tv Nightly Business Report PBS October 31, 2011 6:30pm-7:00pm EDT
>> the market has clearly moved away from the precipice. the markets have run up, but the question is, "where is the follow through?" and that's what the market is struggling with. >> susie: worries about europe haunt the stock market, making for a scary session on what had been a great month for stocks. it's "nightly business report" for monday, october 31-- halloween. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" 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. my colleague tom hudson is on assignment. a bad end to a good month. stocks fell sharply today, but october was a stellar month-- the best gains since 1987. here's a look at the numbers. by the closing bell today, the dow was down 276 points, the nasdaq tumbled 52 and the s&p 500 was off 31. but looking at the month, the dow was up 9.5% in october
and the nasdaq and s&p each added 11%. erika miller looks at what investors can expect for the rest of the year. >> reporter: there were plenty of reasons to feel scared on wall street today. even stock investors got frightened, sending market averages down sharply. but relax, strategist andrew burkley says. today's decline is natural after thrilling gains last week. >> the market is just generally digesting things. and, i think as we've gotten past the european solution-- or summit-- last week, i think people are still groping for a little bit more in terms of implementation, and exactly the details of the plan that are yet to be worked out. >> reporter: october has a reputation as one of the worst months for stocks, and the s&p 500 hit its lowest level of the year on october 3. but, surprisingly, the month as a whole turned out to be one of the sweetest in decades with a gain of about 11% for the s&p 500. market strategist jonathan golub says the other big factor
helping stocks was improving third quarter economic data. >> you have an economy which grew at 2.5%-- not stellar, but almost double what you had the first half of the year. and all indications are the fourth quarter is going to be a decent quarter as well. so that fundamental backdrop is pretty good. >> the stock market posted impressive gains in october, but november could also be a key month for the markets. the u.s. economy and the european financial situation will continue to be watched closely. and don't forget, a third of the firms in the s&p 500 still have to report third-quarter results. so far this earnings season, the message from corporate america has been pretty encouraging. >> as we've gotten through this earnings season-- the third quarter reporting season-- we are still seeing 70% of companies beating expectations-- about 16% year-over-year-growth. in terms of profits, it's still very, very strong. >> reporter: many strategists predict stocks could gain 5% to 10% by the end of the year. the big caveat is what happens in europe.
>> it's kind of like groundhog day, where we wake up to the same movie over and over again-- the same situation. i think this europe situation is going to come back. i think it is going to plague us again. >> reporter: so although there could be more goodies in store for stocks the next few months, it's clear the market's goblins haven't entirely disappeared. erika miller, "nightly business report," new york. >> susie: the market was spooked early in today's trading when m.f. global filed for bankruptcy. it was a dramatic fall for the brokerage firm and for its c.e.o., jon corzine, the former governor of new jersey who once ran goldman sachs. it was jon corzine's dream to build m.f. global into a mini goldman sachs. he talked about transforming the midsize firm to a full-fledged investment bank. but all that changed when corzine and the firm made too many risky bets, especially some bad trades in europe. as the european debt crisis worsened, m.f. global posted a loss of $186 million in its fiscal second quarter
because of that huge loss, it was downgraded to junk status. this is the eighth-largest corporate bankruptcy filing in the u.s. since 1980. m.f. global listed its assets as $41 billion. it has nearly $40 billion in debt. it has a large number of creditors. j.p. morgan bank and deutsche bank trust are the top two of its 50 unsecured creditors, with more than $1 billion each. others include pricewaterhouse- coopers, oracle corporation, bloomberg finance and the forum group. until today, m.f. global was considered among 22 companies financially secure enough to act as primary dealers to sell u.s. government debt. the federal reserve bank of new york suspended any of global's new business and halted its shares. more developments out of europe today showing that its financial problems are far from over. a new report says the number of unemployed people in the eurozone hit a record last month.
