Transcripts For KQED Nightly Business Report 20170801

America and thats widely considered to be the main driver of julys gains which were the best since february. Today the market was mixed. The Dow Jones Industrial average advanced 60 points to 21,895. Nasdaq fell 26. The s p 500 was off just slightly. For the month, all the major indexes were up. The nasdaq was the big winner. Bob pisani takes a look at what worked for investors and what didnt in july. Reporter was a good month overall. S p up about 2 . Up nearly 11 for the year. Techs been the leader and it was again in july. The demand for semiconductors to power cell phones and appliances keeps going up. Oil had a big rally going from 44 to nearly 50, but didnt help a lot of oil stocks. Exxonmobil hit a 52 week low on friday. Banks were mostly down for the knot. They benefit when Interest Rates are higher and traders have been surprised rates have not been rising despite the improving economy. Inflation, for example, remains below the Federal Reserves target levels. One major issue, transports are diverging from the rest of the market. Dow industrials up 3 for the month. Transpor its not one sector. Right across the board. Airlines, railroads and truckers all down. Meantime, money continues to flow into stocks. Investors are increasingly using etfs to get in and out of the market. July saw 23 billion in inflows, lower than the First Six Months of the year but still on pace for a record year of inflows. Second straight year. Investors are continuing to pour money into International Funds which have been strong and bond funds particularly high yield funds as investors continue that hunt for yields. For nightly business report, im bob pisani at the new york stock exchange. When stocks move up day after day, month after month, bargains of course become fewer and farther between, but our next guest has some ideas on where to find them. Hank smith is chief Investment Officer at haverford investments. Hank, nice to see you. How tougher is it to find bargains today than, say, a year, three years ago . Well, theres no question its definitely a little bit tougher but id like to challenge the premise that the market is overvalued just because were making new alltime highs. This market move since the election is right in line with Earnings Growth so there hasnt been that much change in valuation. Were looking at a market at about 18 times forward earnings above the historical norm of about 15 times forward earn rgsrg ings, right in line given the low leve and low levels of Interest Rates so i would characterize the market as fairly valued today. And also there arent all that many other alternatives to equities at this point for a return on your money. Right. The acronym, its a t. I. N. A. Market, there is no alternative market, is very apropos here. The market on average is overvalued or undervalued, as you say, its 18 times forward earnings which is 20 above the historical norm, there are pockets where the market is much more highly valued than that, certainly. Wed have to agree. Then others where some of the stocks have been left behind. Tell me about where some of the ones that are decidedly undervalued reside, and what you have to be willing to accept if thats where you want to put yes. T have the egregious out, we valuations we did in the late 90s, yet we have some areas that are above that average, but nothing like the late 90s where you had 75, 100, 125 times earnings. But today, we think youre getting value in the pharmaceutical stocks that are selling below market, many of them at a below market p e with above average yields and growth big pharma . Big pharma . The ones we know. Johnson johnson, merck, whatever. Merck, pfizer, bristolmyers, yes. The names we all know. And i think youre going to get youre getting a good valuation, youre getting an excellent yield. A better than bond yield with Dividend Growth there. We also think you have value in the banking sector. Look, you have several tailwinds, Interest Rates are trending very slowly higher, but they are trending higher. You have the potential for less regulation. Thats a huge plus. And you have a Global Economy thats doing thats doing very well as compared to several years ago. So that all plays in well for the banks. You know, you also said that you also point out in the notes that i have here that energy has been out of favor. Its had a decent run recently but you have three Energy Holdings that you think still provide good value. Yes. And in this space, we think its very important to stick with quality and we own the three highest quality names there are. Chevron, kpexxonmobil and schlumberger and getting paid to wait with above average dividends there and companies that continue to grow their dividend despite a very challenging macro environment. All right, hanks thanks very much. We appreciate it. Hank smith with haverford investments. Good to be with you. Well, content is king and thats one of the reasons why discover communications is buying Scripps Network interactive. That deal which we tole yd you a possibility sent shares of discovery lower and scripps higher. The combined company would command nearly 20 of available viewership in the u. S. And comes as the Television Industry faces numerous challenges and changes. Julia boorstin has the details. Reporter the discovery channel, Animal Planet and tlc are teaming up with the food network, hgtv and the diy network as Discovery Communications is buying Scripps Networks interactive paying 70 cash and 30 stock for a deal valued at 14. 