Transcripts For KQED Nightly Business Report 20170520

By midweek, the drama in washington spilled over onto wall street. But the major indexes climbed their way back. Today the Dow Jones Industrials advanced to 20,804. Nasdaq was up 28. S p 500 gained 16. For all of the weeks dramatic ups and downs, the dow, nasdaq, and s p 500 were off just fractionally. Dominic chu has more on the week that was on wall street and why it wasnt that bad. Reporter the week didnt start off with any real fireworks. But by the time wednesday morning came around, there was a feel like we actually might see that longawaited pullback for stocks thats been absent for so long. Wall street had been shaking off the headlines from washington for weeks and even months. But the possibility of interference by the white house in an active fbi investigation was enough to rattle things a little bit, enough to push stocks down on wednesday by the most in around eight months, certainly the most in 2017. And it put a real end to that run of calm and steady markets over the last few months. In the end, though, it was just another small blip on the markets radar. Gains posted by stocks on thursday and friday returned major indices to just fractional losses on the week overall. On a sector basis, the relative winners for the week were the s p 500 real estate sector, also Consumer Staples and utilities. Each of those considered perhaps more defensive in nature, less economically sensitive than others. The relative losers in the s p 500 included high profile stocks in the technology and financial sectors. Oil a big focus for traders this week as west texas intermediate crude prices tops 50 bucks a barrel for the first time in three weeks. That helped fuel a rise in energyrelated stocks. Now, next week we get another slate of big earnings reports, including retailers like lowes, tiffany and williams sonoma. And on the economic report calendar, well get data including new and existing home sales and durable goods as well. For nightly Business Report, im dominic chu from the new york stock exchange. Stocks pulled back just slightly late today on two new reports out of washington. According to the Washington Post, a white house adviser close to the president is a person of interest in the russia probe. And the New York Times reports that President Trump told russian officials in the oval office that the firing of former fbi director james comey relieved, quote, pressure on him. The president also reportedly called mr. Comey, quote, a nut job. In response to the Washington Post story, the white house says a thorough investigation will confirm there is no collusion between the campaign and any foreign entity. And on the New York Times story, the Administration Says that by grandstanding and politicizing the investigation into russias actions, james comey created unnecessary pressure on our ability to engage and negotiate with russia. The other big stories for investors are taking place overseas. President trump departed on his first foreign trip since becoming president. His eightday visit starts in saudi arabia and continues in israel. The president will then visit the vatican and later attend the nato summit in brussels and the g7 summit in italy. But the focus now is on the first stop in saudi arabia, a long time u. S. Ally. Hadley gamble reports tonight from riyadh. Reporter u. S. President donald trump may be feeling the heat back at home. But here in saudi arabia, they are rolling out the red carpet. Ministers from the gcc countries as well as leaders from other Muslim States will be filing into saudi arabia to hear from the u. S. President , not just about multibillion dollar trade deals, but also a speech to the muslim world. President trump is expected to address radical islam and ways to combat it in his speech over the weekend. Many here in the muslim world are very excited to hear just what the u. S. President has to offer. The saudis want a stronger u. S. Hand in tackling iran, in bahrain, and yemen. And they want u. S. Help to diversify their economies away from oil. Theyll say iran is the greatest threat to regional stability. Its also all about lower oil prices, which do have an impact on saudi arabias ability to Fund Improvement efforts in yemen. Its also expected a massive arms deal will be announced during the trip. Morgan brennan reports on the American Defense companies that could benefit. Reporter the u. S. Is poised to unveil one of the biggest arms deals ever. A flurry of agreements with saudi arabia expected to be announced tomorrow, while President Trump is visiting on his first trip abroad as commander in chief. The deal will likely be worth upwards of 100 billion, with a potential to grow to as much as 350 billion over the coming decades. Its a sum floated by senior whithouse officials this week. With oil at 50 a barrel, its been met with some skepticism. A little bit of this is hype. But from the standpoint of embracing this with a big grin on his face, thats what people in saudi arabia want to see right now. Reporter during his eightyear tenure, president obama approved 115 billion of potential arms sales to the kingdom. Many of those were put on hold after saudi arabia invaded yemen. Some of those may be resuscitated now, including deals for combat ships from Lockheed Martin and tanks. A new Security System is made by raytheon, run