the transcript of the federal reserve governors' meeting last month revealed that they want more reassurance that the labor market was improving before scaling back stimulus measures. "the immediate reaction was stocks spiked and the dollar fell, because no one knows when interest rates will go up." "this is a data-driven fed..." then, fed chairman ben bernanke, speaking at an event commemorating the 100th anniversary of the fed, said the fed will adopt a "highly accomodative monetary policy." many investors read that to mean that tapering of the fed's bond-buying program that some speculated may begin in
september may be pushed back. "unless the economic data picks up, i don't think we'll see tapering this year." bernanke says he will skip the fed's annual monetary policy symposium next month in wyoming, leading some to speculate that he is clearing the way for his successor. a short list of at least five people includes only one current member of the fed's board of governors, vice chair janet yellen. "my vote would be with janet yellen - extensive experience and history, already an active member, a short learning curve. i can't think of anyone more qualified at this point." "i think timothy geithner is the administration's pick. yellen is in there. lawrence summers is polarizing, and you don't need that in a fed chairman." meanwhile, politico reports former obama economic advisor
lawrence summers is the leading candidate to replace bernanke. some predict a contentious senate confirmation hearing regardless of who's nominated by the president. political chaos in egypt is causing world-wide shocks to the oil market. oil futures topped $106 per barrel on concerns violence following the coup and removal of eyptian president mohammad morsi will spill over to the suez canal and sumed pipeline, which are critical to the flow of oil from the middle east to western markets. also driving up prices at the pump - demand from american motorists. "we are seeing one of the biggest moves in the energy market consecutively than we have seen in years. even if we see a higher price for crude,
it isn't necessarily going to impact to the degree the price at the pump as it did a couple years ago." "but the fact is we are still paying at or near record gas prices." the current national average for a gallon of unleaded gasoline is $3.50, up 3 cents from a week ago. capitol hill remains divided on immigration reform. lawmakers await a proposal on the issue from house republicans, who have said they will not pass the same legislation that passed the senate last week. members of the bipartisian house "group of 7" met yesterday in a private meeting. meanwhile, former president george w. bush is showing support for changes to the current system, calling on lawmakers to find a "positive resolution" on the issue. and, a new report by the white house finds immigration reform could boost gdp by .3% over 20 years. walmart and gap are agreeing to keep tabs on workers at factories in bangladesh. more than 1,000 workers in bangladesh were killed this year when a factory collapsed. walmart and gap are among nearly
20 north american retailers signing a 5-year safety plan that calls for inspecting every factory within a year. a group against sweatshops calls the plan a fake. earlier this week, several retailers, mostly based in europe, backed a separate safety measure. the ceo of smithfield foods says a deal with china will not compromise the safety of its products. in a hearing with the senate agriculture committee, ceo larry pope told lawmakers that being purchased by china's largest meat producer will not change how smithfield's products are made, inspected or distributed. "there should be no noticeable impact on how we do business operationally in america and around the world as a result of this acquisition, except that we plan to do more of it." many skeptics have raised concerns over the safety of china's food supply. the smithfield deal still requires approval by shareholders and regulators. meanwhile, china is expanding a cap on the number of cars citizens can own to fight a severe pollution problem. eight cities are expected to add restrictions. it could slow car sales by as much as 2% in a
country where auto sales have been on the rise. currently, beijing and shanghai are the only cities with vehicle restrictions. the faa is out with new regulations for co-pilots. the faa has been working on sweeping industry changes since a 2009 plane crash near buffalo, new york. the tragic weekend crash landing of flight 214 in san francisco is raising questions about pilot experience in the cockpit. the new guidelines could require first officers to have at least 1500 hours of flying experience versus the current 250. on to an update on earnings news: high-end retailer burberry is impressing wall street with a 21% increase in global sales. china was especially strong. the retailer continues to attract wealthy chinese customers with its fashions. back in the u.s., discount retailer family dollar reports that earnings fell 2.9% as customers make tough spending choices between needs and wants. a test vote on a proposal to lower interest rates on student
loans has failed in the senate. interest rates doubled to 6.8% july first. democrats wanted to retroactively roll the rate back to 3.4%, but the measure came up just 9 votes short of approval. jp morgan is admitting to mistakenly suing credit card customers. in a sample review, the bank found errors in 9% of the 1,000 lawsuits it filed against credit card customers for non-payments. the amounts owed by customers are shown as higher than their actual balances. in the near future, jp morgan may be required to do a more thorough investigation. the government is keeping a closer eye on debt collectors. the consumer financial protection bureau is vowing to crack down on illegal practices in the industry. the head of the cfpb, richard cordray, says many collectors try to get ahead by "flouting the rules." this week, the largest debt collection agency was hit with a record $3.2 million fine after wrongly harassing people to pay off debt. aig and g.e. capital are
joining the list of firms that need more regulatory oversight. the two join large banks that the treasury department calls "systemically important" to the economy. the companies are now subject to extra supervision from the federal reserve. aig and g.e. are not at risk, but could cause major financial damage in the event of a collapse. apple is guilty of price- fixing. a federal judge found "compelling evidence" that apple conspired with five major publishers to raise the retail price of e-books. the judge set a trial for damages, which could total several hundred million dollars. apple plans to appeal and claims that it did nothing wrong and brought more choice to consumers. shares have been falling and closed lower wednesday. hedge funds will now be able to make a pitch to the general public for the first time. the sec voted to lift a ban that has been around for decades that stopped hedge funds from mass-marketing investments. the firms, however, will only be allowed to cater to clients with a net worth of $1 million
or annual income of $200,000, also known as the 7.8- percenters. budget cuts are bumping off bonuses for irs employees. commissioner danny werfel has cut management bonuses and wants to elimate them for unionized employees. the cuts may allow the irs to stay open during its normal furlough days this summer. the senate approves the move, but union officials want bonuses to remain. traders and people in the tech industry are curious to find out today if microsoft is planning a management shuffle. the software giant has been plagued with critism for taking too long to adopt new trends and stagnant stock growth. the wall street journal reports a company-wide shakeup could be unveild today by microsoft ceo steve ballmer. tribune company is splitting in two. the owner of the chicago tribune and l.a. times will separate its newspaper and tv divisions. tribune is putting a lot of focus on the small screen. last week, the company bought 19 television stations in a deal worth over $2.5 billion.
officemax and office depot will be together forever. shareholders overwhelmingly approved the merger. the two office supply retailers are attempting to make a run at industry leader staples. the deal still needs approval from the ftc. still to come, "the lone ranger" failed to be a hero at the box office - but are critics overreacting? that's later on. but first, losing ground: why agriculture is no longer a powerful force in congress. first business continues after this.
something is happening to the once dominant power of agriculture in congress- it is weakening. a sign of that was last month's first-ever defeat of the farm bill in a house roll call vote. what has happened to the farm lobby and the committee clout that agribusiness once wielded? vincent smith is a professor of agriculture economics at montana state university. in a nutshell, sir, what's going on? - well, in 1930 we had almost half of all congressional districts with a lot of farm votes. today there are less than 40 districts where the farm
vote is a significant percent of the total vote. technological improvements, growth in the size of farms, growth in the economies of other sectors, and tremendous improvement in farm productivity have all driven down the number of farms. and though we have 2.2 million farms around in the country, according to the usda, most of the output is produced by less than 200,000 of those farms, and less than 100,000 of those farms are places where the owner- operator has a full-time occupation in the farm. - very interesting. it also suggests, then, that more people are moving to the city, so suburban and urban clout in congress naturally is respondingly changing. - redistricting favors the urban centers, and the rural economy has changed, too. a lot of people who don't work on the farm now live in rural or semi- rural areas - think about areas around columbus, ohio, for example. so, lots of factors are driving down the relevance
and importance of the farm vote, so now you have less than 40 farm districts in the house, where the farm vote is significant. - it doesn't mean, though, that its clout is out, it's just that it's diminished greatly over the years. - that's right. if you're a representative from a farm district, you want to be on the ag committee and you're going to be very supportive of farm programs. but it's harder to get everybody else to go along with your ideas. - professor vincent smith from montana state university. fascinating. thank you so much for enlightening us. - thank you, bill, for having me. coming up, does a major box office disappointment mean doomsday for disney? that's next in movies and money.