6 billion including debt. The two companies are similar and that both of their channels have a truly dedicated fan base. Its not about getting the biggest audience, its about getting an audience that you can nourish that really loves you, and nobodys done that better than scripps with home and garden and food and you put that together with us, we have 20 of the viewership in the u. S. And we have a huge amount of women that we can take to the market. More importantly, we have most of the quality brands on cable. Reporter the combined company have five of the Top Cable Networks for women. Giving it more leverage when it comes to negotiating fees from cable and satellite tv companies. And discovery pushes for its channels to be included in new skinny bundles. This merger comes as tv ratings and ad revenue decline as cable and satellite tv suffer from cord cutting with streaming on the rise. Putting pressure on scripps and discovery. Both Companies Earnings reports fell short of wall street expectations. The combined Company Plans to accelerate growth of digital and shortform video looking to profit from a loyal audience. Even discussing the potential of launching a new direct to consumer subscription service. Our Companies Continue to grow. Weve expanded internationally. We also very much like discovery. Have pivoted from a Linear Television company to more of a Digital Content origination company and now just seemed like the right time and i have to say its a historic day for our stakeholders, the scripps family, our public investors. Reporter the deal requires regulators and shareholders to sign off but its expected to close by early next year. For nightly business report, im Julia Boorstin in los angeles. Meantime the Cable Television company, charter communications, say its not interested in the prospect of a merger with sprint. The comments come despite interest by sprints parent, softbank, to create a giant new Telecom Company in the u. S. Charter is one of the nations largest internet and paid tv providers. According to the wall street journal, softbanks chairman may still decide to make a formal offer to acquire charter, anyway. Shares of charter and sprint moved in opposite directions. Pimco has staged a comeback and is now the worlds best selling active mutual fund manager. According to the Financial Times pimco attracted almost 50 billion to its funds in the six months ending in june. Just a few years ago, investors pulled billions of dollars following the departure of big gross, known among investors as the bond king. The vice chair of the Federal Reserve said political and Economic Uncertainty has contributed to slow Global Growth and thats part of the reason why Interest Rates are low both here and overseas. Stanley fisher said the phenomenon is being driven by a number of factors including an aging population and weak levels of investment. In washington, president trumps top economic adviser says the white house is committed to overhauling the tax code before the end of the year. Director of the National Economic council gary cohn said the number one topic at todays Cabinet Meeting was tax reform. He added the administration and republican congressional leaders are in agreement on that topic but later in the day republican senator orrin hatch, the senates top tax law writer, told reuters reducing the Corporate Income tax rate to 25 from 35 will be a challenge, let alone getting it to the 15 rate advocated by the president. And another big change at the white house today. Anthony scaramucci is out as communications director. He held the job ten days. Scaramucci, a former new York Hedge Fund worker, apparently ran anow of the president and his new staff chief general john kelly over a foul mouthed tirade against members of the president s inner circle. Multiple sources they the dismissal came at kellys request. The white house said scaramucci felt it was best to give kelly, sworn in today, a, quote, clean slate. Still ahead, cramped and crowded. Why a judge is saying enough is enough when it comes to shrinking airline seats. So much for opecs production cuts. According to reuters, the cartels oil output has risen to a 2017 high. Opec and nonopec producers will meet in abu dhabi next week to discuss why some nations arent fully complying with their commitment to cut output. Despite the increase in smi, the price of domestic crude surpassed 50 a barrel. The commodity climbed 8 last week. That rise in the price of oil is being felt by drivers at the gas pump. But for how long . Jackie deangeles takes a look. Reporter have you noticed something at the pump . Getting more expensive to fill up. Over the last month, oil prices have climbed a little more than 7 and today crossed 50 a barrel for the first time in two months. Most of that runup coming because of evidence of summer driving demand kicking in later in the summer. The average price of a gallon of gas is following crude prices higher. Now 2. 32. Aaa says is could go higher than that. Seen prices rise 5 cents in aly l over a week and a half and anticipate prices will go up 5 cents before we hit labor day. For drivers, an end to a very lovely summer where we were seeing low gas prices moving into july. Obviously, those dropping summer gas prices, those days are over. Reporter the rise in prices has been swift and sharp. Wasnt long ago we were talks about lower gas prices this summer. Kind of li christmas in july. Reporter the focus has shifted and now some experts say its possible prices will surpass their peak this year of 2. 