by tom kennedy. Missile defense is important to any countrys strategy today. Weve been recommending raytheon, frankly mr. Kennedy has done a nice job of expanding the capability of his offerings in saudi among other places. Also they have the premier air defense offering and probably the singular best radar capability in the world today. Reporter other agreements could involve more patriot missiles and munitions. According to one industry official familiar with the discussions, more combat vehicles from a british contractor, manufactured stateside. Analysts say it speaks to the fact that Global Defense spending is increasing. The reason many contractors are reporting strong sales growth internationally. The companies have all declined to comment, but ahead of the president s trip, the stocks did soar in trading today. For nightly Business Report, im morgan brennan. In iran, voters are casting ballots in the countrys first president ial election since its nuclear deal with world powers. The election is seen as a referendum on more moderate policies. And as seema mody reports, the outcome could ripple through and potentially disrupt the energy and oil market reporter as the iranians head to the polls, the president and his nuclear deal may be in trouble. Hassan rouhani, seeking a second term, championed the 2015 nuclear deal with world leaders. The landmark pact removed key economic sanctions on iran in exchange for limiting the countrys uranium enrichment program. As a result, irans oil output is up by a Million Barrels a day, and International Oil producers like bp and shell are looking to build out the countrys infrastructure. But this could all change if opposition candidate Ebrahim Raisi wins. Raisi, a conservative muslim cleric, says the nuclear deal has not helped irans economy. While iran has returned to growth, the country still suffers from stubbornly high unemployment. Further complicating matters is President Trumps visit to saudi arabia and israel, two countries which view iran as an enemy. Hard rhetoric exchange between the leaders could intensify tensions. If the reformist candidate wins in iran, the existing president right now, president rouhani, you should look for status quo basically in the price of oil. But if the conservative candidate wins, that could be bullish for the price of oil. You could see the tightening of the supply literally hit the oil market in a very dramatic way. Reporter thats why traders are watching this election so closely. For nightly Business Report, seema mody. Paul christopher joins us now to discuss what the Upcoming Events on the president s overseas travel agenda could mean for the market next week. He is head of Global Market strategists at wells fargo investment institute. Welcome back, paul. Thank you, sue. We want to talk about saudi arabia and nato and the g7 conference. But these late stories that broke today from the New York Times and the Washington Post, do they have the ability to further diminish the president s ability to push his agenda through . Possibly. But the markets dont seem too concerned about that right now. We would have to see some further evidence uncovered by an independent investigator. And most importantly of all, we would need to see mr. Comey go before congress and testify under oath that the white house interfered with his ongoing investigation. That could be a game changer as far as what investors think this administration could achieve. You think saudi arabia could be one of the most important stops the president makes. Yes, i do. Think of the middle east as a place where theres not just been great instability but a lot of jockeying for power. The turks want to be the preeminent regional power. So do the saudis. So do the iranians, even the egyptians. The saudis are looking for someone who will take sides between the arabs and the iranians. Theres cultural differences, they go back hundreds of years. President obama seemed at one point to want to maybe disengage the u. S. And create more of a balance in the region. Thats not what the leaders there are looking for from mr. Trump. What about nato and the g7 summit in sicily . Which do you think has the potential to move the market, either positively or negatively . Probably the g7 in sicily is more important in the near term. Nato is important in the long term in terms of how they decide to deal with russia in the longer term. But in this g7 summit, the leaders are mostly establishment leaders and they need to figure out how to counter the populist tendencies among their electorates. These populist tendencies have to do with slow growth, growth thats not inclusive of the population, and growth that feels like globalization, only benefits a few and not everyone. Theyre going to have to figure out how to come up with stimulative policies, that could have near term positive market impact. If they fail to do so, thats not necessarily a negative, but if they come out of that meeting acrimoniously, not being able to decide who is going to pay for what, and not being able to decide what kind of policies could be important, that could be negative. Well take note. Thank you very much. Thank you, sue. Paul christopher with wells fargo investment institute. Still ahead, looking forward to our market monitor, who says he has a list of stocks that could rise double digits over the next year or s the