tv Nightly Business Report PBS June 19, 2018 5:00pm-5:31pm PDT
"nightly business report" with bill griffith and sue herera. >> stocks plummet as trade tensions escalate and investorst wonder wheth strong fundamentals that drove this bull market a now under threat. risky business economists dismiss. >> a big change to the w. general electric is out. walgreens is in changing the o makeupthe oldest and most widely followed market indexes. those stories and more tonight on "nightly business report" for tuesday, june 19. i'm contessa brewer in tonight for sue herera. >> and i'm tyler mathisen in for
bill griffith. today the dow notched i longest losing streak in 15 months. those gains for the year out of here, gone, this after president trump threatenedo slap additional tariffs on hundreds of billions of dollars ofe chin goods ratcheting up trade tensions between the u.s. an china. investors held on tight as stocks dropped tightly. the shanghai composite index on its lowest level. since then stocks fell about six percent. the dow down 287 points to 24,700 on the tton. the nasdaq dropped 21. the s&p was down 11. eing and caterpillar, the two bellwetheconsidered for trade tensions were the biggest losers on the blue chip. as trade tensions escalate beyond expectations, questions are being raised about the outlook for stocks. pi
bob sani starts us off tonight at the new york stock exchange. >> traders are facing an unpl t unpleasant reality. tax cuts now may u beer a bit of a cloud. earnings estimates have bee ing up and the market is now worried that these numbers might in danger thanks to the tl threat of a looming trade war. analys have been consistently raising estimates for all four quarters expected to pass 20% earnings growth. you don't those kinds of numbers very often. the problem ise sectors l energy and materials and industrials and technologies are most critical for earnings growth are the same most exposed to global trade. given the sky high estimates for the rest of the year i is
littleonder the market is starting to expect earnings cuts may be coming even though analysts don't have numbers to plug into their models yet. the market is starting to get worried. some strategists appear to be clinging to the hope that rump's get tough policy are designed to appeal to voters and that with the strong enomy the esident can afford to press the issue even if the markets drop ande comprom after the election. some of the tariffs are likely not to take effect until after the election maybe to t get that point and that he may relent soon after. but the stakes have definitely been raised. y r "nighsiness report" i'm bob pisani at the new york stock exchange. t trump administration doubling down on the tariff strategygainst china with the request for up to $400 billion on additional tariffs.
>> as the global trade battle intensifies, president trump defended new tariffs, his weapon of choice to fight china's unfair tradece prac >> we have to do something about it. ey maybe gree it has been unfair for the last 25 years. somehow that doesn't seem to work so easily. >> reporter: the tactic slap new fees on chinese goods coming into the u.s. first targeting dish washers and aircraft parts. after china said it would retaliate trump targeted $200 billion more. the resting policy would touch the majority of goods coming into the u.s. from china which totalled 500 billion dollars last year. by comparison the u.s. sent billion in goods to china. that is why the proponent of the
crategy sayshina has more to lose. >> that's what you would d if you were crazy and really wanted to end free trade. w thatt you would do if it was a negotiating positio and you want to remind your negotiatingty counter par of just how much fire power you have. >> investors worry china could move beyond the tit for tat for tariffs and limus u.s.ess there or stop buying treasury. >> investors are keeping an eye on this but this for your protection is very, very dangerous. >> reporter: one key pawn in the battle is chinese phone maker zte banned from buying u.s. parts. trump wants to revive it to extract concessions from china. lawmakers moved to prd g rails around trump's ability to it is still ay national security threat. >> if we allow zte into the
