tv Nightly Business Report PBS October 3, 2011 6:30pm-7:00pm EDT
>> susie: stocks flirt with new lows for the year on growing concerns about the u.s. and global economies. >> our markets are so fragile, the littlest thing really moves our markets in a negative way. >> tom: from bankruptcy rumors swirling around american airlines to fresh lows for bank of america investors. it's "nightly business report" for monday, october 3. this is "nightly business report" with susie gharib and tom hudson. "nightly business port" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt >> susie: good evening everyone. a grisly start to the fourth quarter on wall street. the major averages tumbled today as much as 3%, moving stocks closer to bear market territory, tom. >> tom: susie, investors were startled by news that greece will miss deficit reduction targets it agreed to as part of its bailout deal. concerns about europe continue to impact trading here in the u.s. at the bell, the dow plunged 258
points. the nasdaq lost almost 80 and the s&p fell 32. trading volume starts the week on the heavy side. 1.4 billion shares moving on the big board, 2.5 billion on the nasdaq. >> susie: investors are nervous that this quarter will be just as bad as the last one. as suzanne pratt reports, investors have good reason to be worried. >> reporter: it was not a good start to a month known for stock market crashes and halloween. and, after the carnage to stocks in september, it's no wonder investors are really spooked. so, will this october be a scary one? big board trader jonathan corpina says the change in calendar pages has not improved the outlook for the market.. >> the same mentality that was there last week is now here this week. so, yes, there continues to be pressure on our markets. the markets are very fragile. investors are still very confused as to what the outlook is going to be moving forward. >> reporter: market pros say
companies are likely to report reasssuring third-quarter earnings, and those results could give stocks a boost on any day later this month, but there's serious concern those same companies will make negative comments about business in the fourth quarter and next year as recession worries grow. corporate confessions, a worrisome job market and ongoing problems in europe could spell big trouble for stocks in october and in the fourth quarter. market strategist nick colas says the next three months will be the most treacherous quarter for investors since the financial crisis. >> markets are really worried about policymakers both in europe and the u.s. really dropping the ball whether it regards the euro or whether it regards the deficit in the u.s. >> reporter: colas expects federal budget negotiations in washington in november to weigh heavily on the stock market. just how bad a quarter will it be for u.s. stocks? >> i think there's a really good chance that we end up between 5% and 10% lower than we are today. however, we could be down more
than that between early october and early november. >> reporter: one market strategist said how stocks fare tomorrow and in the coming weeks depends 80% on europe and 20% on the u.s. until european leaders come up with a comprehensive solution to it's unlikely that any rally here will get any real traction. suzanne pratt, "nightly business report," new york. >> tom: still ahead, shares of american airlines parent a-m-r losing altitude. tonight's "market focus" looks at the bankruptcy rumors swirling around the carrier. >> susie: our next guest says the u.s. is in trouble and we need to act now to fix our problems so we can pass along the american dream to future generations. that's the message of a new book by co-authors tom friedman and michael mandelbaum, "that used to be us: how america fell behind in the world it invented and how we can come back". when i talked with "new york
times" columnist friedman, i asked him to explain his book title. what did we used to be? >> we can become the world's richest, most powerful country by accident. the formula for success build on five pillars. educating our people up to and beyond what who whatever the technology, whether the cotton gen or supercomputer, infrastructure to promote congress, having the best most open immigration to track the most energetic and talented immigrants to start new companies, four, to have the best rules for investing and capitol to mation and preventing recklessness and last having the best government funded research to push the boundaries of knowledge. that was our formula for suggest sess, that used to be us. and the reason we are where we are today is in large part due to the fact we got away from that formula. >> susie: and tom, you have a blueprint that you say if we go back to doing those things that we will be on a successful part. but how do we do that in a political environment like what we're going through now that is so polarized? >> this is not impossible,
at all. we need a grand bargain to put in place the basic spending cuts, the basic tax revenues and the basic investments we need, to get back to our formula for suggest zses. we do that, and that private side, that private energy that's constantly filtering up will be channeled in the right direction. >> susie: i was talking to warren buffett the other day and he said the solution to our problems is to let the natural regenerative juices of capitalism to work and those are his words. >> question. >> so is it a matter of waiting it out and getting government out of the way of innovaters. >> i would agree with that. i would partly agree with that. i think there is a kind of natural, you know, creative and entrepreneurial spirit in this country. but i think it's being suppressed. we're like the space shuttle, okay. and but in not a perfect way. all that thrust that you and warren buffett are talking about, that's still coming up from below. but right now our booster rocket, washington d.c., is cracked and leaking energy and the pilots in the
