Transcripts For KQED Nightly Business Report 20171012 : vima

For the major market indexes on wall street today. But first we begin in washington with the latest round of talks to renegotiate the north American Free trade agreement or nafta got under way. The talks are expected to be tough between the u. S. , canada, and mexico. Today canadian Prime Minister Justin Trudeau brought his case directly to the oval office. Kayla tausche has more. Reporter in a meeting with the canadian Prime Minister, President Trump said tough negotiations are ahead over trade negotiations with canada, the u. S. , and mexico. Ive been opposed to nafta for a long time in terms of the fairness of nafta. Well renegotiate. If we cant make a deal, well leave it. But maybe that wont be necessary. Reporter labor groups hosted protest signs outside the talks as business groups worried requirements for higher share of u. S. Parts in autos might kill the deal. Ahead of the meeting with the president , Prime Minister Justin Trudeau and foreign minister christie of freeland met with the ways and Means Committee which oversees trade agreements. In prepared remarks, trudeau touted trade with canada and thanks the group for inviting him. Committee aides say canada requested it. The fact of the meeting underscores an Uneasy Alliance with nafta partners worried the white house is proposing purposely unpopular demands in this weeks nafta negotiations in order to justify potentially pulling out. This round of nafta negotiations will extend in two days, now set to close on tuesday. The extension is meant to give more time to hash out different topics. For nightly business report, im Kayla Tausche in washington. Lets turn now to jonathan lieber, the head of the eurasia groups United States practice. Nice to have you here. Thank you, good to be here. Given what weve heard from the president and from Prime Minister trudeau, how likely do you think that the nafta negotiations will be successful as they exist now . I think the probability of a successful renegotiation of this deal is declining right now. You have a very real deadline, sometime early next year, because the mexican president ial season is going to start heating up. Youve got the United States, who is backing away from their initially fairly reasonable set of demands to a much more difficult set of asks of the mexican and canadian governments, putting a lot more pressure on these talks. What do we end up with, jon . Do we end up with a terminated nafta and bilateral trade agreements with the u. S. And mexico and the u. S. And canada, or what . So i think whats much more likely is the u. S. Very well could trigger the withdrawal provision of nafta, but never actually go through with the withdrawal process. The u. S. Has never withdrawn from a trade agreement before, congress would be very unlikely to support that. In that case you have nafta hanging out there in limbo throughout the mexican president ial election next year, potentially youve got a new government in mexico, potentially the republicans lose the house, and there could be more negotiations next year. Theres talk mexico may not be included in the deal, it may just be the u. S. And canada. If they strike some sort of deal, what would be the advantages as we know the negotiations are right now, to the United States . So, you know, nafta is a quarter of a century old. Theres huge parts of the American Economy in particular that just didnt really exist back then. You can update nafta to include provisions on digital goods, for example. Theres probably intellectual property provisions that a lot of american businesses would welcome. A lot of stuff that the Trump Administration is pushing for is not welcomed in mexico, canada, or the u. S. Business community. Theres not a lot of wind to be gained from the more extreme demands by the Trump Administration. A lot of american businesses like nafta, it helps them do business economically, the chamber of commerce among them. Let me go back to your earlier point. If we activate those sort of withdrawal provisions, but nafta doesnt really go away . Whats the point there . The president gets to say, hey, i walked away from nafta, and what . I think the president is trying to increase leverage. If we know anything about the president s deal history or the books hes written, he wants to go into negotiations with the strongest possible hand he can. In this situation, the way he can increase and maximize his leverage is not just by threatening to withdrawal but actually he could pull the trigger on a withdrawal. It would be a much more serious situation that they would have to stand up and Pay Attention to. Which means well be talking to you again, jon. Thank you so much. Jon lieber with the asia group. The minutes of the last fed meeting show the central bank is on track to increase Interest Rates once again later this year. Steve liesman has the lowdown on what policymakers are thinking reporter fed officials had a serious debate about inflation and wages being too low and what that meant for the next rate hike. Minutes of the meeting show the key issue is the failure of inflation to head the feds 2 target. Members of the ratesetting committee thought the recent inflation was a result of telecom prices. Under this line of thinking, inflation would gradually move up towards its target, clearing the way for a hike. There was also worry that technology and global