more than 16 million people were without jobs. that's an unemployment rate of about 10.2%. that's the highest total ever for the 17 countries that now use the euro. meanwhile, investors are worried about the financial health of italy. despite the fact that europe plans to bolster its bailout fund to the tune of more than a $1 trillion, the market doesn't believe that will be enough to help italy if its debt crisis worsens. the yield on the benchmark italian 10-year bond rose to 6.1% following a disappointing bond auction on friday. that's troublesome since the 6% level is viewed as an important psychological barrier. still, italy's bond yields are much lower than those of greece and ireland. >> this is one of those slowing- rolling problems that could end up resulting in disaster for patients and health care. >> susie: still ahead, what the president is doing to reduce prescription drug shortages.
our guest tonight is already looking ahead to 2012. mark zandi, chief economist at moody's analytics, will unveil his economic forecast at a conference later this week. he joins us now with a preview. >> susie: hi, mark, how are you? >> hi, susie. >> susie: so, here is what youwr conference late they are week. no recession, gdp growth of about 2.8 percent for 2012. the unemployment rate is going to come down a notch to 8.8 percent. now we're at 9.1 percent. you think that 1.4 million jobs will be created. so, still it looks -- even though there is no rcession it looks like the year ahead is more slow growth, right? >> ya, that's exactly right, susie. it's not a recession. i think we will avoid a down turn. it's sluggish and not a lot of progress on unemployment. until unemployment comes down in a meaningful way i don't think
anyone will feel comfortable how things are going. >> susie: i have talked to a loe economy. many are looking to washington to do something to revive things. whether it's a super committee or congress with a tax break, what can we expect out of washington? will they step up? >> well, good place to look. they need to step up. both with respect to short-term policy and longer-term policy. they need to do two things. a super committee has to come up with something. the process fails if they don't have a substance of deficit reduction. that will be renewed turmoil and recession. the other thing that has to happen is congress and administration has to come together and extend the current pay tax holiday. if law makers do nothing we will experience a tax increase january 1st. there is longer-term policy to
be done but those things need to be done over the next few weeks to avoid a recession. >> susie: what about the role o? the federal reserve meets tomorrow. what can we expect tomorrow? more importantly what can we expect out of the fed in the new year to revive the economy. >> i i don't think the federal reserve will do anything tomorrow. it has done things over the last couple of meetings that they won't adjust rates until 2013 and widing long term securities to bring down long term interest rates. i don't expect anything tomorrow. if the economy tends to weaken next year we will get quantitative easing. i don't expect it but wouldn't rule it out. the economy isn't home free yet. >> susie: alright.another impore are watching this week is the october jobs report. that comes out on friday. what do you expect from that? also as we talked about at the
beginning of the conversation 1.4 million jobs to be created in the new year. how much is that going to help, how much jobs do we need to create to really boost the economy. >> good wh question. i think we will create a hundred thousand jobs in october. that's the key number on friday. for context we need 125 to 1,250,000 per month just to absorb the people coming into the labor force each month for a stable rate of unemployment. i don't think we will feel really good about things and bring unemployment down in a significant way until we get job growth north of 200,000 a month. we're a good long way from that. we're not in recession, we're growing and creating jobs but far short of what we need. >> susie: what about housingmars crucial for the economy to do bettebetter and for people to fl better about spending money. >> good point. as long as house prices are weak and falling it's hard to
get enthusiastic about anything. the home is the most important asset most people know and many small business people rely on their home for collateral to get a loan. we will likely see more price declines over the next six to nine months. that's a raoepb to be nervous but i'm hopeful we will get surprise stability this time next year and 2013 we will get price growth. >> susie: we will leave it onth. thank you, mark, for being on the program tonight. >> thank you, susie. >> susie: we have been speakingk
a not-so-great end to what was an otherwise great month for the u.s. stock market. lets take a look at tonight's "market focus!" a sell-off in european shares set the tone here on wall street. eurozone banks plunged following news of m.f. global's bankruptcy. u.s. financial stocks fell in sympathy. the sector just came off its biggest weekly gain in more than a year. bank of america, j.p. morgan and citi all lost significant ground today. all of the dow components ended the day in negative territory. aluminum giant alcoa was one of the dow's biggest losers,