cockpit are fighting over the flight plan. so all that energy is producing a really crazy practice ject other. we can't get into the next orbit, the next great sort of layer of development for it when the pilots are fighting over the cockpit, and the booster rocket is cracked. we have to fix that booster rocket. that is our public side of our public private partnership. and the pilots in the cockpit have to knock it off. >> susie: many of the c.e.o.s that i'm talking about are worried that we are lossing to china and there is almost a feeing like we should be sort of copying the chain ease system. you say not so. >> i don't think we need to copy anything about china except this. china today is getting 90% out of what i would call an inferior political economic model. we are getting 50% out of a superior model. we need to get back to our model. let's do that. let's get 100% out of our model. that's not what we are getting right now. now how long do we remain a great country when all the public side of our great public private partnership can produce are suboptimal
solutions. >> susie: so tom if you were a dock ter and if america was the patient, what is your diagnosis, are we headed for hospice. >> i don't think we are headed for hospice at all. but we're headed for japan. i think our choice is very clear. we are either going to have a hard decade or bad century. there we need to roll up our sleeves for the next decade and dig ourselves out of this hole we dug ourselves in to. or we're going to drift along into the 21st century. >> susie: you call yourself an optimist, a frustrated optimist but it's very hard to feel reassured about the future of america after reading your book. do you really think the u.s. is going to be okay? >> i still am confident americans are not going to commit economic suicide. they're going to see that these solutions don't work and sooner or later someone is going to fill that middle ground. i hope it's president obama. if it's not president obama then i hope it is whoever succeeds him but somebody is going to do it we're not just going to sit back and watch this great thing called america go down.
>> susie: tom, thank you so much. pleasure talking to you. >> pleasure being here, thank you. >> tom: talking about america's future, concentration on china and the u.s. national not happy with china's currency. find overwhelming vote of 79-19 lawmakers cleared a way a key procedural hurdle pushing forward a bill making it easier to slap tariffs on chinese goods unless beijing allows its currency to go up in value. there is growing bipartisan concern that china's currency costs american jobs. darren gersh reports. >> reporter: the senate bill doesn't label china a currency manipulator, instead it settles for a broader standard that the bill's authors say china will have a harder time wriggling out of. >> we believe misalignment is the appropriate standard, that is not subjective. it's not saying why the currency is misaligned or how or who did it... it's simply saying that it is. its a narrower standard. >> reporter: since lawmakers began pressuring china on the value of the yuan, beijing has allowed it to increase by more than 25%-- and much higher if
inflation is taken into account. u.s. exports since 2006 have more than doubled, which is why critics oppose the bill. >> and so the united states senate... wants to put in place tariffs on a major growing country that we have growing exports to and create a trade war? >> reporter: some business groups and conservatives argue the bill could increase costs to consumers and could even cost jobs. >> for every import that we bring in, whether from china or someplace else, there's somebody that's on a ship, somebody that's on a truck, somebody in a factory receiving their goods... somebody in the warehouse shipping the goods somebody assembling the final product. >> reporter: critics say the yuan is still 20% to 40% undervalued, but today's senate action is largely symbolic. house speaker john boehner voted against the last bill branding china a currency manipulator and is unlikely to take up a new bill now. darren gersh, "nightly business report," washington. >> susie: also in washington today, president obama sent congress three much-delayed
trade agreements. he's urging lawmakers to immediately pass the deals with south korea, colombia and panama. he says those trade agreements will support tens of thousands of jobs and boost u.s. exports by $13 billion a year. house speaker john boehner wants those deals passed, too. he says they could be finalized later this month. >> susie: strong sales of pickups and s.u.v.s helped
american automakers drive home big sales gains in september. g.m. and chrysler both posted double-digit gains, with truck sales outpacing car sales. ford sales were up 9%. but things were much different for japan's biggest automakers. u.s. sales at toyota fell 17%, and honda's were off 8%. both of those big japanese automakers continue to rebuild from the march earthquake and tsunami disasters. meanwhile, the coast of northeastern japan remains decimated. the region accounts for only a fraction of japan's economy and population, but the billions of dollars spent on disaster recovery may lift the area out of a long-running slump. lucy craft reports. >> reporter: in tsunami- flattened cities, towns and villages on japans northern pacific coast, the worst of the debris has been cleared. as the cleanup crews wind down, a debate rages here in the northeast, and hundreds of miles