inflation were behind the inflation. That led fed to be less certain about raising d most expect them to rise gradually but some are beginning to think maybe theres more slack in the economy, more slack in the labor market than previously thought. If so, it would cause them to rethink future hikes. The fed clearly indicated its on track to hike again in december. Thats the probably at the moment the even money bet. But if Economic Data over the next several months, including coming inflation reports, show that the low inflation theories are founded, there looks to be enough concern and doubt on the committee to delay that next rate hike. For nightly business report, and those fed minutes helped fuel a modest rise in stocks as investors applauded the Central Banks sentiment that the economy is Strong Enough to perhaps withstand another Interest Rate hike. That led to record closes for all three of the major indexes. The dow rose 42 points to 22,872. The nasdaq added 16 and the s p tacked on four. Another thing investors turned their attention to earnings season. Bob pisani has a look. Reporter earnings season is starting up again. And the key question now is, are we at peak earnings . Could earnings start to decline and maybe even go negative in the next quarter or so . Thats whats got traders worried right now. The short answer, relax, its no. Thats whats propping the markets up. Earnings are trending up after treading water in 2016, earnings have bounced back in a healthy way in 2017. The s p 500, earnings are expected to rise this year over last year, another 11 or 12 in 2018. Second, look at the scope of the growth. Earnings have pretty much returned to double digit growth. Were up 15 in the first quarter, up 12 in the second quarter. The Third Quarter is a bit of an exception. Analysts are only looking for 5 gains. Thats because of major insurance losses from hurricanes harvey and irma. But financials, particularly the Insurance Companies, should bounce back in the Fourth Quarter once all the dust settles. The key to this story is the strong steady growth in technology. Its been the big winner all year. Weve been talking about semiconductors. Semiconductors alone are expected to jump almost 30 in their earnings in the Third Quarter. Thats a huge number. Another big factor is the Global Growth trade. We call it the reflation trade. Its real. Earnings are improving in europe, for example. The stock 600, like the s p 500 for europe, theyre expec to grow 5. 4 in the Third Quarter and 16 in the farther quarter. Thats important given the earnings overseas. No assumptions have been factored in about tax cuts. Yes, traders are expecting some kind of tax cut to materialize and theres some kind of premium in the market expecting that to happen. But its not in the earnings numbers yet. And when that happens, we may see an additional boost. For nightly business report, im bob pisani at the new york stock exchange. Joining us now is karen cavanaugh, Senior Market strategist at Voya Investment management. Karen, good to have you back. It looks like corporate earnings overall are going to be pretty good. Why dont we start with that. What do you see as the overall, when we get through the whole thing, what do you see as the growth rate for the Third Quarter year over year . I think the party is going to keep on rolling. We may not see double digit growth. But were going to see high midsingle digit growth. Well probably end up around 7, 8 growth for the Third Quarter earnings. Thats pretty darn good. Is that because the comparisons are easy for some sectors . Or is it because, you know, corporations are really firing on all cylinders, or maybe a combination of the two . I think a combination of the two. In the energy sector, yes, the comparisons are pretty low from the Third Quarter of 2016. So it makes it a little bit of a lower bar to jump over. Weve seen an increase in commodity prices, helping the energy sector. Sectors like the tech sector are really benefiting from that Global Growth story. We have a synchronized Global Growth expansion going on. Thats not something tha we al. This is a really good backdrop for corporate earningsn you sta favored financials. You still favor financials, theyre still your top pick, but you say in that Third Quarter they will be down 12 . Why . Well, thats really the Insurance Companies that are going to be hit by a lot of the hurricane losses. We definitely will see a bounceback in the fourr. Even i subsectors of financials, i think the banks will do well in the Third Quarter. I think were going to see some positive surprises. Also financials, the valuations are pretty compelling in the financial sector. Theres some good bargains there. Theyre valued lower than other sectors, so you can really jump in, investors can jump in there. If we get any kind of tax cuts, well see the economy move forward. Thats really going to help Interest Rates. Thats going to help financials even more. All right, from your lips to the earnings reports ears. Karen cavanaugh, thank you very much. Thank you. I love it down there in charleston. It is a beautiful part of the world. The number of job openings remain near a record high, even after falling slightly in august. According to the labor department, there are a little bit more than 6 million openings. Job openings have risen as the number of unemployed have fallen to the lowest in a decade. The Unemployment Rate is currently standing at a 16year low of 4. 