controversies swirling in washington have not yet had an impact on the economy. That is according to the president of the st. Louis fed. James bullard today said that the markets should be ready for continued political volatility. He also said that gridlock on big policy issues is the norm in washington. So if Current Events delay or stall major decisions, it wont change the current outlook. The speaker of the house will send the Health Care Overhaul bill to the senate in just a couple of weeks. Paul ryan said the delay was out of an abundance of caution until the Congressional Budget Office releases its analysis of the measure, including the legislations cost and impact on Health Insurance coverage. That analysis, or score, is expected late wednesday. When asked if the score could force another vote in the house, speaker ryan said no. President trumps 2018 Budget Proposal will aim to balance the budget in ten years. To do so, it will rely on the assumption that annual Economic Growth will reach 3 by 2021 and it calls for a total of 54 billion in domestic spending consults. The budget, which was being printed today, outlines cuts to medicare through Social Security and medicare benefits will not be touched. The full Budget Proposal will be released on tuesday. As the rest of the country waits for the Trump Administration to come out with its muchanticipated infrastructure plan, california has already passed a 52 billion transportation bill. And some districts have major Infrastructure Projects already in the works. But there may be a catch for the states residents. Aditi roy reports from lafayette, california. Reporter this is a fiveyear, 40 Million Program to improve 40 miles of pipeline carrying Drinking Water to residents of the east bay near san francisco. Officials say the renewed pipe network will be state of the art. Our job right now is to increase the rate of renewing that pipeline. Reporter but for homeowners in the neighborhood like r. J. Murray, theres a rub. The Water District is raising rates to pay for more Infrastructure Projects like this. And thats not all. Part of the reason the east bay municipal utility district is hiking fees is that during the california drought, urban area residents cut back on water use by more than 20 . That meant a decline in revenues for Water Districts throughout the state, and dozens of them have hiked rates to help pay for infrastructure. Murray, who even stopped watering his backyard during the drought, is skeptical of the more than 9 increase next year. I dont think inflation is going up to that extent. I think it would be more fair and equitable if it stayed at pace with that. Reporter but east bay Officials Say their hands are tied. Like many Water Districts, their fixed costs are 90 of their total costs, and revenues mostly come from water bills. With some Infrastructure Projects that were put on hold during the economic downturn nearly a decade ago, and rising water main breaks during the drought, they say the cost of waiting is just too high. It is a pressing need. Our infrastructure is aging. It doesnt mean it hasnt been maintained, but it does mean the investments, the original investments in this infrastructure were made generations ago. And now its time for us to reinvest in that infrastructure. Reporter murray says hell continue to save water, because its the right thing to do. Even as he gets ready to pay more for it. Im uncomfortable with perhaps the amount that theyre proposing. And i think they should probably put a sharper pencil to all that. Reporter as workers continue to upgrade the information, the association of Civil Engineers says in its latest report card that california will have 44 billion worth of infrastructure needs for its Drinking Water over the next 20 years. For nightly Business Report, im aditi roy, lafayette, california. Shares of foot locker get trampled. Thats where we begin tonights market focus. The athletic Footwear Company says a delay in income tax refunds caused customers to spend less in the latest quarter. Same store sales edged up slightly but they too fell short of expectations. The company said its now focused on cutting costs so that it can improve its full year performance. Shares got crushed, they fell more than 16 to 58. 72. Sales turned positive at deere. The company said improving demand helped it post stronger earnings. They raised profit outlook for the year, shares popped to 120. 90. Scampbells soup recorded lower than expected sales and cut its forecast. It said higher promotions and weak demand for refrigerated drinks hurt results. Profit was also amiss, but campbells raised earnings forecasts for 2017. Shares fell 2 to 55. 78. Vistra energy is reportedly in talks to buy rival dynegy, according to the wall street journal. A potential deal would create one of the nations largest independent power producers. Dynegy shares soared while vistra rose 15 . Auto desk reported a smaller than expected loss and revenue that beat estimates. The company, which is transitioning its Business Model from perpetual licensing to subscriptions, said the move was a good o. The subscription model is essentially changing the game. The whole move to the cloud is changing how we deliver our software to our customers and how we engage with our customers. People who used to be users but not necessarily customers are now customers, because its just easier to access the software and the model makes it easier to become an actual paying user. Auto desk responded by moving up nearly 15 to 109. 