south, in the capital. should a cash-strapped japan simply restore the region to pre-disaster shape or invest in a wholesale renaissance? >> ( translated ): in the past, the government propped up our economy with pork-barrel spending. but with the public budget cut by half in recent years, something else is needed to create jobs and a viable local economy. >> reporter: that something else, many hope, would exploit the region's vacant land, including its unused rice paddies and parks, to transform the northeast into a center for renewable energy, including mega solar power plants, wind farms and geothermal plants drawing on japan's vast but so-far neglected reserves underground. the wish list also calls for fostering a medical tourism industry, catering to japan's fast-aging society. the so-called rebirth of tohoku, or northeast japan, hinges on speedy, inspired decision-making in areas like deregulation and
tax breaks, policies that have been missing from the recovery effort so far. >> if the people is there, and money is there, and clear leadership and clear direction is there, and clear focus on this rebirth of tohoku, it could be possible. >> reporter: some local governments are trying to turn crisis to opportunity by envisioning high-tech, green, smart cities. because of japan's highly regulated nuclear energy-centric policy, japan until now has sold most of its smart-grid technology abroad. northeast japan says it has no shortage of cutting-edge technology, it's just never managed to turn this asset to profit. >> ( translated ): our universities have expertise in semiconductor manufacturing, organic l.e.d. technology and medical equipment. we've been trying to leverage these assets for a long time. but so far, the technology has simply flowed to tokyo. >> reporter: but to turn the region around would take an unusual meeting of the minds, a willingness to pick winners and
losers-- something that japanese say their politicians are not very good at. >> these municipal and local governments, statesmen get into the trap of populism-- just distribute the money. but no one is satisfied in the end, because the level of investment doesn't reach minimum threshold. >> reporter: to avert a worst- case scenario, officials will have to act soon or risk accelerating the exodus of business and workers from the region. the economic decline of japan's northeast coast began long before this year's earthquake and tsunami. depopulated rural communities across japan are struggling. the catastrophe of last march could galvanize northeastern japan to remake itself, and perhaps serve as a model for other depressed regions in japan. lucy craft, "nightly business report," kesennuma, japan. >> susie: tomorrow, lucy takes us to one town devastated by the
tsunami for a look at how residents and business leaders are turning challenges into opportunities. and tom, a lot of challenges here at the new york stock exchange. every one of the dow components was in the red today, except for walmart. >> tom: yeah, one out of 30 was able to push up in the green as we began the fourth quarter, similar to how we wound up the third quarter which meant a lot of selling prebure. let's look at tonight's market focus. the fourth quarter got underway just like the third quarter ended-- lower stock prices. lots of selling. 3% drop in s and p.
pulling out to a year-to-date chart, you can see the index broke below its august lows, taking it down to its lowest price of the year. the index is now 12.6% lower than where it was at the beginning of the year, and it's down almost 20% from its april high-- putting it just shy of bear market territory. all the major sectors lost ground tod, lead by financial stocks-- down 4.5%. energy stocks, big drop in oil price, and health care stocks were down more than 3% each. as we mentioned earlier, bank of america dropped to its lowest level since the market bottom in march 2009. big move lower. the share price is below $6 per share. independent banking analyst ken thomas says it's clear b. of a. is struggling. >> a bank that's almost to the point of doing some very desperate things, because it's not very often when a bank decides to lay off 35,000 people, close 750 branches and raise fees unexpectedly, unlike any other big bank.
>> tom: other big banks falling to new 52-week lows includ citi and morgan stanley. citi lost almost 10%. morgan stanley was off 7.5%. both at new 52-week lows. j.p. morgan fell 5%, closing about a dime above its most recent low. another big stock struggling today was american airlines parent company a-m-r. shares plummeted over worries about bankruptcy. analysts point to two headwinds- - labor costs, thanks to its pension obligations, and the cost of maintaining its older fleet of planes. morningstar analyst basili alukos says it's the pension costs that are the biggest challenge. >> until they get a huge inflow of cash to be able to satisfy that debt, since they are not generating cash from an operational perspectism, the only way i see for them to get rid of it is through a bankruptcy. >> tom: shares lost a third of their value today. volume was very heavy-- eight times average-- as shares closed below $2 per share. despite the worries, american has been successful in refinancing its big debt load.