2 . The president of the dallas fed says he wants more signs of inflation before raising Interest Rates again. The yield on the benchmark tenyear treasury has fallen, a reversal of what you usually see. Robert kaplan calls that development ominous. He doesnt want the fed to raise rates too fast and risk getting whats known as an inverted yield curve, because that tendsed to a precursor of a recession. The Deadly Wildfires burning in california have taken their toll already. And now threaten one of the safe. Conomic the head of the food and drug administrn says the country may start to see some drug shortages because of the damage that hurricane a caused to puerto rico. 10 of drugs prescribed in the u. S. Are made by manufacturing facilities on that island. Drug makers are working to get their facilities back online, but theyre facing widespread power occupation and supply iss. The images out of Northern California are nothing short of apocalyptic. Homes and businesses have been destroyed by the hundreds, lives lost, much of the damage caused by the deadly wires concentrated in sonoma and napa counties, the heart of wine country. Aditi roy reports tonigh reporter Ray Signorello is seeing his winery for the First Time Since it burned to the ground. His father bought the property in 1977. And now the onceelegant tasting room is a pile of rubble. Signorello is one of five wineries in napa destroyed or heavily damaged by the more than dozen wildfires that have ravaged the state, hitting wine country the hardest. Signorellos wine maker was on the property at the time of the blaze and tried to save it. So my crew had come up to try to fight the fire for a little while. But they didnt have near the equipment. I mean, i dont think you could have had the equipment to battle what they were trying to battle here. Reporter it was too late and the had to flee. They are not alone. In neighboring sonoma county, the owner of Paradise Ridge winery says he will rebuild. Its devastated, suffered complete loss in both the wine making facility and also our tasting room and events center. Reporter the Economic Impact of the wildfires to the tourism economy could be significant. According to the wine institute, california sold 34 billion worth of wine this year and the states Wine Industry generated 114 billion worth of Economic Impact in the u. S. In napa, dozens of hotels, restaurants, and wineries that were not damaged remain closed due to Power Outages and road closures. They include meadowwood, silverado resort and spa, and wineries like cakebread ander about berringer. The one good thing is the wineries had completed their harvest. It will take a year or to to rebuild. It could have been a lot worse for us. And other people are going through really tough times right now. Reporter he also adds that he doesnt expect any long term damage to his crops. Wine makers in this area meantime say what remains to be harvested are Cabernet Sauvignon grapes. They are thickskinned and impervious to smoke. Im aditi roy, nightly business report, napa valley, california. The Airlines Reported stronger than expected results despite canceling thousands of flights due to hurricane disruptions. Delta said some of the strength in the laters est quarter came overseas. In terms of the desirability of travel going over to europe, its the first time in about three years where our International Unit revenue outpaced domestic revenues. We feel good about that trend going forward. The company warned higher fuel costs would hurt operating margins in the Fourth Quarter. Still, delta eked out an almost 1 gain on the day, ending at 53. 07. Jetblue said the recent hurricanes will cut into its profits in the third and Fourth Quarter. For the Third Quarter, earnings per share will be reduced by as much as 7 cents and as much as 13 cents for the Fourth Quarter. Jetblue shares rose almost 1. 5 to 20. 53. Kroger says its exploring strategy alternatives to its Convenience Store businesses which may result in a sale of its stores. It reaffirmed its guidance for the year and says it plans to cut costs and make larger investments in e commerce. The luxury handbag maker coach is changing its name to tapestry. The company, which bought kate spade and stuart weitzman, says the company reflects that the company houses several brands. Coach will change its stock ticker to tpr. Shares of coach, or should i say tapestry, finished down 3 to 38. 87. The Networking Company Juniper Networks cited lower revenue in its cloud vertical. Shares initially fell following the news and ended the regular day down more than 1 persons at 26. 86. Prepaid car Company Black hawk network is also forecasting disappointing results. It said increasing competition would cause earnings and revenue to miss estimates. The company beat profit expectations. Shares initially lower, they finished the regular day down about 1 at 44. 20. It was a heart breaker and perhaps the worst loss in the history of u. S. Mens soccer. The American National team fell to the last place team from trinidad and tobago, failing to qualify for the world cup for the First Time Since 1986. Now, you might think this is just a sports story, but its a lot more than that. A number of companies have a lot riding on this event. It was a heartbreaker, i watched it and couldnt believe it. But the networks probably were looking at it, television had a lot of riding on it. Fo