42 a gallon and could do it rather quickly. The funny thing with fuel is, when crude falls, gas prices take their time to move down, but when crude prices spike, the hikes come very quickly. Theres a number of factors in the summer that actually cause gas prices to spur up that arent directly connected with crude prices. We also are looking at higher demand this summer. We also are looking at u. S. Production levels as well as where refiners are in terms of their runs, and so theres a lot of other factors playing into the price at the pump, not only the price of fuel. Reporter more expensive gas be a hire trehigher trend for tf driving demand drops in the fall and prices usually move lower. Rising tensions in venezuela could keep the price of crude elevated which would translate at the pump as well. For nightly business report, im deangeles. Tesla and General Motors are charging up the electric car market. This week the chevy bolt goes on sale nationwide. Over the weekend tesla delivered the first model 3s. Phil lebeau has more on the two new electric vehicles trying to make carmakers and buyers rethink what it means to go green. Reporter tesla has finally rolled out its model 3. In front of a throng of tesla employees at its plant outside san francisco, ceo elon musk delivered the first 30 model 3. Were going to work day and night to do right by the loyalty that youve shown us, thank you for doing that. Reporter now that tesla has delivered the first 30 model 3s, the real challenge comes. Producing a half million vehicles next year. As tesla ramps up its production, its racing to not only fill reservations for the model 3, but also win over car buyers who traditionally look at a Mercedes C Class or bmw 3 series. Tesla definitely can compete with mercedesbenz and bmw because it does have that elevated image. It doesnt necessarily have the product lineup that a mercedes or bmw has but in terms of people wanting to pay a little bit more, it could definitely capture more of those type of customers willing to pay extra to drive a car that represents how they feel about life. Reporter meanwhile, gm is also expanding its electric car sales. Making the all electric chevy bolt available nationwide. Until now, sales were limited to a few states like california and oregon. Like the model 3, the bolt will start in the mid 30,000 range. This is the start of several automakers pushing newer electric vehicles. Many at lower prices. But with greater range, some promising over 200 or 300 miles when fully charged. The goal . Convince americans they can go electric and still go wherever they want whenever they want. Phil lebeau, nightly business report, fremont, california. Boeing is creating a new unit to develop aircraft electrical systems. The move could pit the plane makers against suppliers like honeywell and rockwell collins. The unit called boeing avionics will focus on aircraft navigation, flight controls and other core technologies. The Worlds Largest plane makers said the goal is to lower costs, increase quality and deliver more services and revenue to the company. More Services Revenue to the company, i should say. Shares of boeing rose in trading today. A federal judge is ordering the faa to review seat sizes and leg room on commercial airlines. The advocacy group, flyers rights, pushed for new rules regulating seat sizes saying smaller seats are a health risk and the average size of the airplane plane, itself, has shrunk along with the spacing between them. So how might this impact the airline industry, itself . James is aviation expert and attorney at Motley Rice Law Firm and joins us to talk more about that. Welcome. Nice to have you here, jim. Thanks for having me. Whats your reaction overall . It seems like it might be good for passengers, certainly, if, indeed, we get bigger seats and better spacing, but what about for the ai obviously, for the passenger, it would be a much more comfortable ride. If you look at the court order, the court was focused on the safety aspect of passengers being able to egress the airplane. The overall impact on the airlines is probably not that much. I would imagine that the airlines, theyre trying to decrease the seat size to put more passengers to increase revenue, i would imagine theyll keep that Revenue Target the same, and if they do have to increase the seat size, theyll just end up paying more for a ticket. So this was a judge who ordered the faa to take a look at seat size as it impacts on safety and how quickly people can get off a plane. Were a long way away, arent we, james, from a point at which anybody orders airlines to change the size or the pitch which is the difference between where a seat ends and the next one begins on an airplane, right . We are. The order specifically, as you mentioned in the introduction, group flyers rights, petitioned the faa to change or stop the airlines from shrinking the seats. And the court the faa denied the request and based it by what they said were some studies, but they didnt produce any studies or a evidence to the court and the court said you dmeed to look at this and you need to produce something that says that it does not affect the egress. Lets say the faa does take a look at this and decide that they need to change or set certain standards for rules. Does congress become involved . Or not . Congress certainly can become involved. The faa works based on congress rules. There is a current standard right now that aircraft that seat more than 44 passengers has to be able to have everyone out in 90 seconds or less so thats something that i think the faa really needs to investigate with these shrinking seats. Right. Jim, thank you so much. Appreciate it. Thank you for having me. All right. P pandoras results are music to investors ears. After the bell, the Music Streaming Company posted a nor rower than expected loss in the latest quarter. Sales grew more than estimates helped by growth in advertising and subscriptions. Pandoras shares anymo ss initi uponed on the news. 8. 95. Dinavaxs experimental hep b treatment gets another shot. A panel of expert advisers to the fda recommended to approve the biotech companys medication after determining that date ta t supported the safety of the drug. The treatment which has already been rejected twice will be considered for approval soon. Shares rocketed. 71 . You heard me right. To 15. 