Transcripts For WETA Nightly Business Report 20131001

The Health Exchanges are up and running and the ceo of wellpoint, one of the systems biggest players, tells us what to expect as the insured begin shopping for coverage. All that and more tonight for nightly Business Report for tuesday, october 1st. Good evening, everyone. It is day one of a partial federal Government Shutdown, and if youre like most people, you didnt see this one coming, stocks ended the day higher. Heres what a congressional stalemate and failure to reach a budget deal looks like in washington. Twofifths of all government offices have been shuttered, parks and monuments, medical Research Products put on hold. 800,000 federal workers furloughed, told to stay home without pay, and president obama warning republican lawmakers about how harmful past shutdowns have been and why Congress Needs to reopen the government, restart federal services, and get people back to work. We may not know the full impact of this republican shutdown for some time, it will depend on how long it lasts, but we do know a couple of things. We know that the last time republicans shut down the government in 1996, it hurt our economy. And unlike 1996, our economys still recovering from the worst recession in generations. Meanwhile, on wall street, heres how the shutdown looked, all the major stock market averages recorded modest gains, climbing right out of the opening bell. The dow ended the day 62 points high, the nasdaq was the biggest gainer, up 46 points, and the s p added 10. Well, believe it or not, there have been 17 federal Government Shutdowns in the past. The last one in 1996. So how have the markets reacted in previous budget impasses and what if the standoff lasts longer than traders are counting on . Heres a look at how the markets reacted in the past and whether a shutdown may be good news or bad news for investors. What did you find out, dominic . Susie, tyler, look at this, the Government Shutdown for a lot of employees. For the most part, markets seemed to shrug it off, so just how much does a Government Shutdown really matter for stocks . The u. S. Will lose about 300 million of Economic Activity each day. They go on to say that a weeklong shutdown could shave 0. 2 of a off Economic Growth in the fourth quarter. In other words, the longer any shutdown last, the incrementally worse Consumer Spending could be. So with stock markets, with trading around Government Shutdown, we looked at the last 12 times its happened, going back to 1978. On average, the uncertainty leads to losses in all three major u. S. Averages a month prior to the shutdown, but fast forward to a week after each shutdown, on average, the dow was up a percent well call it. A month later, that gain was nearly 2 , and a year later, the dow was up an average of, get this, 15 . A week after the shutdown ends, 2 a month later, and 15 a year later. And how about the nasdaq . Its actually down marginally a week after a shutdown, up marginally a week later, but get this, up 20 on average a year later. Now the caveat here, guys, were seeing other moving parts besides the shutdown, but this would be one reason why investors arent all that concerned. Of course, with the debt ceiling debate, thats a complete other story. Maybe we should shut down the government every year with that kind of return. I feel a lot better already. Thanks. Thanks very much. A delay in the release of marketmoving economic data, that includes todays august Construction Spending report, which was never released by the bureau of economic analysis. Thursday, though, we do expect to get last weeks figure on initial jobless claims, because that data was already collected, but the real biggie, the report that all of wall street waits for every month may not be coming out this friday, that is the labor departments september jobs report. Right now Officials Say its not expected to be released until government funding is resumed. Heres another possible causality of the shutdown, the Justice Departments trial to stop the merger of American Airlines and us airways might be postponed. Right now its slated late november. Federal issuing asked to postpone the proceedings due to a cutoff in federal funding. Meanwhile, just today, the Texas Attorney general announced a split from the Justice Department saying that his office now supports that airline merger. Shares of us airways and americans american company, which trades on an alternate exchange, both closed higher today. A 27monthlong streak of sales gains for the u. S. Car business has ended. Ford sales did rise nearly 6 and chrysler had its best september in six years, but sales fell sharply at general motors, toyota, volkswagon. Gm said weak demand for its redesigned fullsized pickups was a big driver of its 11 sales drop last month. The annual sales rate dipped to 15. 3 Million Units last month, down from 16 million in august. Over in the commodity markets, gold prices took a tumble today, settling at a twomonth low after the Government Shutdown sparked a lot of investors to put their money into less risky assets like cash. Gold prices fell more than 3 , losing more than 41 an ounce. Pharmaceutical giant merk is slashing costs, as well as thousands of jobs, as it battles competition from cheaper generic drugs. Investors, though, rallied around the dow component today, sending shares nearly 2. 