the stocks of other legacy carriers fell hard as well. u.s. airways was down 16%. united continental and delta fell more than 11% each. the latest effort to push down the cost of cash was launched today. operation twist is the federal reserve's strategy of long-dates government bonds. the fed bought $2.5 billion worth of i.o.u.s coming down in 25 to 30 years. the fed's goal is to use $400 billion dollars to push longer term interest rates lower. it certainly worked today. here is the yield on the long bond-- the 30-year government i.o.u. it fell to 2.7%, its lowest yield-- highest price since late 2008. big move lower there. and that's tonight's "market focus." >> susie: here's what we're watching for tomorrow: federal reserve chairman ben bernanke goes to capitol hill to speak to lawmakers.
he's expected to defend the federal reserve's latest fiscal intervention. also tomorrow, the world will be watching apple. the company is expected to unveil its new much-hyped iphone 5. yahoo and abc news are joining forces in a news partnership. together, they're expected to deliver news content to more than 100 million american users each month. that's 25 million more than their closest rival, cnn.com. the two organizations began the partnership with a big get. yahoo collected online questions for an interview with president obama conducted this afternoon by abc news anchor george stephanopoulos. >> tom: a $0.5 billion program to train and place workers in green jobs has fallen far short of its goal, so says the labor department's inspector general. just 8,000 people participating in the program have actually found jobs, according to a report out today.
gold miners. that brings us to tonight's "word on the street," "nationalization." alix steel is a reporter at thestreet.com. so why are these nationalization efforts taking place, alix. >> well, pretty much any where. nationalization can come and take over part of a mine like hugo chavez did in venezuela or higher tacks and that's everywhere, you flame t mongolia, brazil, peru, new guinea, anywhere in west africa, these are the places where countries really want a bigger slice of the pie, gold prices are still up 16% a year-to-date. and where there are change elections. >> tom: you mentioned rand gold, the ticker symbol-- some think it is at risk of nationalization but the c.e.o. rejects that, who is to believe. >> well, i'm going to go with the c.e.o. on this one because he has a really good relationship with the local community and the government. i mean take mali where he mines. it makes up 22% of growth,
rand gold resources, hired over 7,000 people and that's not even counting the trickle down effect. they had $1 billion in tacks over the last ten years. that definitely counts for something, if the stock is up 21% for the year. so it is definitely not a risk for certain investors. >> tom: compare that to barrick gold, abx, it share price has been ray layed lately. what kind of risk do the big minors have through this nationalization. >> it's really 50/50 because the good news is they are very well diversified because they are global miners but the bad news is they are very well diversified because they have global minors. they have exposure everywhere, and it is going to be an ongoing conversation, an ongoing risk they are going to have to manage. >> tom: dow own any of the shares you mentioned tonight, alix. >> as a reporter i'm not allowed to own shares of companies i cover. >> tom: full disclosure, the article street.com a link on our web site. word on the street tonight, thank you, alix, with thestreet.com. >> when it comes to the
super:committee that is charged with cutting's nation's mass difficult-- massive deficit down to size, tonight's commentator is urging its members to think big. she's maya macguineas, director of the fiscal policy program at the new america foundation. >> the new super committee, the 12 men and women charged with finding $1.5 trillion in savings over the next 10 years, have the hardest job in town. if they succeed, it will be a tremendous feat. and it won't be enough. even with all that savings, the debt will be growing on an unsustainable path-- faster than the economy. instead, they should go big. put everything on the table. deal with the biggest problems of health care costs and social security. squeeze every last dollar out of defense and ineffective and outdated programs. and reform the tax code so it helps grow the economy and raises more revenues. saving $4 trillion might actually be easier than a smaller amount, because there
would be a huge upside-- we would have fixed the problem. the headlines will be "success" instead of "more is needed." and those 12 super committee men and women will be absolute national heroes if they could pull this off. i'm maya macguineas. >> tom: just a reminder. you catch us online at n.b.r. on pbs.org. you'll find all the market data from the program. you can also follow us on twitter, @bizrpt, or my personal feed, @hudsonnbr. if tweeting isn't your thing, friend us on facebook at bizrpt. >> tom: that's "nightly business report" for monday, october 3. i'm tom hudson. good night everyone, and good night to you too, susie. >> susie: good night tom. i'm susie gharib. good night everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: