TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Best year ever. Car sales accelerated in 2015, as automakers report their highest annual sales in history.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Turn around time? Will some of the blue chip stocks that lost their shine in 2015 gain it back in the New Year?
MATHISEN: And trouble in Texas? The Lone Star State’s economy boomed along with the price of oil. So, how is it holding up now that crude is cratering?
All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, January 5th.
HERERA: Good evening, everyone. And welcome.
Investors may not have liked 2015 very much, but automakers sure did. The industry sold a record number of vehicles last year. In 2015, Americans purchased roughly 17.5 million cars and trucks. Topping the previous high set in 2000.
The reasons are the ones we’ve been telling you about, cheap gas, low rates on loans and a strengthening economy and job market.
And as Phil LeBeau explains, records were broken despite lukewarm sales in the final month of the year.
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Americans bought new cars, trucks and SUVs at a strong pace in the month of December, though maybe not as strong as many on Wall Street were expecting.
The major automakers boosted sales last month between 5 percent and 12 percent, which was generally shy of what many on Wall Street were expecting. The one notable exception, General Motors (NYSE:GM) — it increased sales 5.7 percent in December and for the first time since 2007, GM sold more than 3 million vehicles in the U.S.
With interest rates starting to rise and the expected monthly payment for auto loans expected to move slightly higher, some have been concerned that perhaps we’ve seen a top in auto sales in the U.S., but analysts believe we should see strong demand continue for the foreseeable future.
ERIC LYMAN, TRUECAR VP: We’re actually still expecting 2016 to see some sales growth which will be the first time we’ve seen seven consecutive years of sales growth since really the dawn of the automotive era.
Overall, U.S. auto sales came in at a record clip for 2015 at roughly 17.5 million vehicles. Compare that with the depth of the recession when the annual auto sales were roughly 10 million vehicles. After 2016, many believe we have not seen the top and that we could see sales inch even higher.
HERERA: And that was Phil LeBeau reporting. We’ll have another report from Phil a bit later in the program on new technology that allows cars to talk to one another.
But, of course, those low gas prices that helped auto sales seem set to stay that way at least for now. Today, despite continued tensions in the Middle East, domestic crude settled near an 11-year low at just below the $36 a barrel. But the energy markets remain on edge as the divide between Saudi Arabia and Iran deepens.
Hadley Gamble reports tonight from Riyadh where she spoke with the Saudi foreign minister.
HADLEY GAMBLE, NIGHTLY BUSINESS REPORT CORRESPONDENT: I did get chance to catch up with the Saudi foreign minister earlier today. I asked him how can this crisis with Iran be resolved and I asked him to respond to accusations from Tehran that this country will face retribution over the execution of the Shia cleric, Nimr al Nimr. Take a listen.
ADEL AL-JUBEIR, SAUDI FOREIGN MINISTER: He’s a terrorist. He’s as much a religious scholar as Osama bin Laden was. He was implicated in inciting people, recruiting people, providing weapons and munitions for people and he was involved in attacks against security people.
And what I find very puzzling is this individual is a Saudi citizen. He committed the crime in Saudi Arabia. He was sent in Saudi courts and the sentence was carried out by Saudi authorities.
What does Iran have to do with this? They execute hundreds of people every year. Nobody says anything about it. This is their system.
And so, for the Iranians to inject themselves into our domestic affairs is in line with what Iran has been doing for years. At a certain point, everybody reaches their limit. The Iranians have gotten away with murder literally for more than 30 years. We did not escalate. We have not escalated in the past.
Very simple. Iran should back off. They should stop being aggressive. They should stop interfering in the affairs of neighbors. They stop supporting terrorism.
GAMBLE: So, the Saudi foreign minister there telling me that essentially Tehran really needs to back off and stay out of Saudi’s business. And, of course, just in another sign of just how far things have deteriorated in that relationship, I asked him how his country and how Iran, how the world can hope to possibly defeat the Islamic State if Iran and Saudi Arabia aren’t even talking. And he said he basically doesn’t even know at this point if Iran really wants to defeat the Islamic State at all — guys.
MATHISEN: That’s Hadley Gamble reporting from Saudi Arabia.
HERERA: Well, from one oil capital to another, Texas. That state’s economy is closely tied to the energy industry and just as it grew rapidly as prices rose, there are now growing concerns about that region now that prices are falling.
Brian Sullivan reports from Houston, a city synonymous with oil.
BRIAN SULLIVAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: For years, Texas has been a shining star of the American economy. Nearly 2 million people have moved to the state in the past five years. And Houston’s oil-fueled jobs boom is one reason why.
