Transcripts For KQED Nightly Business Report 20140213

South could make history if they vote to unionize. Theres also a lot on the line for big labor if it goes down in defeat. All that and more tonight on nightly Business Report for wednesday, february 12th. Good evening, everyone iim sue herera. Susie gharib has the evening off. Im Tyler Mathisen and i am not a winterholic. I am so done with it. Our lead story tonight is not about me, its about the economy and how its being affected and in a big way by the most brutal run of harsh Winter Weather in years. Another massive ice and snowstorm called winter storm pax slammed into atlanta and North Carolina today and will be making its way through virginia into the northeast tonight and tomorrow. Some forecasts call for up to a foot of snow in and around philadelphia, new york city, boston. About one out of every three americans will feel this storm. It will close schools, snarl traffic, ground planes and more important for business, exact a toll on Economic Activity. So what is the real cost of all this wicked Winter Weather on the u. S. Economy . Our Steve Liesman takes a look. Reporter its pounded the midwest, the south and the northeast. So its no surprise that the weather is now expected to pound the national economy. Bonechilling cold and widespread snow is likely a major culprit in the recent economic weakness. Thats turned janet yellen this week, the nations new chief of the Federal Reserve into something of a meteorologist. There were weather factors. Weve had unseasonably cold, temperatures that may be affecting Economic Activity in the job market and elsewhere. Reporter if it feelings like theres more snow this year youre absolutely right. Last year at this time just 43 of the nation was covered with snow, and a lot of those areas were sparsely populated. This year, even before the big storm hits the northeast, 60 of the nation is covered in snow, and include both heavily Populated Areas and places like the south that almost never see snow, making the economic disruption that much worse. The ice and the snow in places like atlanta has workers staying home this time instead of slip sliding to the office. Those are lost work hours for the economy. Shoppers also stay away from the malls, meaning lost sales that will show up in corporate profits and reduce national growth. What Winter Weather taketh it gives back. Economists expect a snap up in the spring when americans are expected to brush off the ice and snow and emerge at long last from their homes turned igloos. Steve liesman joins us with more and paul walsh Vice President at weather analytics. Steve, how seriously do you think the fed takes the Economic Impact that this is going to have on the economy, and does it change the way that they do the pull back in economic stimulus . I think they take it very seriously. Because they really want to know what the underlying trend is. Then you have a situation where we have some weakness in the economy, and we dont always know whats attributable to weather and what isnt. Because a lot of times with corporations that miss on their earnings, its a convenient excuse. The same may also go for politicians so we dont know. What we do know we look at the graphics that i showed you earlier that my good friend paul walsh puts together for us. We look at how much colder and snowier its been than normal. We see unusual data. That makes us think that maybe some of the weakness is coming from the snow. Tylers fact earlier, one in three, its the greater population that is affected by this that is really the key to whats different about it paul walsh, let me turn to you. Steve mentioned earlier there may be a kind of a snap back effect after all this harsh winter gets away and maybe the spring is warmer and less rainy than last spring was. Do you see that . Do you expect that . I do. I actually think that whats going to happen for a couple of reasons, cabin fever is a real factor in terms of getting people jazzed for spring. And when you have this kind of situation where youve got a long period of time where its brutally cold, which weve been going through, you dont even need warm weather. You just need more seasonal weather to really drive a resurgence in demand. So what i think is going to happen is by the time we get into mid march, maybe late march when it becomes more seasonally warm, even if its than normal it doesnt matter at this point. It just needs to be not a polar vortex. I think were going to see a resurgence in demand. I think that retailers stand to benefit actually. I think the comp works out really well. Last year we had a really cold spring that lasted all the way into may. So when you put those two things together, i think retailers are actually in pretty good shape for the balance of q 1 once we get through the balance of february and even into q 2. But steve, the economy has been recovering but its kind of a fragile recovery in a lot of ways. For some businesses, this can be a really lethal blow in some ways. Nobody saw im not shopping and im a shopaholic. The Retail Business has been going through a lot of changes nothing to do with weather. They have to do with the balance of the internet. Youre just barely hanging on. You get a winter like this, all of a sudden you cant make it. Just before we came on there was a report from the Cheesecake Factory missing its earnings, blaming the weather. So thats the kind of thing thats out there. I dont think among the things paul was talking about snap back in cheesecake purchases come this spring. I think thats an area that doesnt make back for lost economic time. Paul youre agreeing with that. Youre not going to eat twice as much cheesecake at the Cheesecake Factory because you missed it last week because of a winter storm. Some businesses will be affected. Are there businesses that can take advantage of either the bad weather or that pentup demand . Oh, for sure. Even from a bad weather perspective, the large retailers. For example, the