tv Nightly Business Report PBS April 1, 2014 6:30pm-7:01pm PDT
this is "nightly business report" with tyler mathisen and susie gharib. >> did you review the documents gm submitted to the committee? >> no, i did not. there were over 200,000. drama on the hill. a tough outing for general motors ceo as lawmakers pressed her about why it took a decade to recall cars with defective parts. but did her answers satisfy investors and drivers? i believe the market is rigged. i believe you're part of rigging. >> drama on the street. is wall street rigged? the debate stopped trading midday at the new york stock exchange today. all this as the s&p rallies to an all-time high. but will earnings season derail the move higher?
we have all that and more tonight on "nightly business report" for this tuesday, april 1st. and good evening, everyone. it was a record day on wall street for the s&p 500 and the dow transports, by the way. but we begin tonight with general motors. it is under intense scrutiny by lawmakers for safety concerns about its cars. today its new ceo got slammed by members of the house over how the automaker midhandled the crisis. faulty ignition switches in general motors vehicles have been linked to 31 accidents and at least a dozen deaths over the past 13 years, prompting a massive recall. lawmakers want to know what took gm so long, and did gm put money ahead of lives. for her part, barra attempted to reassure those lawmakers along with investors and drivers that gm cars are safe and that she and the company are terribly sorry. eamon javers has more on today's heated testimony barra's
performance and what's next for gm. >> reporter: gm ceo mary barra arrived on capitol hill this afternoon to apologize for gm's failures leading up to the automaker's recall of 2.6 million vehicles for dangerously defective ignition switches. >> nothing but the truth. >> reporter: the audience included grieving family members of people killed in switch-related accidents. >> today's gm will do the right thing. that begins with my sincere apologies to everyone who has been affected by this recall, especially the families and friends who lost their lives or were injured. i am deeply sorry. >> reporter: but in the face of tough questions about what gm knew and when about the problem, barra repeatedly said she did not have the information. citing gm's ongoing internal investigation. >> gm was notified by delfi of this, correct? yes or no. >> i am not aware of this. >> you don't know about that? i'm getting this information
from the chronology that gm provided to ntsa. >> i was not a part of that organization at the time. that's why i'm doing the investigation to understand that. >> when was that that gm informed nhtsa? >> i don't know that. >> reporter: it was a tough outing for the relatively new ceo of the nation's largest k carmaker. >> did you review the documents gm submitted to the committee? >> no, i did not. there was over 200,000. >> reporter: the day began on an emotional note as the families of the dead gathered with lawmakers. >> our daughters, sons, sisters, brothers, mothers, fathers, wives and husbands are gone because they were a cost of doing business gm's style. >> reporter: at the hearing, barra announced that 9/11 victim compensation czar ken fineberg is going to take on a similar role here for gm. she's not done yet. tomorrow she's going to face a senate committee as well.
a eamon javers in washington. >> brian, how did mary barra do in your view? did she answer the question that is you wanted to hear? >> i think ms. barra did as well as can be expected. she's new to the job, she wasn't ceo when this all took place. i found her to be humble, apologetic. she did not speculate as to what the real answers can be. i think they're in search mode as to what the answers really are. this is very early in the process. it's not surprising congress wanted to see her so quickly. but i think to her credit she did not go so far as to make any statements that down the road could come back to haunt her. >> in some cases she didn't answer the congressmen and women's questions, did she, brian? >> no, i don't think she did. and i think that could be expected. as she said, there was a
200,000-page data dump that she and her team are working through right now i think that -- >> if congress people could have read it why couldn't she or her people have done that and briefed her on it? >> i think it's very easy when you have a 200,000-page data dump to be able to snipe bits and pieces and have a bit of a gotcha session. i think ms. barra could have done a little bit better job with some of the more what i would say headline issues that i think she should have been better briefed on. but overall, this is an ongoing investigation. and i think the worst thing that she could have done would be to make a declarative statement that down the road could be proven to have been misleading. >> brian, what about consumer reaction? how do you think drivers are going to feel about her testimony? are they going to feel safe in a gm car? do they trust the company? >> i think the proof of this will bear out over some time. what was interesting today, gm released its march auto sales
with the rhett of test of the a. passenger car sales are up 10% for the month of march. this has been front page headline leading news for the past couple of weeks. it would have been interesting to see whether consumers decided not to purchase towards the back half of the month. that doesn't appear to be the case. as this plays out over the course of the next few months i'd expect there to be some sort of backlash to consumers. thus far it hasn't really taken place. >> for investors in general motors, is this a problem? >> i think it is in the near-term. clearly there are going to be a couple of moments over the course of the next couple months that can be expected to be fairly ugly. as this investigation goes forward. obviously with consumers passing away in auto crashes, it's a terrible event. and i think that there's more to be found about this. and i think that at least in the
