SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Poker face. The Federal Reserve remained vague about when it intends to raise interest rates and the markets seem to like it.
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: High stakes. Why Microsoft (NASDAQ:MSFT) has so much riding on the new launch of the flagship product.
HERERA: Bearing the brunt. Ninety million retailer investors are losing a lot of money in the Chinese stock market plunge. Tonight, meet one farmer who lost it all.
All that and more on NIGHTLY BUSINESS REPORT for Wednesday, July 29th.
MATHISEN: Good evening, everyone, and welcome.
The Federal Reserve opted tonight show its hand. In its latest policy statement, the Central Bank made just subtle changes, offering little in the way of new clues about when or whether it will hike interest rates for the first time in almost a decade, and the markets seem to like that cluelessness. The Dow Jones Industrial Average rose 121 points to 17,751.
NASDAQ gained 22. And the S&P 500 climbed 15.
Steve Liesman has more on what the Fed did and did not say.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Federal Reserve left interest rates unchanged in its July meeting as expected, but the question is whether it hinted at a rate hike to come at the next meeting.
On the one hand, it upgraded one part of the equation needed to raise rates, jobs. But it left the second one, inflation, unchanged.
ANIKA KAHN, WELLS FARGO: The Fed doesn`t want to show its hand as did it in the 2013 paper tantrum. We don`t want to see any volatility in the financial markets.
LIESMAN: The Fed they were solid job gains, suggesting a step closer to its criteria of gains in the labor market needed to hike. It also suggested a lower bar for hiking, saying it will hike when it sees, quote, “some further improvement, not just improvement”.
BOB DOLL, NUVEEN ASSET MANAGEMENT: I think the Fed is acknowledging, the economy is improving. I like their language around the labor market. The economy is standing up on its own two feet more than it has in some time.
This will eventually cause the Fed to raise rates.
LIESMAN: But the Fed characterized inflation in virtually the same terms it did in June, as running below the 2 percent target and likely to gradually rise in the medium term to that target.
So, no progress there. That means the September hike still depends on strong job gains in the next two reports before that September 17th meeting. And it depends on inflation numbers that don`t slide backwards even amid lower commodity prices and slumping international growth.
KAHN: Of course, inflation is going to play a very big role. We continue to see that when we look at core inflation numbers, that those numbers are gradually increasing. In fact, if we look at the three months average annualized rate, that`s also picking up, which shows an upward trend.
LIESMAN: So, was there a hint would it raise rates in September? Yes. If you count that they`ll look at the jobs date and the inflation data and make up their mind then. That`s not really much of a hint at all.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman in Washington.
HERERA: And as Steve just reported, the recent route in commodity prices is on the Fed`s radar. But today, oil prices rebounded from near six-month lows. West Texas crude settled up nearly 2 percent to $48.79, on a possible surprise move by the world`s biggest oil producer, Saudi Arabia.
But as Jackie DeAngelis explains, the move higher may be short-lived.
JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Oil prices popping on the session. One of the contributing factors, some headlines coming out from Saudi Arabia that the country could cut its production at the end of the summer and throughout the rest of the year. The numbers that we`re looking at, 10.3 million barrels a day, hovering around 10 million a day according to sources by the end of 2015.
Traders saw this is a bullish sign for crude prices but then said they`re concerned. It may not be enough of a production cut from Saudi Arabia.
They want to see something along the lines of a million barrels a day to really believe that this is a significant enough to impact the oil market.
Still, of course, there have been many factors that have been pressuring crude prices down 15 percent in the last month. One of them, Iranian oil, the potential for it to come back online.
Of course, we`re still waiting for Congress to potentially approve the deal that was passed by President Obama and the other world powers. But the question will be when this oil, if and when it comes back online, what that will do to the market. And if U.S. production cuts and production cuts coming out of Saudi Arabia will be enough to still balance the supply, demand equation.
The overarching theme in the pits right now is that the bias is still to the downside, although shorts are telling me they`re a little nervous.
Reporting for NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis.
MATHISEN: Federal Reserve watches the housing market very closely, and today, we learned that higher prices are beginning to take a toll on home buyers. Signed contracts to buy existing homes, otherwise known as pending home sales fell 1.8 percent in June from the prior month. That National Association of Realtors says the drop comes after five straight months of gains. Despite the decline, sales are still more than 8 percent higher than they were a year ago.
HERERA: The International Monetary Fund has been calling on the Federal Reserve to delay an interest rate hike until next year or risk stalling the U.S. economy.
And today, the head of the IMF, Christine Lagarde, described the U.S.
economy as, quote, “the strong performer”, end quote, but added that the world economy is fragile and still faces some downside risks.