91. Our market monitor tonight likes all weather stocks he said could rise 10 to 15 over the next year and a half. The last time he was on in july, he recommended disney, microsoft, and starbucks, all of which have rizsen. John trainor, welcome back. Good to see you. And congratulations on those picks, theyre doing well. Were very pleased with them. We own themall, and were very pleased. Excellent. You say that you have some muted expectations for the market. So youre looking for a 10 to 15 return on your picks. Thats a pretty good return, for muted expectations. It is, for those three stocks, those are the expectations. For the overall market, were probably in the high single digits. Youve got, you know, sort of the trump effect, as youve been discussing this evening, which we think will keep investors a little cautious, probably have a little extra cash in their portfolios. We dont see the market becoming extremely ebullient this year. Were hoping those stocks outperform. Tjx. Retail has a tough week. Why do you like this stock . This is t. J. Max. We like it in particular because it has a Business Model that can compete against the amazon effect. A lot of your viewers have seen amazon devastate retailers across the board. T. J. Maxx has a unique sales proposition. Plus as the Department Stores struggle, that creates opportunities. Lets move to disney. Disney suffered a little bit in its latest earnings report. Theyre suffering from the cord cutting situation. But you think that that provides opportunity. Absolutely. In fact we think this little pullback in disney presents a little buying opportunity for investors. But disney has the content that consumers want. What disneys got to do, and we think robert iger will do a great job figuring out how to deliver that content to consumers. Consumers still want their content. Theyre just not happy with those high cable bills. Disney has to figure out a different distribution channel. You say oracle has managed to concord the Cloud Computing model that it put forward several years ago. Absolutely. Weve watched oracle for several years. The stock really has been flat for about three years now. They finally figured out their cloud strategy. And as you heard with the report that you just gave earlier, companies are moving to the cloud. And youve got to have a cloud strategy. Oracle has a phenomenal strategy. We think theyre poised for good performance going forward. John, thank you so much for joining us again. We appreciate it. Great, thank you. John trainor with Peoples United Bank wealth management. Coming up, sold. The man who won a bidding war and paled the highest price ever for a piece of work by an american artist. Heres what to watch for next week. On tuesday, as we mentioned, the white house will release its full budget for the 2018 fiscal year. On wednesday, the Federal Reserve releases its minutes from the may meeting when the committee decided to keep Interest Rates unchanged. On thursday, members of the opec oil cartel will meet to decide whether to extend a Production Cut deal. Thats what to watch for next week. A Record Number of americans have auto loans. According to data released this week by the new york Federal Reserve, 107 million americans are financing their cars with loans. Thats more than 40 of the adult population. And its up from 80 million back in 2012. Car sales in 2016 hit an alltime high. And today, the number of auto loans outpaces home loans. Which means demand for gasoline. But its been weaker than expected this year. That is expected to change. The Energy Industry is expecting record demand this summer as the economy grows and gasoline prices remain relatively cheap. The u. S. Gasoline market accounts for roughly 10 of the global oil consumption. Earlier this week, we told you about the art auctions happening in new york. We also told you that the sales were seen as a test of the market. Tonight we tell you sales exceeded expectations and the mart market is alive and well. Reporter a painting by basquiat sold for nearly double the estimate, making translate most expensive painting sold by an american artist and the sixth most expensive sold at auction. The buyer was a 41yearold japanese ecommerce billionaire. He said, when i first encountered this painting i was struck with excitement and gratitude for my love of art. The piece was sold in 1984 for 19,000. The buying and bidding were strong throughout the week with sales topping about 1. 5 billion from just over 1 billion last year. Le leda and the swan went for 53 million at christies. This Francis Bacon triptych went for almost 52 million. But basquiat is the new darling of the global art market. Christies sold this one previously owned by steve cohen for 35 million, a total of 16 basquiats were sold this week, totaling more than 200 million. The previous record was 57 million. He plans to open a museum in japan. For nightly Business Report, i the up and down finished the week with a rally. The dow advanced to 20,804. Nasdaq was up 28. The s p 500 gained 16. That will do it for nightly Business Report for tonight. Im sue herera. Thanks for joining us. Have a great weekend, everybody. 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