But as the new reality of lower prices sinks in, that growth at least in Houston, may be at risk.
UNIDENTIFIED MALE: This used to make 5 1/2 couplings.
SULLIVAN: Maximo Tejeda runs a company that makes pipes used for oil wells. He has had to lay off half his workers over the past year.
MAXIMO TEJEDA, TEXAS TUBULAR PRODUCTS FOUNDER: We have had to go from over 1,100 employees to less than 530 now.
SULLIVAN: Houston is much more than just the old oil town it used to be. The city is diversified with medical, technology and manufacturing helping to power the economy to more than 3 million workers last year.
But make no mistake: Oil is still the blood that flows through Houston’s economic veins. And oil’s impact is felt across many parts of the economy especially housing.
DOUG GOFF, JOHNSON DEVELOPMENT CORP COO: We sold 2500 homes in 2015. That’s down about 8 percent from 2014, which was a record year for us.
SULLIVAN: If housing slows, many of the construction jobs that come with it could also be impacted which could also then hurt consumer spending as jobs are lost.
Nobody is predicting a lights going out on the Lone Star State anytime soon. But if oil prices do not recover, Texas and in particular Houston, could be in for a rough couple of years.
For NIGHTLY BUSINESS REPORT from Houston, I’m Brian Sullivan.
MATHISEN: On Wall Street, investors remain cautious following yesterday’s big beginning of the year selloff. Overnight, the People’s Bank of China reportedly injected $20 billion into money markets last night and that helped stocks stabilize.
By the close, the Dow Jones Industrial average was up 9 points. Blue chip index down as much as 110 middle of the day. NASDAQ ended the day lower by 11 and the S&P 500 was up 47.
HERERA: So, two days into the New Year, investors may be wondering if some of last year’s losers will be this year’s winners.
Take Walmart for instance. It was the worst performing stock on the Dow in 2015, but today, it outpaced the broader market to finish more than 2 percent higher.
Dominic Chu takes a look at whether some names that lost their luster last year will shine in 2016.
DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Some investors are hunting for value in last year’s beaten down stocks but not all of last year’s losers necessarily have an equal shot at outperforming in 2016. So, take consumer electronics giant Apple (NASDAQ:AAPL), construction equipment maker Caterpillar (NYSE:CAT) and retail king Walmart, all three members of the Dow Jones Industrial Average. And all three underperformed the index.
Some experts think, though, you have to be choosey about which stocks to invest in.
KEVIN NORRIS, UNIVEST WEALTH MANAGEMENT PRESIDENT: I think the Apple (NASDAQ:AAPL) valuation is compelling. I think it’s trading around 10 to 12 times estimated earnings. I think Caterpillar (NYSE:CAT), you have to be a little bit cautious, because they’re in some industries that are struggling, mining industry, for instance, and they do get a good portion of their revenues from overseas. So, they’re going to be largely dependent upon the dollar in their earnings. But I would invest in both for the long haul.
Walmart is under a restructuring right now. Not quite as high on Walmart as we would be on Cat and Apple (NASDAQ:AAPL).
CHU: Others are looking at bigger picture themes like which sectors could do well and which ones investors should remain more skeptical about.
JOHN AUGUSTINE, HUNTINGON BANK PRIVATE CLIENT GROUP CIO: What we see from the forward estimates is two sectors, health care, consumer discretionary, still project double digit earnings growth in 2016. The sectors we would look to, so to speak, stay underweight during 2016 to start, now, the easy ones are energy and materials. We just don’t see commodity traction there yet.
CHU: Of course, there already countless bullish and bearish views in every part of the market but many on Wall Street are approaching 2016 with more caution and not all beaten down stocks are ripe necessarily for gains.
For NIGHTLY BUSINESS REPORT, I’m Dominic Chu.
MATHISEN: And speaking of caution, two big banks are starting the New Year on a somewhat bearish note. Just this week, JPMorgan (NYSE:JPM) said that the strategy of buying on the dips no longer works.
And today, Citi downgraded its outlook for U.S. equities to an underweight.
Let’s turn those issues over to Michael Farr, president of the money management Farr, Miller and Washington.
Michael, welcome. Good to see you.
Last time we were together was Fed Day down in chilly Washington. It’s a lot chillier there tonight. And the market’s starting off a little bit chilly.
What do you think of Citi cutting equities in the U.S. to underweight?
MICHAEL FARR, FARR, MILLER & WASHINGTON PRESIDENT: I think they’re just listening to us and the last time that we were standing in front of the Fed where you and I talked about a reallocation of risk where we said that all of the FANG stocks that had gone up because the Fed was there with easy money when stocks went down wouldn’t — that same play that same investment wouldn’t work, that risk would once again matter. I think that the big banks are just following Mathisen and Farr down a very logical road.