near-term this is an overhang for investors. as you look out one year, two years down the road, i think it really gets back to whether gm can make cars that are of the quality that consumers expect. they have a good product lineup as far as what they rolled out over the course of the last two years. the question is can they convince consumers that what they're making is on par with their competition? >> and that's going to be a big question. we'll see how that all plays out. thank you so much, brian, for coming on the program. brian sponheimer with cabeli and company. auto sales for march exceeded estimates even for general motors, overall sales up nearly 6% last month, on pace now to sell more than 16 million units this year. shares of general motors cars rose 4% over all. sales at ford up 3%. best march in eight years for that company. the big winner was chrysler. sales there up 13%, mainly on
the strength of its jeep division. shares of ford rose nearly 5% on the day. general motors shares were flat. those strong car sales boosted stocks on this first trading day of the second quarter along with solid manufacturing and constructions spending reports, and it even pushed the s&p 500 to a new record high. the dow rose almost 75 points, the nasdaq surged about 70 points on a big jump in tech stocks. and the s&p added 13 points, closing as we told you at 1885, a record. if the market rallies will earnings season be the next major hurdle for stocks? first quarter profit warnings are already near record levels, our friend at faxet senior earnist analyst john butters is back with us to put it into context. john welcome back. good to see you. earnings season, does it have the potential to stall or derail the market? >> well, tyler, as you said we're expecting a much weaker earnings season than we did when we started the quarter.
the expected growth is now a decline of .4% down from an expectation of 4.4% when we stad the quarter. at this point in time 93 companies in the s&p 500 have given negative guidance. that's the second highest number we've seen since we've been tracking the data in 2006. two sectors in particular really stand out. the consumer discretionary and industrial sectors. both seeing record numbers of companies giving guidance. two sectors likely to be impacted by the unusually cold weather we had this past winter. >> these analysts track the numbers not only for q 1 but they're also looking ahead to the second quarter, third quarter, fourth quarter. what are the projections you're seeing so far? to tyler's point, how might this play out in the markets? >> first quarter certainly is expected to be the dip in the earnings for the next couple of quarters. if we look ahead for second quarter analysts are looking for growth of 8%. and then again in the second
half 2014 expected to hit almost 11%. so one of the key things to watch this earnings season is the guidance what sort of comments give. because if we do see analysts or companies start to lower their expectations, we may see analysts take those numbers down the on the flip side, if we see companies saying the first quarter was a one quarter aberration due to the weather, we expect things to be solid for the rest of the year. the market will take that optimistically if we don't see those numbers come down in the second half of year. >> is the weather the principal reason earnings are going to be plat in first quarter of the year or are some companies using it as a figure leaf to cover up things that go deeper than that? >> certainly in the past we have heart companies use weather as an excuse. we're seeing some of the boy who cried wolf syndrome potentially. this time around i think it is a legitimate excuse of the 18 companies that have reported so far. eight of them have cited the negative impact of weather. most of those being in consumer
space such as retailers, such as costco or companies in the industrial space that had difficulty transporting goods or transportation in general such as fed-ex and cintas. i think this quarter the weather is a legitimate issue in terms of having a negative impact on revenue and earnings. >> so the spotlight will be on jp morgan chase next week who reports its earning. big dow stock reporting earnings next friday. what are you expecting from them? and looking ahead, how are the financials doing? >> look at jp morgan chase, they're expecting a 10% decline in eps this quarter. this would be the third straight quarter they've had a year-over-year decline in eps if that's the case. the financial sector is really interesting sector. this quarter it's really a middle of the pack quarter. it's expecting a decline of 1.5%. last quarter it was the leader in growth at about 24.5% due to strong results of insurance. if we look ahead in the second half of the year, this is one of the sectors really expected to see a pickup in earnings growth
in the third quarter and fourth quarter. we'll certainly keep an eye on the guidance and commentary from these companies as this is expected to be one of the best performing sectors in terms of earnings growth in the second half of the year and for all of 2014. >> our quarterly visit with john butters, thank a lot. >> thank you for having me. >> john is with faxet. still ahead, last minute surge. a target once thought out of reach was met. 7 million people have signed up for health care insurance under the affordable care act. but does that lead to a healthy prognosis for the new law? that's next. general motors wasn't the only iconic american company getting grilled by lawmakers today. so was caterpillar.