countryhina and its government will use our phones to spy on each of us. >> reporter: the white house will appealo lawmakers to stand down on zte. even if they do it is unclear how president trump would use that leverage. there arekso trade t scheduled with thee. ch for "nightly businessreport"." >> the chinese government accused the u.s. of blackmail and warne of swift retaliation to the tariff threat. eunice yoon picks up the story from beijing. >> reporter: china has described president trump's tariffs as blackmailing. the commerce ministry said china would fight back fermi and is considering qualitative and quantitative retaliation. the fact is china cannot match the u.s. on tariffs covering
$200 billion birth of goods because chi only buys $130 billion worth of goods. so there are a l of questions as to what china could do next to retaliate. some of the busines people i speak to say they are worried about investigations or safety inspections, delayed license approvalscko b expansions and consumer boycotts. despite the toughre talk t are chinese who are worried about the impact of the u.s. tariffs on the chinese economy. that was reflected in the stock market today. shanghai was down by five percent at one point. and h tg kong lostee percent. one former chinese official told me he is worri about the impact of the u.s. tariffs because all of the economic indicators are showing that the economy here is going to be weaker. the fixed asset investment isg slow down. there are problems in the property sector and debt is rising. he also said that china does
rely on exports more than the united states. but what china does have is political ll. just as president trump might t want to appear weak to his supporters, president xi jinping will not want to look as though he is caving to internation pressure. this is not a democracy and there are a lot of levers that the government can pull and that was hinted at in the state media with one paper saying the u.s.e seems to h fooled itself thinking china is running out of bullets in thisoi o trade war. the truth is as long as the u.s. wants to fight it, chi will not run out of bullets. for "nightly business report" i'm eunice yoon in beijing. >> some economists are concerned about the impact on the economy and the potential for this trade fight to leave economic scars. v liesman looks further into this. >> reporter: as the old saying goes a few billion here and there and pretty sn it starts be real money.
president trump escaling trade disputes to a place where all the tariff threats can have meurable impacts on u.s. and global growth. if you were to have 400 billion of tariffs executed and not just discussed you are probably talking about off of global gdp. >> after that potential negative effects and added uncertainty which are weighing on stock now. does it resolve itself by way of a negotiated tcome that allows both parties to walk away claiming some level of victory or is this something to continue to have to deal with on a day over day basis that allows equity investors from getting enthused about the underlying strong fundamentals. >> with potential for new tariffs and retaliatory up to $400 billion the impact will depend on the u.s. economy. >> if the uerlying economy wasn't doing as well and if we
didn't he the stimulus i think there would be a lot more to worry about.e u.s. economy i think in the second half is going to accelerate as opposed to decel rate. so wurtever pre we face on the side i think we are in a b muchter position to absorb it. >> most agree fair trade from china would boost u.s. growth. there is increasing doubt about the cost of getting there. for "nightly business report" i'm steve liesman. at what point could escalating trade tensions become a sizable head wind for the markets? joining us now is founder and ceo of zoeo financial. eau probably the previous guest say the tax and budt il winds more than offset in the short tm whatever head winds there are from trade. do you agree with that? >> i would ifagree. we look at the most recent data from retail sales we saw
acceleration going into the second quarter. the earlier comments make a lot of sense which is if anything if this had happened maybe in january o february it might have had a bigger impact in th overall markets. going into the acceleration i think it could cuson it up to now. it does escalate that could mean more volatility than we are seeing right now. >> the expectation has been for a strong secondal of the year that q 3 and q 4 earnings would continue s tow growth now. when you are looking at what the possibilities of a trade w do to that, is it going to temper the expectations? >> that's a great question. i do think that there isne re driver that effects earnings going into the second half which is oil. you look at earnings and earnings expectation and guidance going into the second half, energy stocks is where the biggest upgrades to earnings have come in. i would kp an eye on oil. if oil continues to fall that i