MATHISEN: That’s a dangerous thing to do, Michael.
HERERA: You know, Michael, what changed? Because when you and Ty were down in Washington, you were talking about the fact that the data were coming in better than expected in some case or certainly strong enough for the Federal Reserve to make their first move on interest rates. And now, all of a sudden, this market came into the New Year with a very bearish tone.
FARR: It has, Sue. I think that that bearish tone has been building for a while. I think a number of investors look through year end and said, wow, we really didn’t make any money last year. We’re taking a look at the news out of China, which continues to deteriorate.
Now, keep in mind, Chinese — the Chinese economy is still growing. But there’s sort of a global malaise. And we’re seeing a global weakness. So, as we look at stocks, we aren’t looking for anything robust, but sentiments turning negative. When investors’ sentiment turns negative, the whole herd kind of runs in the same direction and the stampede shifts.
It’s important to pay attention to the data, the discipline and do your research because you can get caught up in a lot of noise. The sky isn’t falling, OK? Look at the numbers.
MATHISEN: Where can I make money on 2016?
FARR: You know, I published on CNN.com my top 10 stocks for 2016. A lot of the stocks that didn’t do well in 2015, some of the — the Johnson & Johnson (NYSE:JNJ) kind of names that have nice dividends, good balance sheets are selling at discounts to market multiples continue to look good.
So, if you look at technology stocks, some of those with solid balance sheets, some health care stocks I think look pretty good and consumer staples. All of these are defensive. People continue to spend money in these areas. And I think with a little bit of a dividend and a patient investor, there’s still money to be made.
HERERA: You also like U.S. multinationals, but that’s your way of playing the international market versus going into maybe developed Europe or something along those lines.
FARR: It is, Sue. And I think for me, I like companies that report according to GAAP standards and where our regulators can actually have some control.
But if you think about Europe for a minute and some of these markets where perhaps the growth isn’t robust, central banks are infusing a lot of cash. We know what happened to our markets as our central bank infused a lot of cash.
So, I like participating and owning some stocks in those markets through some of these large multinationals that I think will do very well either driven by their own success or the success of the Central Bank.
MATHISEN: All right. Michael, thanks very much. Happy New Year to you.
FARR: Happy New Year, guys. Thanks for having me.
MATHISEN: Michael Farr of Farr, Miller and Washington.
HERERA: And shares of two gun-makers hit all time highs today as President Obama outlined new measures intended to reduce gun violence.
The president used his executive authority to expand background checks and strengthen firearm laws that already exist.
Speaking at the White House, he said the actions could save lives and became emotional when reflecting on the shootings at Sandy Hook Elementary.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: First graders, every time I think about those kids, it gets me mad. And by the way, it happens on the streets of Chicago every day.
(END VIDEO CLIP)
HERERA: Smith & Wesson shares rose 11 percent. The company also gave an upbeat outlook for earnings and sales. Sturm Ruger (NYSE:RGR) gained more than 6.5 percent in trading today.
MATHISEN: And still ahead, looking to move to the West Coast? There’s one city people are flocking too and where rents are soaring. See if you can guess.
MATHISEN: It has never been more expensive to buy a home in Manhattan. The average price of an apartment hit a record $1.9 million in the fourth quarter of last year, this according to the real estate firm Douglas Elliman. The Manhattan market held up despite volatility overseas. And that impacted international buyers.
HERERA: But if you’re looking to rent, you also may be in for sticker shock. Rents rounded out 2015 with some staggering numbers. And one city in particular is taking a huge lead, thanks to big job growth.
Diana Olick has the story.
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Rents continue to soar, ending 2015 with the highest year end rent growth in a decade. It came in at 4.7 percent in Q4, a little lower than Q3 but above the year before.
Rent growth has been at that level or above for five straight quarters and that’s the longest it has been that high for that long in over 20 years. This is all according to Axiometrics.
Now, topping the hot rent list, Portland, Oregon. Last fall, it replaced Oakland, California, for the highest annual rent growth, up 12 percent in Q4 compared to the previous year. Job growth is fueling demand, outstripping supply and pushing home values and rents significantly higher.
Portland home prices were up 9 percent in November year over year. And that’s far higher than the 6 percent home price gains we saw nationally according to Core Logic.
And Oregon came in at 2015’s most popular moving destination, according to United Van Lines. Sixty-nine percent of interstate moves were inbound. This as the Northeast experiences a moving deficit, New Jersey, New York, Connecticut and Massachusetts made the list of top ten states people are leaving.