(BEGIN VIDEO CLIP)
CHRISTINE LAGARDE, IMF MANAGING DIRECTOR: If I look at the global economy as it stands at the moment and base on the real latest, the world economy outlook, we have a situation where growth is a little bit tepid, I would say, 3.3 percent, 2015. Hopefully, 3.8 percent in 2016, which is clearly better. So, we have recovery as we have said. But it`s fragile, it`s unbalanced, and it`s — there are some downside risks on the horizon.
(END VIDEO CLIP)
HERERA: Ms. Lagarde also described China`s economy as resilient despite the recent drop in that country`s stock market.
MATHISEN: One global company is entering what it calls a new era.
Microsoft (NASDAQ:MSFT), the world`s largest software maker, is launching an updated version of its flagship product, Windows 10. It rolls out today, but in a much different way that past versions, because this one is free to most existing Windows users. Investigators seem pleased. They sent shares 2 percent higher on Microsoft (NASDAQ:MSFT) in today`s session.
And as Josh Lipton reports, the company has a lot riding on its success.
SATYA NADELLA, MICROSOFT CEO: Do you want to make Windows 10 the most loved release of Windows?
JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Microsoft (NASDAQ:MSFT) CEO Satya Nadella has earned praise for his decision to focus on mobile technology and Cloud services. But now, he faces his biggest test yet with the launch of Windows 10, the company`s new operating system.
DAN IVES, FBR CAPITOL MARKETS: Nadella, especially after the disappointment of Windows 8 that we saw, this really needs to be successful for investors to believe that Microsoft (NASDAQ:MSFT) can re-create the growth.
LIPTON: The Windows franchise still accounts for some 25 percent of Microsoft (NASDAQ:MSFT)`s revenue and it impacts a lot of people. More than 1 billion people rely on Windows today.
But expectations are muted. A financial bump in Windows 10 would show up in the company`s devices and consumer licensing group. Right now, Wall Street thinks sales in that division will fall 6 percent in 2016.
Analysts have been disappointed with the most recent upgrades.
PATRICK MOORHEAD, MOOR INSIGHTS & STRATEGY: I believe the expectations are so low here based on what they saw with Windows 8 that I think investors will probably be surprised at how well they do. And also, the way they`re accounting for Windows and being very conservative and what they`re telling people that says it really won`t have an impact until next year, I think they`re playing it very safe.
LIPTON: Analysts do think Windows 10 will be popular. There`s an all new browser called Microsoft (NASDAQ:MSFT) Edge. Cortana, Microsoft (NASDAQ:MSFT)`s digital assistance which responds to voice commands, also comes to the desk top.
UNIDENTIFIED MALE: What`s the traffic like going home?
CORTANA: Traffic is light.
LIPTON: The operating system starts up and resumes faster and boasts more built-in security features. There is also the hope that Windows 10 could give a boost to weak PC sales. Research firm IDC expects PC shipments to drop 6 percent this year.
Microsoft (NASDAQ:MSFT) has set very ambitious goals. The software giant wants 1 billion Windows 10 devices in the market within just the next three years. Today is the start of that campaign.
For NIGHTLY BUSINESS REPORT, I`m Josh Lipton in San Francisco.
HERERA: From old tech to new. Facebook (NASDAQ:FB) reported better than expected earnings and revenue that was slightly better than expectations. The social media company earned 50 cents a share, 3 cents better than forecast.
But profits fell 9 percent from a year ago on heavy spending. Revenue jumped 39 percent to $4 billion as more advertisers flocked to its mobile app. Despite the beat, shares initially fell in after-hours trading.
Julia Boorstin has more on the numbers and what investors need to know about that report.
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Facebook (NASDAQ:FB) beating across the board as it hits nearly 1.5 billion users, 65 percent of whom use Facebook (NASDAQ:FB) every single day. The key sign that its product is working for consumers and its ad for marketers, average revenue grew to 2.76 cents,
6 cents better than expected and up from a year ago.
David Winer (ph) telling us that video ads were key to driving growth as is mobile, which is down 73 percent of the company`s total ad revenue, from 62 percent in the year ago quarter.
Back over to you.
MATHISEN: Julia Boorstin reporting.
Anthem and Humana (NYSE:HUM), two companies caught up in the health care consolidation wave, both reported better than expected earnings today. Anthem hiked its
2015 forecast, and Humana (NYSE:HUM) reported at 25 percent jump in profits. The stocks went in different directions, though, with Anthem rising and Humana (NYSE:HUM) falling.
And with a third of Americans enrolled in Medicare and Medicaid, Bertha Coombs reports on how dependent both these companies are on those government programs, which coincidentally turned 50 today.
BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: For Americans, Medicare has become a cherished entitlement. For politicians, the senior health plans is a sacred cow, while the Medicaid plan for the poor is sometimes more partisan.
REP. NANCY PELOSI (D-CA (NASDAQ:CA)), HOUSE MINORITY LEADER: We must not allow the promise of Medicare and Medicaid to be undermined or be betrayed.
COOMBS: For insurers, the government programs are now an important source of growth. In the last decade, the percentage of seniors buying private insurance plans for services not covered under Medicare has more than doubled, from 13 percent to 31 percent. While expansion under the Affordable Care Act has seen Medicaid add 14 million low income Americans.
CECI CONNOLLY, PWC HEALTH RESEARCH INSTITUTE MANAGING EDITOR: People with government health care, that number is growing. While the number of people with private insurance through their employer is starting to shrink a little bit. So, it`s a matter of which direction the numbers are shifting.
COOMBS: And that shift is helping the bottom line of firms in the government health care sector. The nation`s second largest health insurer Anthem reported second quarter profits above estimates after adding nearly a million new Medicaid customers. Through its proposed acquisition of Cigna, Anthem hopes to grow the combined Medicare business.
Humana (NYSE:HUM) which has agreed to be acquired by Aetna (NYSE:AET), posted reports slightly higher than expected, though the Medicare giant`s patients have been using more medical treatments, pressuring its profits. Slim margins on government plans leave less room for error than employer coverage says Ceci Connolly. And then there`s the political risk.
CONNOLLY: When the economy gets tight, and the politicians are looking to balance a budget, that`s a natural pot of money. They`re big pots of money they look to squeeze down.
COOMBS: But as George Washington University professor Lee Nichols (ph) points out, with insurers more involved in government health care, Medicare and Medicaid patients now have a voice with big business to push back when funding cuts are threatened.
Bertha Coombs, NIGHTLY BUSINESS REPORT, Washington.
HERERA: Still ahead, the Chinese farmer who lost more than just his money in the Chinese stock market decline. He also lost hope.
MATHISEN: The Department of Defense awarded a multi-billion dollar contract to the defense contractor Leidos which teamed up with Cerner (NASDAQ:CERN) and Accenture. As reported earlier this week, these company will be responsible for modernizing the military`s medical records for near lip 10 million military records. The contract is valued at around $9 billion over the next 18 years. Allscripts and privately held Epic were also in the running for that contract.
HERERA: Boeing (NYSE:BA) may make some big changes if Congress doesn`t move on the Export-Import Bank. Chairman Jim McNerney says the company is considering moving some of its units to other countries that offer export credits. And that`s just one of the many things that Congress has on its to-do list with not much time to do it.
Eamon Javers joins us from Washington.
So, there isn`t a lot of time here, Eamon. What does Congress have to get done?
EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Yes, that`s right, Sue.
There are at least five big ticket items still on the agenda here in Washington as Congress goes out for its summer break. When they come back this fall, take look at this to-do list that they`re going to have get through somehow all the partisan bickering here in Washington. They`re going to have to work on a highway bill just tonight.
Just tonight, the House passed a short term extension of that. They`re going to have to deal with the Export-Import Bank. The Senate tried to get that through this week and the House said no to that. They`re also going to have figure out whether or not they`re going to approve the president`s Iran nuclear deal. And the debt ceiling and a continuing resolution to fund the government will all be on the agendas there, Sue.
So, a lot of work coming up this fall.
MATHISEN: Which of those are going to get done?
JAVERS: That`s a really great question.
My guess, Tyler, is the things that get done are the absolute must-pass to keep the government open. So, the continuing resolution, I think you can bet that that will get done. I think raising the debt ceiling, as tough as that is as a vote for Republicans, that will probably get done too. Some other things might be a little bit more discretionary.
HERERA: So, which ones might? If you have to go through that discretionary list, which ones do you think are either so contentious that they won`t be able to get to agreements or they might put it aside or they simply won`t be able to get it done?
JAVERS: You know, I wouldn`t have said this earlier this year. But I think the Export-Import Bank really could be in the crosshairs here. The Congress has allowed the authority to expire. It is operating sort of with a broken wing right now.
There are conservatives on Capitol Hill who really hate the idea of a bank that financials loans for U.S. exporters for their customers. That one sort of splits the party between the Chamber of Commerce wing and the very hard core conservative wing. That one could die there.
HERERA: So, Mr. McNerney`s comments about maybe moving some of the Boeing (NYSE:BA) units to other countries, will that resonate with those who perhaps are on the fence about the Export-Import Bank? Because if Boeing (NYSE:BA) moves those units, it may mean they`re going to lose those jobs.