home depots of the world, the walmarts of the world that have very advanced supply chains now are able to move products they monitor the weather and move products so they have just enough at the right time. Example, last week i live outside of philly, had no power. Friday morning i was at home depot. They had 120 generators. So they are able to actually take advantage of that. And in terms from taking advantage of the snap back, in i think retailers are also looking at that positively as well and taking action to get in front of it. Theres another thing out there which is that Delivery Companies are doing better. Because people arent going out to get stuff. Theres also a bit of a cabin fever business. We heard a little bit of a surge in alcohol sales. And i havent heard this but im guessing the Cable Networks may do better because on demand, whatever people do when theyre in their house they may be spending that money they were going to spend out of the house. Netflix. Netflix are something that could benefit because of that. These cabin Fever Companies are out there that are make some money on this. Steve, theres also a baby boom that typically happens about nine months after every one of these events. Its a delayed reaction. That would be a delayed reaction, wouldnt it . Theres an up side to the polar vortex. There is. You know, steve, the weather aside, how does the economic recovery look to you . Because the jobs figures have been a little squishy. Some of thats weather related. Some of the data is going to be lumpy over the next few weeks. Could be a huge problem. I thought it looked good going through the Fourth Quarter. 4. 1 in the Third Quarter, 2. 6, 2,2. 5 was about what we had been doing. Everybody thought First Quarter you have a little run up in inventories. The stuff on the shelves, theres a big swing factor in quarter for quarter growth. We thought we would have an inventory draw down. Sell the stuff on the shelves not necessarily replace it. That was First Quarter. Why you say that very technical term squishy its absolutely accurate, sue. Youre going to have this inventory draw down, a little bit of bounce back from that strength of the third and Fourth Quarter compounded with the weather. So its not going to look good for probably january and february at this point. Steve liesman, paul walsh, thank you guys both very much. Fourday win streak in the market stalled today. Proctor gamble was the biggest decliner in the dow falling nearly 2 after warning of lower profits this year due to currency problems in emerging markets. The dow and the s p closed modestly lower but the nasdaq was able to squeeze out some gains for the fifth session in a row. Lets take a look at the final numbers. The dow today down 30 points, nasdaq was up 10, and the s p ended just a fraction lower. One top bond fund manager says the rocky start to the markets this year could spark the Federal Reserve to reverse course and actually increase its bond buying. Jeffrey dunlap, ceo of double line capital, says that even with a 5050 chance of that happening, yields on the benchmark 10year treasury will fall. I thought the bond would fall than rise. You should see the tenyear dip down to 250 or low. He also predicts that puerto ricos sovereign bonds which you may know have been cut to junk status by two major rating firms will be volatile but eventually theyll be fine. Cisco beating analysts on both the top and bottom lines in its fiscal second quarter. It also raised its Quarterly Dividend from 17 cents a share to 19 cents. Cisco made 43 cents a share excluding items, bettering estimates by a penny. Revenue was also a slight beat last quarter, topping 11 billion. Though that was down from a year ago. Shares initially trended lower in afterhours trading as you see there. Sheila damarajin joins us from the nasdaq oaks change. Sheila, whats the one take away you pinpoint . Good evening, tyler. Wall street is always about looking ahead and forward expectations. What cisco said about its future, disappointing investors. The lower end of the companys Guidance Range did fall below what analysts had expected. As a result we are continuing to see that stock trend down in the after market. Cisco is in business in transition. Its core routers and switch issers business is down double digits yearoveryear. Certainly that transition has been exacerbated by a weak emerging markets condition. Cisco has talked a lot about its transition to its newer businesses, connecting everyday products to the internet. As we all know, transitions take time. Certainly cisco has been struggling with that. Investors right now not impressed with that switch. Back to you. Thank you, sheila, very much. Earlier today geiren Company Reported higher crop prices allowed farmers to buy more new equipment. It pull easily Beat Estimates by nearly 30 cents. But the good news ended right about there as it projected a slow down in Farm Equipment sales for the year ahead, shares fell more than. 5 during todays trading session. Farming wagg ws the focus a big agricultural show and the topic was californias historic drought. While the east is getting slammed with snow, the west coast is dealing with a severe dry spell. It is changing the way farmers are working their land and buying new equipment. Jane wells has more from tulari, california. Reporter at the world ag show, tens of thousands of farms want to know how to stretch a gal of water. In the palm of their hand they can monitor their fleet, they can monitor irrigation. Reporter the problem is, there may be no water to irrigate. This year we expect zero. Our allocation is zero. Reporter this massive farm show is taking place in the area hardest hit by californias epic drought. But mother natures losers become technologys winners. This Company Makes drip Irrigation Systems and expects a p parched west to help sales grow double digits. Drought it good to a point. When it drives growers to be concerned about their future, to have any water at all thats not