5 higher. Mary thompson has more on merks restructuring and whats next for the company. Drug giant merk is slashing expenses to sharpen its focus. Heres ceo kenneth fraser. This is not a change in our strategy. This is all about greater focus and about generating greater operational efficiencies. The changes betting merks future on four areas, vaccines, diabetes, oncology, and acute care. To get there, its cutting 2. 5 billion in costs by 2015. Its trimming 8,500 jobs, on top of the 7,500 cuts already announced. Shrinking its workforce by 20 . Its reducing its real estate footprint and abandoning Research Products with little promise. And while merk still expects to earn 3. 45 and 3. 55 a share this year, independent consultant barbara ryan says recent product delays and the failures from key drug trials forced merk to act now. Clearly, that hasnt delivered results for shareholders that are competitive with their peers, so i think this represents the fact theres pressure for them to find ways to improve their return. The expense cuts seen helping merks bottom line in the near term while it works on the key to longterm health, that being its pipeline. Analyst tony butler says the company has two important drugs in the works. One in oncology and one in alzheimers. Just to be clear, there are others, but those two are the biggest opportunities that merks seen in a long, long time. Merks been hampered by slowing sales of its diabetes drug and generic competition for singulare. Recent successes like gardisil have been few and far between. For nightly Business Report, im mary thompson. We begin market focus tonight with earnings from the largest u. S. Drugstore operator. Were talking about walgreen. Strong sales of generic drugs offset spending on nonessential items. The company also said its Customer Loyalty card program helped boost sales and that it sees the trend improving. Walgreen was one of the topperforming stocks on the s p today, rising 4. 5 to 56. 24. More investors bailing out of jcpenney. This time its perry capital. It sold about half its position in the retailer only a month after it had increased its holdings. The move comes days after jcpenney said it would issue 1 million in new sales. The stock is down more than 30 just over the past four weeks. Well, a weak outlook pressuring sales of diamond foods, recorded a wider than expected quarterly loss and agreed to pay 96 million in a securities lawsuit. Costs associated with the relaunch of emerald nuts and a reduced supply of walnuts. If youre in the nut business, that hurts ya. Stock dropped to 10. 21. Shares of yahoo getting a lift after citi raised its price target. The analyst citing user growth and search trends. The Chinese Ecommerce Company yahoo holds an ownership stake. Stocks rose to 34. 31. A clerical error was responsible for a proposed cut in the medicare reimbursement rate for one of its tests. The stock took a hit yesterday. Today, they said that low number was the result of a clerical error and will be corrected so the shares bounce back, closing up almost 8 to 25. 31. And now is your chance to own a piece of the nations bestknown skyscraper. The Empire State Reality trust, the owners of the new york city Empire State Building set prices this morning at 13 a piece. This is at the bottom of the inspected range. The Company Hopes to raise just under 1 billion when shares begin trading tomorrow. The ticker symbol, esrt on the new york stock exchange. Next, the Health Care Industry undergoes a dramatic shift. First, lets take a look at the International Markets today. Well, despite the partial shutdown of the federal government, new Health Care Insurance exchange is open for business today, the most Ambitious Initiative of president obamas signature legislation, Affordable Care act. So how did things go on this inaugural day for those state and federal online and telephone marketplaces . Bertha coomes joins us now from albany. Bertha . Reporter tyler, you know, officials have been saying all along, expect to see glitches on the early stages of this open enrollment process on the exchanges. Well, they certainly werent wrong. We saw plenty of them today. Marylands couldnt come up, hawaii couldnt come up on time today, and a lot of people had trouble logging on. Even so, we saw here in new york Officials Say some 10 million visitors to the site. Not necessarily unique visitors, but that gives you an idea of the kind of volumes they were seeing today. In some cases, more volume than they could handle. New york States Call Center handled more than 2,500 calls. And its exchange website, more than 2 million hits during their first two hours of operation. We certainly anticipated there would be a very high volume, 2 million hits in a couple of hours, honestly, exceeded even our estimates of the initial need. Reporter while new york scrambled to add server capacity, maryland officials struggled with connectivity issues, which prevented the States Health connector from going online until noon. While there were no major problems reported with colorados exchange, some residents there still preferred inperson information. Coverage, of course, would start january the 1st and