85. The utility owner scana said it would abandon plans to finish reactors in South Carolina. The company cited rising costs and uncertainty over tax credits. Scana and its partner, South Carolina Public Service authority, had already spent close to 8 billion on the plant. Scana shares were higher by 5 to 64. 37. Ceiling and wall maker armstrong world said lower costs helped that companys sales grow at a faster clip than analysts were expecting. Profit also rose. The company also lifted its fullyear outlook for sales and earnings. Shares jumped 9 to 48. 55. Restructuring costs and pricing pressure in the u. S. Cut into earnings at the drug maker, sanafy. The companys overall revenue street targets. Still the Company Raised its forecast for 2017 saying it expects broadly stable earnings. Shares fell a fraction to 47. 36. And analysts at Pivotal Research g downgraded facebooks stock from hold to sell. Warning that investors are not considering the risks to growth. The official said face is facing a saturated digital ad sector and issues with ad fuelable on its platform. Shares fell 6 to 169. 5. Coming up, should the white house declare a federal state of emergency to address the Opioid Epidemic . Heres a look at what to watch tomorrow. Apple reports earnings tomorrow. Investors will be looking to see if consumers held off buying iphones in anticipation of the new model which is expected to be released. The major automakers will report their sales figures for july. The question is, what role incentives p results . And john flanery takes over tell at general electric. What to watch on tuesday. Los angeles reached a deal to host the 2028 olympic games. L. A. s bid committee estimates it will cost more than 5 billion to stage the games. It says it can cover all expense through revenue, sponsorship and ticket sales. The city also hosted the games in 1984 and 32. The move paves the way for paris to host the 2024 games. A sugary drink tax will take effect in chicago on wednesday. This after a judge dismissed a lawsuit by retailers that challenged the measure as unconstitutional. Consumers in cook county which is home to chicago will be charged a penny per ounce for both sugar and artificially sweetened beverages. An attorney for the Retailers Association said the plaintiffs are considering an appeal. The Opioid Epidemic struck dozens of states and tonight a new report from the white houses Opioid Commission recommends the president dechair a sta declare a state of emergency. Elon is covering the story from washington. What are some of the details of the report and what will a state of emergency mean . Reporter well, it would mean that congress woul additional pressure on it to provide funding for opioid addiction treatment. It would also elevate this issue in the public eye. So the commission pointed out that there are 142 americans dying every day from opioid addiction, thats equivalent of a september 11th happening every three weeks. This report that come out from the commission today used very Strong Language to drive home this idea that this is something that is happening not just in places like ohio, but across the country on a massive scale. Some of the other recommendations in this report included making sure that more money is going toward treatment and that insurers are getting reimbursed for those treatments as well. Its also requiring that Law Enforcement carry the drug which is used to reverse people who have overdosed from opioid or from fentanyl which is a substitute for an opioid. Right. That is also something being recommended currently. The report is out, Strong Language. What are some of the next steps here . Well, the next thing to do is to finalize this report. This was just a draft report that was issued by the Opioid Commission. A bipartisan commiss chaired by new jersey governor chris christie. The final report from this commission will come out in the fall and then it will be up to the white house and up to congress to actually implement some of those ideas. The white house is saying that it plans to do that in 2018. Theres also a controversy around the pricing of that overdose reversal drug. Was that addressed in the . They didnt talk specifically about how much this costs, but the idea that Law Enforcement around the country should carry it is one that has been controversial. Partly because this drug has gotten way more expensive in a very short period of time because of some of the high demand weve seen for it. Theres also some people who feel t, you know, if Law Enforcement had this drug on hand, that actually might encourage or enable some people to be exceptionally risky with this drug knowing they have a way to save themselves. All right. Thank you very much. That is nightly business re im sue herera. Thanks so much for watching us. Thanks from me as well. Im tyler mathisen. Have a great evening, everybody. Well see you back here steves the dramatic rock of cashel is one of irelands most evocative sites. This was the seat of ancient irish kings for seven centuries. St. Patrick baptized king aengus here in about 450 a. D. In around 1100, an irish king gave cashel to the church, and it grew to become the ecclesiastical capital of all ireland. 800 years ago, this Monastic Community was just a chapel and a round tower standing high on this bluff. It looked out then, as it does today, over the plain of tipperary, called the golden vale because its rich soil makes it irelands best farmland. On this historic rock, you stroll among these ruins in the footsteps of st. Patrick, and wandering through my favorite celtic cross graveyard, i feel the soul of ireland. Yeah this is bbc world news america. Funding of this presentation is made possible by. The freemen foundation. And coal Fuller Foundation pursuing solutions for americas neglected me. Planning a vacation escape thats relaxing inviting. And exciting. Is a lot easier than you think. You can find it here in aruba. Families couples and friends can all find their escape on the island