a good thing for us or the industry in general. When we have a relatively dry year it can drive some increased demand for sure. This. Reporter this farmer has been buying water but without i dont put one extra gallon of water onto the plants that i need more than i need in order to harvest the plant to make the fruit or the vegetable. Reporter heres the thing. Farming has gotten so efficient that even though costs are going up, often so are profitses. An example, californias the number one dairy state. Dairy men are paying at least 20 more for hay to feed their cows. Does that necessarily mean milk prices will go up . No, they already have. The milk price is at an alltime high. We do have some margin. And were just going to have to bank that margin and make sure we can have adequate feed supplies. Reporter even though some warn california is facing a dust bowl, this isnt your grandfathers farm. We have some of the highest prices right now in california agriculture, in part because of the drought, but primarily because of demand from abroad. So farmers will survive this. It will cost a lot of money and there will be changes. But they too will survive this. Reporter for nightly Business Report, jane wells, tulari, california. Still ahead, the United Auto Workers union attempts to make history at a plant in tennessee. Well tell you whats at stake whichever way the vote goes. A recall to tell you about. Toyota recalling nearly 2 million prius hybrid vehicles worldwide. About 700,000 of them here in the u. S. A Software Glitch can cause the engines to stall. Thankfully no accidents or injuries have been reported due to that problem. Meantime, the overall quality of autos made in the United States slipped for the first time in 16 years. A new j. D. Power Vehicle Dependability survey of owners of 3yearold cars and trucks found that engine and transmission problems especially in smaller, more fuelefficient fourcylinder cars caused quality to fall from last years record high levels. Bucking the trend, g. M. s luxury cadillac brand rising 11 places this year to rank as the third most reliable name plate behind lexus and mercedes benz. Ford is selling a lot more cars these days in china. The automaker and its chinese partners sold nearly 95,000 vehicles in china in january. Thats an increase of 53 from the same month a year ago and a 35 leap from december. A historic vote for u. S. Auto workers today. Employees at the volkswagen plant in chattanooga are casting ballots on whether or not to join the United Auto Workers union. If approved it would be the first foreignowned auto plant represented by the uaw in the u. S. In 27 years, and the first ever in the south. Phil lebeau has more. Reporter on a cloudy day in chattanooga, tennessee, workers at the volkswagen plant are starting to clear up their future. Voting on whether or not to join the United Auto Workers union, a move some workers believe will make their plant more competitive. We will have an opportunity to voice our concerns and the things that we hope to improve the company. And i think that will work better for us than the current system. I want us to have a voice in the global works council. And i want us to be able to bring more products, more cars here to chattanooga. Reporter vws plant in tennessee is a rare opportunity for the uaw to add members after a foreignbrand plant in the southern u. S. , something its never done. Over the last 35 years, as foreign automakers like bmw, toyota, and others started building cars in right to work states in the south, their workers have never moved to join the uaw, even though their pay and benefits would have likely increased. Meanwhile, as big three plants primarily in the north shut down, uaw membership began to drop. After peaking at 1. 5 million in 1979, it fell as low as 355,000 just a few years ago before edging slightly higher in 2012. Whats at stake here isnt simply a unionized plant but a new way for u. S. Firms to compete in the global economy. Reporter there are many fighting to keep the uaw out of vw chattanooga. Senator bob corker says unionizing the plant would be a mistake. And antiunion groups think workers are being misled about life in the uaw. Were trying to get out there to make sure that employees team members of volkswagen have all the information they need so they can make an informed choice. Reporter approximately 5,000 workers are casting secret ballots through friday evening. The National Labor Relations Board is overseeing the vote. If approved it will be the first uaw organized plant in the deep south. Phil lebeau, nightly Business Report, chicago. And read more about this Historic Union vote at the vw plant in tennessee. Head to our web site, nbr. Com. Cvs saw Fourth Quarter profits jump 20 . That is where we begin tonights market focus. The network topped estimates on the strength of content and licensing and distribution revenues, even though advertising was basically flat. The Company Also Announced a 1. 5 billion buy back plan. Shares initially spiked after the announcement. The stock ended the regular session up 1. 5 to 618 oreomaker offer add upbeat outlook but shares still fell following a report. At the end of the regular trading day the stock was down slightly to 33. 21. Owens corning earnings topped estimates and the companied announced its firth Quarterly Dividend in 14 years, 16 cents a share. The companys ceo said the cold weather actually helped sales. Its been a very, very cold winter. Generally what we find is when people have Severe Weather conditions they appreciate really good roofs. They appreciate very wellinsulated houses. And that sent the stock up almost 9 to 43. 20. Dow chemical rejected activist investor dan lobes call for the company to split itself in two. Dow said it already examined the possibility of separating its petrochemical operations from its specialty chemical business and decided the move wouldnt be productive. Lobe fired back at the company saying its lack of transparency makes it very difficult to figure out how that decision was reached. Shares today fell 1 to 46. 37. Last falls Government Shutdown delayed the tax filing season. That is causing intuit to lower its outlook. The tax Software Company said revenue and earnings expectations will shift to the Third Quarter instead of the second since americans will file later. That worried investors, shares down 4 to 69. 72. And amazon plans to hire 2500 new fulltime workers at its Order Fulfillment centers around the u. S. But today investors were more focused on the downgrade the online retailer received from ubs. The firm lowered its rating on the stock to neutral from buy and slashed its price target by 50 because of concerns that amazon may raise the price for its prime service. Shares of amazon down 3. 5 today to 3. 49. Mammography is a multimillion dollar business in america. Tonight a new study is casting doubt on the value of that screening. A 25year canadian study which tracked almost 90,000 women found that having an annual mammogram between the ages of 40 and 59 did not reduce the chance of dying from Breast Cancer and may increase the number of women getting treated unnecessarily. The researchers say the current guidelines should be reconsidered. Coming up tonight, why is this bus carrying workers to and from the Office Making some in San Francisco so very angry . Good news about the federal deficit. Uncle sams budget shortfall for january was less than half what economists expected, just 10. 4 billion. Some say thats a sign of stronger federal tax receipts last month. On tuesday it was the house and today it was the Senate Passing a bill to raise the nations debt ceiling, allowing the treasury another year to borrow more money. Todays vote was a close one, though. 5543. And the bill now heads to president obamas desk where hell sign it into law. The president also signed an executive order today raising the minimum wage for all federal contractors from the current 7. 25 an hour to 10. 10 an hour. That pay scale only applies to new contracts with the government, not existing deals which employ about 2 million people. In california, some Silicon Valley Tech Companies are facing a lot of criticism about companyrun private buses taking employees to work. Which is escalating tensions about income inequality and leading to some ugly protests. Josh lipton has more. Reporter tech works in seattle this week suffered a small taste of what their colleagues in San Francisco have been dealing with for months. Anger from activists protesting gentrification. Mass protesters holding a banner reading gentrification stops here, stood in front of a microsoft shuttle preventing it from moving. Similar demonstrations have been going on in San Francisco. Protesters are targeting the private buses operated by google and other Tech Companies which shuttle workers from bus stops to their offices. The protesters say that theyre not just angry about the buses but broader issues of gentrification and income inequality. The buses really are kind of emblematic of this class privilege people have. Are they too delicate to take Public Transportation . I take Public Transportation all the time. Ive lived here 50 years. Ive taken Public Transportation for 45 of those 50 years. Ive turned out just fine. Reporter as wellpaid tech workers moved to San Francisco, the cost of living in the city has skyrocketed. Home prices and rents have soared 15 , and 13 respectively in the last year alone. Many longterm residents of the city have also been forced out of their homes. Evictions are up 40 in the last three years. The Business Community counters that the protesters represent a small but vocal minority. They acknowledge that home prices are surging, but they blame the increase on a lack of housing inventory. Demand they say is outstripping supply. For every tech job thats created, five other jobs are lost. Reporter the president and ceo of the San Francisco chamber of commerce makes another point. Tech is a job multiplier he says. Meaning when every well paid engineer is supporting restaurants, retailers and personal services. From taxi drivers, people working in restaurants and hotels, those are the jobs being created primarily taken up by San Franciscoens. So if you want to solve the problem of underemployment or unemployment, you hire more tech jobs, those create all the other ones. Reporter San Francisco is booming which is deepening the divide between the haves and have nots. The question is whether theres enough Common Ground between the two to ease tensions. Josh lipton, nightly Business Report, San Francisco. And finally tonight, paula deen is cooking up a comeback. The disgraced tv chef who lost her southern cooking show and some lucrative endorsements deals after using racially insensitive language has formed a new company. Its called paula deen ventures. She got upwards of 100 million in financing from the private equity firm najofy company. A spokesman for that firm said the money will be used to establish new deals with broadcasters, retailers and other outlets. And that does it for nightly Business Report for tonight. Im sue herera. Thanks for watching. And im Tyler Mathisen. Thanks from me as well. Have a great evening, everybody, and well hope to see you back here tomorrow night. Nightly Business Report has been brought to you in part by the street. Com. Founded by jim cramer, the street. Com is an independent source for stock market analysis. Cramers action alerts plus service is home to his multimillion dollar portfolio. You can learn more at the street. Com nbr.  ttnight onnquest p8 miles oof the coast of San Francisco, the farallon iilands rise up from one of the richest marine ecosystems on the planet. Pcome along as quest ventures t to meet the scientists who call phe island home. And find out how bay area engineers are usiig Laser Technology to make virtual recreations of the worlds greatest monuments. Major funding for quest is providdd by the National Science foundation