were going to see if you qualify. Okay. Once we help you apply, well go through the process with you online. Reporter in texas, one of 36 states with a federally built exchange, residents had better luck trying to get information on the phone and at inperson Information Centers than online. Kimberly got the answers she needed after finding she could not log on to healthcare. Gov. The website was overwhelmed, so we couldnt get on the website to find out how much it would cost. Reporter whats key now is getting those issues resolved over the next two months, when enrollment applications are expected to peak for the january start of coverage. Our systems folks are able to have capacity added to the system. Theres a Technical Group of experts that are monitoring the performance of the website and will adjust it as needed. Reporter federal Officials Say some 2. 8 Million People logged on today on healthcare. Gov, the federal portal for all of those states where they built the exchanges. Imagine if theyve had better capacity, it was very slow, they might have had even more people logging on. But what everyone continues to say, this is just the opening day of what is going to be a marathon. Back to you. Thanks a lot, bertha reporting from albany, new york. One company that could benefit in a big way from these exchanges is wellpoint, the nations second largest insurer, joe swedish recently predicted that the new business could boost his companys revenue by 20 billion by the year 2016. When i talked with him earlier today, i asked him of the 46 million americans uninsured, how many does he expect will become wellpoint customers . Our sense is that were projecting 2 million enrolles coming to wellpoint through the enrollment process into 2014 and beyond, so we believe were perfectly positioned to bring in those enrollees as the enrollment process unfolds. Mr. Swedish, i know its a little too early today, but from what youre hearing, how is the signup going so far . Well, were very encouraged, and ill tell you why. One, theres top of mind awareness. Number two, people are shopping. And were seeing that in all of our states, which gives us a lot of encouragement regarding what the next six months will look like. But were also hearing from a lot of people who are saying they just dont think its worth it to sign up on these insurance exchanges, that the premiums are still expensive and they are worried they are going to have limited access to doctors they can see. Make your case on why they should sign up. If there is subsidy that is available to them, i would argue that the out of pocket is substantially less than what they would expect. So, they really do have to do their homework in that regard. Regarding network configuration, that is a fundamental part of how the exchanges are built. Networks are built to create access, to create quality, and to create price competition. With respect to wellpoint, we believe we have met that test in terms of melding those three objectives together to create a product that is going to be highly desirable to enrollees that believe the exchanges will bring them health care here to for they have not head. Big companies, as well as Small Companies outside of wellpoint are all lobbying to get this new business and consumers also have lots of choices here. Is all of that competition going to be bringing down prices . It would seem so, right . We believe q seeing that some Big Companies take walgreens, for example, thats saying to their employees, here, take this money and go buy your own insurance. Is that the direction that were going and that soon all of us will have to buy our own insurance . Well, i think its maybe not quite accurate to say all of us will be buying insurance on the exchange. We believe that there will be a very Robust National account activity, large employers will retain their employees. Yes, there will be those that move their employees out to private exchanges, maybe ultimately public exchanges. I think were just witnessing an incredible transformation that has begun on october 1, and were going to see a lot of moves and changes as the Health Care Landscape changes. And id underscore its a dramatic shift. So two, three years from now, what are we going to be saying about obama care, success or disappointment, failure . Were betting that it will be a success. Were betting the hallmark that weve administered by way of analysis of what the consumer wants, the consumer censure approach to delivering health care to these consumers, will translate to success in the long term. Swedish also told me that the Government Shutdown is not having an adverse impact on the obama Care Insurance exchanges, and for all the criticism, the program is getting from lawmakers in washington, he still says its a quote, successful model. Coming up on the program, am zon is expecting a big rush for the crucial Holiday Shopping season and is hiring thousands to get ready. First, heres how commodities, treasuries, and currencies performed today. Get ready for apartment rents to climb higher. If you can find a place to rend. Vacancy dipped to the lowest level in a decade. Just 4. 