the world's biggest mining and construction equipment maker is accused of shoveling $8 billion in profits to offshore accounts and evading billions in u.s. taxes. hampton pearson was at that senate hearing and has more. >> reporter: heavy equipment giant caterpillar avoided paying $2.4 billion in u.s. taxes under a corporate restructuring 15 years ago that shifted most of the profits from parts sales worldwide to a subsidiary in switzerland. that's the major finding in a just released report from the senate permanent subcommittee on investigations. what turned into a five-hour marathon hearing began with committee chairman, michigan democrat carl levin, saying closing off shore loopholes should not be held hostage to a complete overhall of the tax code. >> we cannot tolerate the loss of our taxable revenue the way it is currently lost to uncle sam, which is the use of these tax loopholes which are
unjustified and which are exploited and pushed over the limit at times. we've had hearing after hearing which shows that. >> reporter: caterpillar and its long-time tax consultants, price waterhouse coopers, which was paid $55 million for its strategic advice, say they are obeying the law. pointing out caterpillar's effective tax rate is 29%. three points higher than the average for u.s. corporations. >> caterpillar's philosophy is that our business structure drives our tax structure. we do not invent artificial tracks structures. >> reporter: republicans on the committee were outspoken in their defense of cat erpiller and its offshore tax strategy, leading to charge senator rand paul. >> we should be complimenting caterpillar and perhaps giving them an award. caterpillar not only employs 52,000 people but pays $600 million in taxes every year. so really we've got the wrong people on trial here.
the tax code needs to be on trial here. >> reporter: so caterpillar now joins the ranks of apple, microsoft and hewlett-packard who have all been called to capitol hill in the last 18 months to defend their tax strategies. for "nightly business report," i'm hampton pearson in washington. and staying in washington, there's some celebrating at the white house tonight over a milestone for the affordable care act. the administration says more than 7 million americans signed up for a new health care plan through online marketplaces by last night's open enrollment deadline. president obama spoke at the white house late today. >> i said before, i will always work with anyone who's willing to make this law work even better. but the debate over repealing this law is over. the affordable care act is here to stay. >> so has the six-month enrollment period been a success? john harwood joins us now from washington with more. john, what happened at the end
of the enrollment process to reach these goals, these unexpected numbers? >> reporter: well, tyler, the white house always said that the shape of the enrollment process would include a spike at the end. i think this is a spike that was bigger than they expected, but they did a very heavy social media campaign. that's why they sent the president on with zach g galafinaisis. lebron james. ellen degeneres. i think that's what produced this number. as for whether that makes the enrollment a success, don't know that yet. we won't know until we see how financially viable and balanced these exchanges are. >> so president obama found it pretty upbeat today saying the affordable care act is here to stay. john, what's his message? >> reporter: well, his message was two parts really, susie. one was celebration. as you indicated earlier, i
haven't seen the president, his aides, congressional democrats this elated since the night he won a second term. but the president also was reflecting real exasperation with the political resistance he's faced. there was a plaintive tone in his voice when he said i can't under underwhy people argue against giving health care to people. it's a fight that's going to take place through the fall when democrats try to win back the house that's going to be hard and hold on the senate will be hard. >> what is the gop's reaction to today's events? >> well you see a whole series of reactions. yesterday speaker boehner said we're going to continue trying to repeal the law. you had some republicans coming out and saying the numbers are made up, that this is just spin from the administration. others saying well yeah maybe people have signed up but haven't paid their premiums. they're still trying to absorb these numbers. over time once we see how satisfied americans are, maybe
the program gets more popular or not. the outcome of that is going to determine how well the election goes and then the fate of the law going forward. >> john, thank you very much. john harwood at the white house tonight. trading on the new york stock exchange at a standstill for a time today. traders were transfixed on author michael lewis who says that stock trading is rigged by so-called high frequency traders. things got really hot between brad katsuyama and prominent figure in flash boys william o'brien over whether the average investor can compete with high-speed traders accused of rigging the market. >> you said in the book, that's when i knew the markets were rigged. it's disgusting you're trying to parse your words now. you can't say that. >> you are quoted that way in the book. >> let's walk through an example. >> do you believe it or not? because you said it. >> let me walk you through an example.