woulhink have a bigger impact on earnings for the second half than the trade tensions. >> why is oil coming down? >> for one, we have one catalyst coming up which is the opec meeting in vienna on friday. there is an expectation that opecight decide to increase production therefore more supply would effect oil prices. the other one is that the dollar has been appreciating and there is a negative relationship between dollars getting stronger and oil prices faing. those are two of the major drivers. i think that is a bigger driver for the overall equity market going forward. if therade tensions do escalate it might be a different story. >> how are you advising your clients to factor in the risk of a global trade war, the importance of oil into this
equation? >> i think it is a great question. the best way to think aboutt is do not let headlines dictate your long term investment strategy. we don't know whats going to happen when it comes to trade and with oil. if i have to pick between the two i think oil matters more. th is why you have a well-diversified portfolio s't you dave to know. >> thanks veryuch. and to another issue that is part of the national conversation today, immigration. the top two business lobbying groups came out against the white house's policy of separating immigrant children from their families after they cross the u.s./mexico border. the chamber of commerce said this isn about who we are. the business round table which represents ceos urged the administration to end the policy immediately calling the practice cruel and contrary to american values. >> and in a wide ranging speech
the president asked congress for a third option on immigration. >> what i'm asking congress to do is to give us a third option which we have bn requesting since last year. the legal authority to detain and promptly remove families togethers a unit. we have to be able to do this. >> senate majority leader mitch mcconnell said the problem at nde border needs to be fixed expects the senate to address it with a narrow bill and not ade immigration reform sasure. e of the companies with the biggest exposure to china, still ahead.
a big shakeup coming to the dow. walgreens will replace general electric in the index prior to the open. ge was an original member of the dow back in 1896. the s&p and d jones which determines which companies are in or out of the dow said the decision that the economy has changed and with consumer finance, hlth care and tech companies becoming more prominen o while importanc industrial companies is less. ge's low stock price was a factor. following the news shares of ge fell in the extended hours. walgreens jumped. here is al r wakeup from starbucks warnime sales will n weaker than expected and the company plans to close doors. at sent the stock lower in initial after hours trading.
kate rogers joins us with details. >> starbucks ceo presenting at a conference and breaking quite a bit of news f lowering the sales guidance for the third quarter of 2018 to one percent from three percent glob johnson said that shareholders deserve better and added that he is determined to fix this. he talked a lot about growth with howard schultz stepping down and will be closing 150 under performing stores in the densely penetrated market up from a historical average of 50 stores per year. the company announced it would be slowing licensed store growth, the stores in hotels and airports a will be hiring an outside consultant to make it more efficient and to help identify areas of opportunity and growth. they plan to return approximately $25 billion in cash to shareholders via buyback and dividends through 2020.
an they also approved a dividend of 36 cents per shar l >> a of news. >> thanks very much. appriate it. >> starbucks just one of a number of companies with operations in eina. semi conductor sector has the highest revenue expose to china. dominic chu runs through the list of companies that get a fair amounen of r from the world's second largest economy. >> the biggest companies in the world have become incrsingly multinational. not every company reports in from different regions globally but some do. for those that break it down china can play a huge role. of the biggest industrial km companies in the s&p 500 many do deals in china. deere gets about 80%. catteerpillar gets 9%.