"the lone ranger" failed to ride high at the box office, and that is leaving diseny with a dilemma. or is it? erik childress, our movie guy, is here. good to have you on the show, as always. people are jumping all over this disney story after what is being called a "flop" hit the box office over the weekend. what do you think? - i think it's not good news - i mean, for the movie itself. this is a movie that's probably going to need to make at least another $400 million worldwide just for the film to even break even, and that's probably not going to happen. they're already expecting a $150 million writeoff on this film. a lot of people are using the "john carter" reference. it's probably not going to be the biggest bomb of the year, but it's going to be one of them. - what went wrong here? was it a demographic issue with younger generations maybe not connecting? what do you think? - there are so many different
theories and whatnot. i'm sure for every theory you could come up with you could probably offer a counter-argument as well. the demographic thing... disney is just going to be watching its budget from now on. it was already shut down because of a $250 million budget at one time. they got it down to around $215. that's still very high for a western. but these are the people that did the "pirates" movies, came up with $3.7 billion in grosses for the "pirates" movies, so they gave them carte blanche and let them do what they want, and they paid the price for it. - some people are saying we might see some more safer sequels coming from disney. - like "iron man 3?" the $1.2 billion movie that came out this year that disney is making tons of money on in conjunction with marvel. they probably have that $150 million write-off in a suitcase in jerry bruckheimer's closet. so i'm sure they're going to be just fine. - here's a look at the numbers at the box office from the holiday weekend: "despicable me" coming in at $143 million, so that sequel did extremely well for universal; "the lone ranger" at $48 million; "the heat," $36 million; "monsters
university" at $30 million; and "world wars z" at $26 million. - look at that "despicable me" number - for five days. that's the highest-grossing animated film for a five-day gross, even more than "toy story 3." universal is having one heck of a year. we really came down on them last year for "battleship." since then, their numbers have been impressive. they are already looking at like $1.7 billion in profit just this year from the movies. they have five of the 10 most profitable films this year alone, and that includes "fast & the furious 6" and "despicable me 2," which in about a week-and-a-half with the international numbers is over $300 million. it's only a $76 million-budgeted film, so it's already one of the most profitable films of the year. - coming out this weekend, "grown ups 2" and "pacific rim." - forget about "grown ups 2," the sandler sequel. but "pacific rim" is a $180 million-plus- budgeted robots-vs-monsters movie that a lot of fans are really hoping is going to do well for director guillermo del toro, who has a high fanbase. i am not a fan of the movie. i think the action sequences in the movie are completely incoherent, even moreso than some of the "transformers" movies, even, which i am certainly not a fan of. but i think the movie could have a very big international base. it could do very well overseas. here in the u.s., i think that
matt cavanaugh of cmz trading joins us for a look at yum! brands, which reported earnings after the close. good morning, and what is your trader's take on the earnings results? - i think it was kind of really as expected for me. yum! has had really lowered expectations. the stock has rallied quite nicely - about 9% this year - while the analysts have taken their earnings estimates down by about 8¢ for this quarter. so, a slight beat, but really nothing too surprising here. - is the stock a buy at current levels, and what would be your strategy? - you know, i think it's a
hold. before these earnings came out, my strategy was to sell out-of-the-money put spreads and out-of-the-money call spreads. i think $75 is a resistance and $70 the support, and i think that still holds today. you've got kind of a pull and a push between those areas, and really nothing new. it looks like china is coming back, but a holding pattern for yum! here. - thank you, matt, and have a great trading day. - thank you. time for us to take off for now. coming up tomorrow, how budget cuts to education have teachers digging deep to pay for classroom supplies. plus, see if you can beat the guys at answering the bonus round question in this week's traders unplugged. from all of us at first business, thank you for watching!
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