For NIGHTLY BUSINESS REPORT, I’m Diana Olick in Washington.
MATHISEN: The drugmaker Eli Lilly (NYSE:LLY) issues a weak financial outlook and that is where we begin tonight’s “Market Focus”.
The company cited impacts from foreign exchange as well as analysts differing revenue expectations in various units. On the upside, Lilly said it does expect R&D spending to be higher than last year and it has nine late stage drugs in its pipeline. Shares of the drug maker up 1 1/2 percent to $84.11.
Gilead’s shares rose after the FDA granted it a priority review for experimental Hep C treatment. Hep C treatments once made up a majority of Gilead’s sales but competition has been eating into revenue. Shares of the company up more than 1 percent on the day to $99.26.
Spirit Airlines chief executive Ben Baldanza steps down and company shares step up. Baldanza had been in the job since 2006. He gets credit for keeping ticket prices low while boosting fees. Shares of the airlines rising almost 6 percent today to $41.50.
HERERA: Meantime, three major carriers have increased air fares. According to “Reuters”, Delta raised fees by up to $4 one way. Southwest and American increased ticket prices by $3. Shares of Delta fell slightly to $48.57, Southwest rose, and American Airlines finished down nearly 1 percent.
Amazon (NASDAQ:AMZN) says customers ordered more than 23 million items from its sellers on Cyber Monday, an increase from the previous year. The retailer delivered more than 1 billion items sold by third party vendors in 2015 through its fulfillment by Amazon (NASDAQ:AMZN) service. Third party sellers are able to store their products in Amazon’s warehouses which then enables Amazon (NASDAQ:AMZN) to fulfill the orders directly. Shares of the company down slightly to $633.79.
MATHISEN: Amazon (NASDAQ:AMZN) is also teaming up with an automaker. Today, Ford said that it is working with the tech company to connect cars to home devices so that you can do things like start your vehicle while in your living room.
Let’s be clear here. The vehicle is not in your living room. You’re on your living room. But you turn on your porch light while you’re driving home.
(BEGIN VIDEO CLIP)
MARK FIELDS, FORD PRESIDENT AND CEO: We’re accelerating our transition from an auto company to auto and mobility company. If you look at Internet-enabled devices, smart devices in the home, more and more people are buying them. And we want to integrate Ford vehicles into that.
(END VIDEO CLIP)
HERERA: Ford’s CEO Mark Fields made that announcement at the consumer electronics show in Las Vegas where the buzz isn’t just about cars talking to homes but also to each other.
Back again is Phil LeBeau who went behind the wheel to show us how that technology works.
LEBEAU: All right. Here we go.
Auto supplier Delphi says this is the brains behind the next generation of intelligent cars and trucks. Software and cameras in this test vehicle allows them to not only talk with other cars so they can avoid collisions at blind intersections.
VOICE: Changing lanes.
LEBEAU: So, we’re changing lane because there’s a hidden driveway up here.
But it also goes one step further. Communicating with stoplights about changes in traffic and with the smartphones of pedestrians, so they can stop or slow down and avoid crashes where pedestrians could be hurt or killed.
LEBEAU: The car has let us know. He’s right there.
JEFF OWENS, DELPHI CTO: The opportunity to get that the advanced information before the car is there before anybody’s put in danger is — it would just be an incredible improvement in safety.
LEBEAU: Vehicle to vehicle communications is a crucial step in the development of autonomous drive cars and trucks like the Google (NASDAQ:GOOG) car. Delphi’s technology will be in the first GM models with super cruise control which come out later this year. The next step for smarter cars which will hopefully lead to fewer people being in accidents.
HERERA: And to read more about the way cars communicate, head to our Web site, NBR.com.
MATHISEN: Also on display at the consumer electronic show this week is virtual reality technology. The industry expected to grow rapidly over the coming years.
And as Julia Boorstin reports there’s more evidence than ever that the technology has gone mainstream.
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Virtual reality is headed for a breakout year, with Sony’s Morpheus and Facebook’s Oculus both launching highly anticipated VR headsets. Presales of Oculus Rift starts tomorrow.
And today, HTC just announced its second generation virtual reality system, the Vive 3.
On the heels of the first shipments of the lower cost Samsung gear VR selling out over the holidays, a new study out today finds nearly half of American who’s play any sort of video games are interested in at home VR.
MIKE VORHAUS, MAGID ADVISORS PRESIDENT: These are really strong numbers. You don’t need to get anywhere near the number of people that said they’re very interested to have a very successful launch.