2 of the nations Apartment Units are currently unrented. The firm says that despite the decline in vacancies, a weak job market and stagnant wages have prevented rents from rising. A big settlement between wells fargo and freddie mac today. Wells is paying freddie 669 million, most in cash, to settle claims of Mortgage Loans that went bad. The nations biggest Mortgage Lender will repurchase risky home loans it sold to the Government Firm at the height of the financial crisis. Susie, a big auto recall to tell you about in a year marked by several of them. Bmw says it is going to have to recall 176,000 vehicles. The problem, apparently, is with the power brake system. All of the cars are from the model years 2012 to 2014, obviously, the most recent models there. And the company says that even if the oil is cut off to the brakeassist mechanism, which is apparently the part thats faulty here, the brakes will still work, but drivers may have to press harder on t eer on the. Meanwhile, borrowing by Small Businesses last month hit a sixyear high. The Thompson Reuters Small Business lending index rose 1 in august, reaching its highest level since 2007, before the start of the great recession. This reading came as investors and Business Owners were preparing for the Federal Reserve to announce a reduction in its stimulus program, something the fed decided not to do, citing uncertainty about the u. S. Economy. Well, walmart is gearing up for a big boost in webbased sales. The worlds biggest retailer announced plans to open two ecommerce distribution centers. One center will be in fort worth, texas, with 275 fulltime associates. The other is planned for bethlehem, pennsylvania, which will eventually employ 350 staffers. In the meantime, a company firing on all cylinders, amazon. Com is getting ready for an expected boost in Online Shopping this holiday season. It is hiring, get this, 70,000, 70,000, temporary workers at its u. S. Fulfillment centers. Thats 40 more than it took on just a year ago. The Worlds Largest etailer says so far this year it has turned 7,000 Seasonal Workers into fulltime employees. Now even though amazon and walmart are preparing for a boost in online sales this year, a new survey finds that more than half of all americans do not save money for the Holiday Shopping season. Transunion says that more than 64 of people surveyed say they dont plan on putting aside money earmarked for holiday spending. For many, this may mean using current credit cards, o opening new lines of credit, or taking on extra debt. No matter how you look at it, all harmful for Consumer Financial health. Finally tonight, more and more women are taking the whim and buying cars on their own. One company is running up against roadblocks. Jane wells has more. Reporter a lot of people put buying a car up there with root canal, minus an thee sha. Almost 40 of all new car buyers are now women, yet a survey by capital one suggests the vast majority of them bring a man with them to buy a car. True car is trying to change that in an ad that is driving controversy. I talk big, right, and at the dealership i was trying to hold my own. Its kind of tough. True car provides free online pricing information on cars. The californiabased Company Gives buyers prices. True cars Business Model was challenged by some dealers and regulators and lost about half its network. It survived all that, is now bigger than ever, but is getting new heat over that ad aimed at women, especially this part. True car makes it a lot easier to go in by yourself. I dont need to bring a dude with me. Some call that sexism. Ad week said, quote, apparently women have to Research Pricing while men have the magical ability to match it on the nose. The companys founder has been caught off guard. You know, my initial response is look at go daddy, look at carls jr. , these companies that really do exploit women. Were, in fact, positioning the female buyer as a strong buyer, who has the ability now to make great choices with great information, and in no way was it meant to demean anyone. Has the ad worked . Business from women are up 40 . Revenues this year should double to 135 million. As more women are negotiating car prices online, only finalizing the paperwork in person with or without the help of a, quote, dude. For nightly Business Report, jane wells, los angeles. You know, switching gears here, big day for health care, october 1st launch, and you gave it a test drive. Only time will tell whether these Health Care Exchanges will work. I tried to register today, i did have to wait about ten minutes while the thing was overwhelmed with other people, then i had several glitches in trying to register, then you have to click on something. Did you give up . Never made it on. I will try again tomorrow. We will report back to you. A lot of glitches. Its a lot of things that have to go right. Thats nightly Business Report for tonight, im susie gharib, thanks so much for joining us. For more stories you saw here tonight, join us on our website, nbr. Com. Im tyler mathisen, thank you very much for watching this evening. Have a great evening, everybody, see you back here tomorrow. Announcer nightly Business Report has been brought to you by thestreet. Com. Interactive multimedia tools for an everchanging financial world. Our dividends stock adviser guides and helps generate income during a period of low interest rates. We are thestreet. Com