>> yes or no question. do you believe it or not? >> i believe the markets are rigged. >> there you go. >> i also think that you're a part of the rigging. if you want to do this let's do this. >> lewis brought the term high frequency trading to light this week with his new book "flash boys" but still supports investing in stocks. >> do you not invest because -- do you stay out of the market entirely because you don't want to be scalped a bit? no, you don't. but that doesn't mean the scalping is okay. to what degree does that system have in it this incredible instability just to able the scalping? the complexity of the system is breathtaking. >> meanwhile, the fbi has opened an investigation into the practice, trying to find out if firms taking advantage of fast-moving market data over high-tech wires unavailable to other investors are actually engaging in insider trading. tyler? there's a big change coming to the new york stock exchange. goldman sachs is preparing to sell its so-called designated
market trading unit which pairs up buyers and sellers on the new york stock exchange. goldman acquired it for $6 billion. now that so much trading is moved off the exchange floor, experts say that space is now worth only about $30 million, maybe less. can you say tax writeoff? to surgical's new device gets the okay from regulators and shares jump. that's where we begin tonight's market focus. the food and drawiug administran approved the da vinci xi. it allows surgeons to perform complex but minimally invasive procedures. the stock was the biggest gainer on the s&p 500 surging nearly 13% to 493.60. shares of yahoo! rose on reports that it's in talks to acquire online video service news distribution network for $300 million. the deal could be a competitive threat to google's youtube.
yahoo! was up more than 1.5% to 36.49. and casino stocks popped after mccow announced first quarter gaming revenue grew 20% beating analyst estimates. winn resorts las vegas sands and mgm get most of the revenue from mccould yo mccow. news corp. won the dismissal of a lawsuit. that suit accused them or defrauding shareholders by hiding illegal phone hacking at two of its newspapers. shares of news corp. up 1.5% today to finish at 16.94. tjx companies parent of t.j. maxx and marshalls new dividend of about 17 cents a share will be paid to shareholders in june. shares up a fraction, 61.19 to finish there. coming up, 4 million americans expected to get hit with the alternative minimum tax.
are you at risk of paying it? and is there anything you can do to avoid it . just 14 days to go before tax day, april 15th. and many high earners are dreading the possibility that they might have to pay the alternative minimum tax this year. so what's the amt all about and how can you avoid being targeted for the tax? sharon epperson has answers. >> reporter: lamb haalmost half americans do their own taxes. many think they're taking advantage of all tax breaks. millions of taxpayers may not realize some big tax breaks they'd normally take on their regular income tax return won't save them any money at all if
they're subject to the amt. the alternative minimum tax. >> many people actually call it the stealth tax. it's because it comes as a surprise to people that they're affected. >> reporter: many taxpayers need to do two calculations, one for their regular tax and one for the amt, and prepare to pay the higher amount. a certain amount of income is exempt from the amt. if you're a married couple, the full exemption amount is $80,800. it's $51,900 for single taxpayers. but the amt exemption phases out as incomes rise. as result, taxpayers with incomes over $200,000 are most likely to face this tax. >> it's generally those people who are i'd say moderate to upper income who may have lots of like state income tax deductions, a lot of children or other exemption. they're the ones who are generally going to be affected by it or at least need to check to make sure they're not affected by it. >> reporter: if you live in new
york or any place where state and local taxes are high, those taxes can be a big deduction on your regular return. but the amt won't allow it. you won't save much with miscellaneous deductions, including exemptions for children, either. >> deductions for amt purposes are in essence penalties. they're trying to capture taxes on expenses and deductions that really shouldn't have slipped in their minds through the cracks. >> reporter: many deductions are adjusted downward or eliminated entirely when calculating the alternative minimum tax and may trigger a tax liability. so what can a taxpayer do to avoid the amt? don't take too many itemized deductions, tax experts say, since they'll lose their value. instead, shift some deductions to a year when you're less likely to be subject to the amt. but with the april 15th tax filing deadline just two weeks away, many taxpayers will just
need to be prepared to pay the higher tax. for "nightly business report," i'm sharon epperson. >> if you want to know more about the alternative minimum tax and what it means to you, go to our web site, nbr.com. it is april 1st, april fools day. that means some companies try to drum up some press by announcing outrageous stunts or unveil hard to believe products that seem to fool a lot of people, including some of us. domino's pizza is at it again this year announcing the edibox. do not try this at home, folks. fresh direct said it would start delivering salmon that was caught by eagles. pepsico which makes cheetos snacks handed out perfume that smells like cheetos. >> people were having a lot of fun today. i couldn't play any jokes on you, though. >> nor i on you.
another beautiful day in paradise! let's go! 'this tower may be the most complex, and costly building ever constructed on american soil. it will be a place where people will come to work and to remember.' we all saw a lot of things that we weren't meant to see, you should never have to see. 'out of the shadows cast in this city's darkest hour...' we lost much on september 11. we lost 3,000 people. we lost our offices. we lost lower manhattan. '..it will rise a symbolic 1,776 feet. now the race is on to get it finished.'