dropping 7%. the stock is down 30% this year as falling aluminum prices continue to take the shine off of profits. speaking of shiny metals, gold fell sharply. the precious metal lost $22 to settle at $1,725 as the dollar sold off following word that the bank of japan intervened in currency markets. still, the yellow metal is up 6% for the month. oil prices also rose sharply in october. crude oil futures gained 18% in october but fell modestly today. energy stocks were the weakest group in the s&p 500. one energy issue caught in the downdraft was u.s. refiner valero. its shares, which have run up on takeover speculation, tumbled nearly 8% after reliance industries, an india-based firm, denied it had any interest in buying valero. valero will report quarterly results tomorrow. another weak group in the s&p 500? materials, led by steel stocks. a.k. steel and u.s. steel each
fell 9%, while allegheny technology ended off 7.5%. this sector has been under pressure lately and blames it on china's currency policies. over in the tech sector, yahoo slid 5.5%. the company said it's considering selling its asian assets rather than finding a buyer for all of yahoo. it would redistribute that money to shareholders. two japanese auto giants got caught up in the selling. honda plans to stall production at its north american plants by 50% due to parts shortages caused by flooding in thailand. that flooding also affected toyota, which may cut overtime for production in north america through the end of this week. and that's tonight's "market focus." it's one of the most golden of golden parachutes. oil driller nabors industries is
giving outgoing c.e.o. eugene isenberg a $100 million payout. the "wall street journal reported that 81-year-old isenberg is getting the rich on as chairman of the company. a clause in his contract stipulates the payment in case of a "change in responsibility." in the past 20 years, not counting the latest sum, but including the value of exercised stock options, isenberg has made almost $750 million, according to standard & poor's execucomp. nabors recently reported a third-quarter profit of $74 million, versus a loss last year. prescription drug costs are a major concern. quality concerns and industry consolidation are some of the reasons manufacturers aren't making enough drugs for everyone who needs them. today president obama announced an initiative to help prevent drug shortages. darren gersh reports.
>> reporter: flanked by a cancer patient and a hospital pharmacy manager, the president today warned of the risks of growing shortages of drugs. >> this is one of those slow- rolling problems that could end up resulting in disaster for patients and health care facilities all across the country. >> reporter: latest figures from the university of utah's drug information service shows the number of drug shortages rose from 211 last year to 232 so far this year. that's up sharply from 129 just four years ago. manufacturers are not required to say why they are running short, leaving experts to speculate. >> is it that the companies haven't had enough profits and that's why they haven't been able to reinvest in their manufacturing? perhaps f.d.a.'s regulations are too difficult to comply with? we don't know why companies are having these manufacturing problems, but we do know that they are having these problems. >> reporter: many of the drugs in short supply are delivered
through an i.v. they are usually generics and are complicated to manufacture. >> in addition to the complexity, we also have that some of these production lines may be getting older and in need of repair. >> reporter: the president's executive order today is part of his campaign to blame congress for blocking action on important issues. the order requires drug makers to provide more advance notice of supply disruptions. to head off shortages, the f.d.a. will speed up approvals of new drug suppliers and manufacturing facilities. the justice department will also investigate allegations of price gouging. some hospitals say they are seeing drug distributors taking advantage of shortages to make huge short-term profits. >> they do report seeing prices anywhere from tens to hundreds of times what you would see as the normal price. >> reporter: to prevent shortages in the future, makers may have to consider heading off shortages by providing incentives to keep manufacturers making drugs that are now unprofitable. darren gersh, "nightly business
report," washington. >> susie: as we reported, october was a good month for stocks. our next guest says november could be another good one for investors. in tonight's "word on the street," david peltier joins us. he's portfolio manager at thestreet.com. >> susie: hi, david.thank you f, susie. >> susie: tell us why you're up? >> historically november is a pretty good month in the market. like looking for certain pockets of value. the energy sector and individual names that should do well wether the market goes up between now and the end of the year. >> susie: we heard from so muchg seasons so cautious on outlooks for the rest of the year. where is the catalyst for a growth in the stock market? >> there were some good and some bad about. two-thirds of companies in the smp 500 have exceeded earning spec stations.