BOORSTIN: And a sign of how broad demand is for virtual reality, Magid Advisors’ new survey finds even gamers are more interested in entertainment content in VR, movies and television, than they are in playing virtual reality games.
And now, media companies are investing to create new VR apps to stake a claim in this new type of content. Netflix (NASDAQ:NFLX), Hulu and DirecTV have all launched VR apps. They’re among the hundreds available in the Oculus app store, and dozens available for Google (NASDAQ:GOOG) cardboard’s $20 headsets.
And studios are placing big bets. Today, Fox revealing its VR adventure, the Martian Experience which I had a chance to try out.
I got it.
Martian Experience will go on sale for Oculus Rift and Sony (NYSE:SNE) Morpheus. Fox, which is leading Hollywood’s push into VR, is planning one more adventure like “The Martian” which will work on the more expensive headsets and two designed for the lower cost mobile VR headsets .
So, all tied to fox films but not designed to be marketing but a whole new revenue stream.
And cable channel sci-fi just announced it’s launching an innovation lab to create immersive virtual reality content, as well.
VORHAUS: It will start growing and growing. You wouldn’t dream of watching TV today without an HD today. So, I imagine, for the right content, people wouldn’t dream of watching that content if it wasn’t on VR, for the right content.
BOORSTIN: And that means big business. According to research firm, Digit Capital, virtual reality and augmented reality are projected to generate $150 billion in revenue by 2020.
For NIGHTLY BUSINESS REPORT, I’m Julia Boorstin, in Los Angeles.
HERERA: Coming up, a first look inside of New York’s medical marijuana dispensaries that opens for business Thursday.
MATHISEN: Here’s a look what to watch tomorrow. ADP releases its report on the number of jobs created in the private sector. We also get international trade figures, factory orders and data on the services sector. The Fed will release the minutes from its last meeting when it raised interest rates. And UPS expects tomorrow, I wonder why, to be its busiest day for returns. And that’s what to watch for Wednesday.
HERERA: A sobering new survey on Americans finances. According to the Pew Charitable Trusts, one in three American families don’t have any savings. That includes 10 percent of those who earn more than $100,000 a year. Half of households say they would use credit cards if they needed funds in an emergency.
MATHISEN: And finally tonight, New York’s medical marijuana program goes into effect Thursday. The new law is considered one of the nation’s strictest with limits placed on the way cannabis can be ingested and who has access to it.
Kate Rogers (NYSE:ROG) gives us some exclusive look inside one of the dispensaries in Manhattan.
KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: While New York state’s medical marijuana startups are gearing up to open their doors on January 7th, Columbia Care may have the buzziest location of them all. The reason be? It’s right off of Union Square in New York City. Set to be Manhattan’s first medical marijuana dispensary under the 2014 Compassionate Care Act.
The dispensary features tight security with five outside cameras and patient verification necessary before even stepping inside. Once patients get through the doors, they’ll enter this modern pristine waiting area but you might notice it’s not sterile like a doctor’s office. Instead, the goal here is to maximize patient comfort.
NICHOLAS VITA, COLUMBIA CARE CEO: We have tried to create an environment where patients feel welcome, they feel warm, they feel safe, and they feel like they’re having a professional experience.
ROGERS: Under New York state’s medicinal marijuana laws, five companies were awarded licenses to grow and manufacture as well as sell products. All cannabis must be grown in the state and each company is licensed to open four dispensaries.
Patients can only seek treatment if they have one of ten illnesses approved by the state’s department of health including cancer, ALS, AIDS or HIV and Parkinson’s.
Columbia Care has operations in Washington, D.C. and Arizona and will be expanding into Illinois, Massachusetts, and San Diego, California, later in the year. But opening in New York is a symbolic step.
VITA: It really sets the tone for policy for you know, for enlightenment, for intellectual curiosity and innovation.
ROGERS: But don’t expect them to expand into the recreational space. Instead, Columbia Care is intent on expanding patient access in New York and beyond.
For NIGHTLY BUSINESS REPORT, in New York City, I’m Kate Rogers (NYSE:ROG).
HERERA: And here’s another look at the day on Wall Street which was really relatively calm —
MATHISEN: By comparison.
HERERA: — especially after yesterday’s steep losses.
The Dow Jones Industrial Average rose 9 points to 17,158, blue chip index have been down as much as 110 midday, NASDAQ fell 11, S&P 500 added four.
And on that note, that does it for NIGHTLY BUSINESS REPORT. I’m Sue Herera. Thanks for joining us.
MATHISEN: And thanks from me, as well. I’m Tyler Mathisen. Have a great evening, everybody. And we’ll hope to see you right back here tomorrow night.