diversified industrial 3 m gets 13% and for ao smith a thi of its business comes from china. it isn't just the industrials. we known consumer-oriented companies have a l of exposure. ta nike which gets 12% of business from china. tiffany gets 13 starbucks is 15% and the same with mcdonalds. apple gets around 20% of sales through china region. these are some companies to watch if trade gets more heated in the wys,ks and months to come. for "nightly business report" i'm dominic chu. >> rough day for the auto makers. shares fell on the rising trade tensions in part because china is the world's largest auto market and a very lucrative one. philebeau is at the port. how important is china to this
port? >> it's critical. i'm standing in the middle of i would say about 5,000 bm suvs. these are vehicles that are parked here tomorrow or the next couple of many of them will be loaded into container ships and sent to if yk at the numbers in lchina. terms of vehicle exports to china from the united statest has steadily increased over the last ten years abo 267,000 were sent over there last year. and that number is expected to move a little bit higher this year. and you are primarily talking about bmw, mercedes-benz. you have some from the big three, as well. and tesla which is alsong sen its vehicles built in california over to china which is the largest and fastest growingel tric vehicle market in the world. >> china said it would lower auto import tariffs. with a trade w in the air could that be under reconsideration? >> it'ser already u
reconsideration for certain vehicles. when the trump administratio said we got about $200 billion in new tariffs that we are going to implement immediately and this was about a week ago china responded and said we are going to get certain agricultural products, other products from the united states and certainid hy electric vehicles which means certain tesla models that are ordered from chinese customers now will be slapped with a 35% t as opposed to a 10% tariff. that is the concern of the auto industry that some of the bmws ina can say let's move back to 25% or let's move it higher. nd >> boeing also has a plant in atcharleston. ould be the impact of a trade war there? >> boeing's biggest customer is if you look at markets, 202 of the boeing commercl airplanes
delivered last year went to china. that is about 26% of the annual deliveries last year. it has a little bit of cushion the fact tha airlines order airplanes knowing they are not delivered for several years. it is unlikely that chinese airlines would cancel orders immediately. that said chioes have a reputation and a track record for sayin we are moving some of the orders over to air bus or any future ordersould go to air bus. that is why boeing is sensitive to t trade tensions. >> phil lebeau at the port of charleston. the genehepy treatment shows promise. drug maker says three boys with muscular distrofy showed improvement. the trial is still in its early es saresta said it helped grow a key protein that is missing in people with this disease. >> we need to take the results we have and treat additionale
children andeed to watch the children for a while. but this is potentially transformative. we have given this gene therapy that treplaces thock absorber and in these first three children at three months they are showing amazing exthession. shock absorber appears to be in the muscle and appears to be working. >> the shares soared to 14393. afr the bell fed ex said it shipped more packages at higher rate helped overall earnings rise. the g deliverynt gave strong guidance for the year though it does see earnings coming in just a little light. shares ended the regular session down two percent at 25839. the business software maker oracle reported an increase in profits after the bell saying growth in the cloud division helped overall results so inching a little higher. shares of oracle initially higher in the extend sessi
but finished the regular day down at 4627. >> laz boy saying mor customers made purchases resulting in growth across all divisions and higher same store sales. it the full year it said expects consolidated sales to rise more than four percent but shares were initially lower in after hours and ended a d up. and preliminary results show carl icahn has full control over sandage energy board of directors. he sought to control the board earlier this year after he iticized management for missteps. shares took off rising seven percent to 1702. coming up, what is at stake for apple as trade tensions with china rise?
app is a stock that a lot of investors eve outright or mutual fund. it can find itself in the cross hairs of the intensifying trade standoff. >> reporter: mainland china is critical to apple's success and a very important part of its financial future. analysts estimate the country accounts for about 15% of the company's total annl revenue and apple has vast manufacturing erations in china. most iphones are assembled there and shipped. apple's ceo tim cook has made china a priority, t visiting country and making big investments in chinese companies like ride hailing giant.
the "new york times" reports that the trump administration told cook it wouldn't place tariffs on iphhoesh today peter navaro countered he had no knowledge of any such exemption. apple could gett caughn the cross fire in other ways. apple is concerned that the chinese government could cause delays in the supply chain in retaliation for the president's proposed tariffs. some analysts say they aren't too worried. >> we estimate 100 million in cost could increase. so it's not cost perspective. the worry is from the supply chain pefpective. asow i think it is more of a scary headline than a reality. that is what investors are concerned about. >> analysts note a potential advantage for the iphone maker sells ana popular device in c and its assembly employs a lot of people, more than 1 million chinese work in some way on
apple products. i'm josh lipton in san o. franci before we go, maybe against our better judgment here i another look at the big declines on wall street. the nasdaq dropped 21 the s&p 500 was down 11. "nightlhat does it for business report." thank you for watching. >> thanks from me, as well. have a great evening. we'll see you back here tomorrow night.