i want to look where earnings are growing the most. energy is very cheap right now. when you look at value investing any stock or sector has a price to be bought. i think there is good value out there now. >> susie: alright.let's talk abe possibilities out there. you have two stocks to tell us about. the first is triquin semi conductor qtnt. tell us why you like it? >> it's below tangible book value. this is how much the shareholders have on balance sheets when a company is profitable it won't trade below that level for much longer. they have had operating problems in the past few quarters as management gets business back on track i think the risk premium will back the stock. >> susie: alright.now this stocr this year was about $15 we saw a moment ago. now it's about $5.
what target do you have for the stock. >> i think the stock moves back up to $7 or $8. they're a big supplierer of apple. have two chips for the new iphone and should be profitable for the next few quarters. >> susie: the next one nortrupp. >> yes they have a 3.5 percent dividend value. the ceo was buying the stock on the open market. i think they're inexpensive at 8 time earning pricing the bad news and they raised the earning guide last week. >> susie: again this is a stocky going strong up to $70. now it's much lower than that. what kind of a target do you see on this stock. >> i think this stock could
ultimately move back up towards 70° no matter the over all market the next few months. >> susie: any disclosures davidr newsletter readers but i do not own it personally. >> susie: thank you, david.we hd peltier. >> tomorrow five of the gop candidates will join us on manufacturing on the u.s. economy. the complaint is nothing is made in america anymore. here they make construction and far gear for the global market. we will have full coverage of the candidates remarkets here. >> susie: here's what we're watching for tomorrow. the federal reserve begins a two-day meeting on interest rates and the october reports on construction spending and manufacturing are released. also tomorrow, u.s. automakers could have an october surprise. experts predict strong car sales, with some brands seeing
their strongest month in several years. more and more americans are staying home to watch movies. for the first time since 2008, home video sales have increased. americans spent nearly $4 billion on at-home movies over the summer. that's a 5% increase over the same period last year. consumers bought more blu-ray discs and rented from kiosks like redbox-- and mail-order and streaming videos from netflix. despite that sales, buying is down for the year about 2%. do you like bigger screens and faster data service? at&t wireless has a cell phone for you. starting on sunday, the company will sell two new phones, the h.t.c. vivid and the samsung galaxy s2 skyrocket. both run on google's android software. they'll only be available in nine cities, including atlanta, chicago, dallas, washington d.c. and boston.
at&t will charge and extra monthly fee for phones operating on the new network. there's debate on capitol hill on how the current tax code should be restructured. many lawmakers and business executives say the system currently being used is too complicated and needs to be fixed. tonight's commentator agrees. he's doug holtz-eakin, president of the american action forum and
former director of the congressional budget office. >> a lot of people have heard about tax reform, but they don't really understand why it would be important. let's start with corporate tax reform. most people focus on the fact that the united states has a combined income tax of 39.2%, the highest in the developed world, for the single most anti- growth tax of all the possible taxes. so if you have a factory, the tax wipes out the incentives for hiring more workers. that hurts jobs, that hurts incomes, that hurts our standard of living. worse, that factory is competing with, say german, factories in, say, the czech republic. when germany sells in the czech republic, they pay just the 19% czech republic tax. but the u.s. firm pays 19% plus another 20.2% to reach the u.s. tax of 39.2%. the u.s. factory will lose that business. even worse, when corporations realize they can't compete in the united states these jobs in
the u.s. are going to go away entirely and end up in factories around the globe. which brings us to the most important thing about corporate tax reform-- fairness. who loses when we can't compete internationally? and who loses when we don't grow? american workers lose wages, benefits and jobs. that's what at issue in corporate tax reform. growth, competitiveness and fairness. we need to fix this tax system. i'm doug holtz-eakin. >> susie: and finally, a holiday first for macy's. the department store plans to get an early start on black friday sales by opening at midnight. more than 800 macy's stores will stay open for 23 hours and close at 11 p.m. on november 25. last year, only eight macy's locations opened that early, while the rest let shoppers in at 4 a.m. c.e.o. terry lundgren says the move is in response to shoppers' eagerness to shop early for great deals. target announced a similar move last week. that's "nightly business report" for monday, october 31. i'm susie gharib. good night everyone and happy