JAVERS: Yes, it may back fire, though. Conservatives on Capitol Hill may look at that as bullying by big company executives, and they might dig in their heels even more on the Ex-Im Bank, which is just very, very unpopular in that group.
HERERA: All right. Eamon, thanks so much, as always.
JAVERS: You bet.
HERERA: Eamon Javers in Washington.
MATHISEN: And, Sue, we begin tonight`s “Market Focus” with mixed results from MasterCard (NYSE:MA).
Earnings were basically flat. Revenue growth was weaker than expected.
This is as the stronger dollar weighed on the company`s results. On top of that, the firm offered more rebates and incentives for deals. Still, shares were up today more than 1.5 percent to $96.73.
Defense contractor Northrop Grumman (NYSE:NOC) posted earnings that topped estimates.
Profit was higher on a tax credit and because of margin improvement. On that, the firm hiked its full-year profit guidance. Shares rose 6 percent to $173.44.
GlaxoSmithKline`s quarterlies topped estimates on both the top and bottom lines, sales of its AIDS medications and cost cuts helped the drug maker overcome a slump in sales of a big lung drug. Shares were two percent higher to $42.62.
And Jarden (NYSE:JAH) reported earnings and revenue that were in-line with expectations. The CEO of the company, which is behind brands like, I love this — Crock Pot!
HERERA: Crock Pot.
MATHISEN: Crock Pot, Sue, and Yankee Candle, says despite concerns about performance overseas, he still sees opportunity.
(BEGIN VIDEO CLIP)
JAMES LILLIE, JARDEN CEO: Brazil, we have a pretty big base of operation.
And, obviously, you`ve have to struggle with the rial, the economy has slowed down quite a bit. We also see there`s a lot of white space for growth. While the economy may have its issues and its ups and downs, we have market share opportunities across the board, whether it`d be in Europe, or Asia, or in Latin America, or Brazil specifically.
(END VIDEO CLIP)
MATHISEN: Shares were up 2 percent to $55.32.
HERERA: I love my Crock Pot.
Altria`s earnings and revenue came in better than analysts were expecting.
On that, the tobacco producer raised its full-year guidance and announced a
$1 billion stock buyback program. Shares were off 1.5 percent to $54.40.
A disappointing late report from Whole Foods. The grocery chain missed on both fronts and same-store sales came in below estimates. To top it off, the company cut its annual sales forecast. Shares were way down in initial after-hours trading. Before the close, the stock was off slightly to $40.82.
Wynn Resorts (NASDAQ:WYNN) reported profits that plunged more than 30 percent on slumping revenue from Macau. This as the Chinese government has cracked down on gambling corruption, which has hurt casino owners. It was a choppy trading right after the close. Shares ended the regular trading day off 2 percent to $96.03.
Marriott on the other hand beat on the bottom line, but revenue came in a little bit below forecasts. Its third quarter earnings estimates were below consensus, but the hotel operator lifted its full-year outlook.
Shares were unchanged initially after the close. Before the bell, the stock was 3 percent higher to close at $77.
MATHISEN: Volkswagen, which is now the world`s top automaker, is warning about the most important market, China. The German company said its net profit in the second quarter fell 16 percent because of weakness in the world`s second largest economy. VW also cut its full year outlook for deliveries.
HERERA: The stock market in China rebounded overnight, putting a stop to the three-day slide that wiped 11 percent off of China`s main stock market index. The Shanghai Composite rose more than 3 percent, but it`s still down about 25 percent from its peak in mid-June. And it`s the 90 million retail investors in that country that are the real casualties, including a rural farmer who spoke about his financial ask emotional pain with Eunice Yoon.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Far from Wall Street and the financial capital of Shanghai, farmer Yang Cheng saw his dream of getting rich disappear in the stock market. Yang began investing in 2008 from the remote town of Panzhihua in southwest China. He lost everything.
“I feel so hopeless,” he says.
Traditionally, average Chinese shun the stock market as the unreliable investment. But that changed in 2014 when the government started promoting stocks as part of a grand slam to open the economy and expand the role of markets here.
Yang put his savings of $164,000 in the bull market and invested his relatives` money, too. He bet it all on one stock, a local mining company.
“When the market climbed to 4,000 points, I realized the risks were pretty high”, he says. “However, public opinion on government policies affected my judgment.”
But what doomed him was margin trading. His brokerage convinced him to try it. He borrowed $1 million. More than five times his portfolio.
When the market hit a low point in early July, his brokerage forced him to liquidate. In an ironic twist, he now owes roughly the same amount he originally invested.
Yang isn`t alone. At brokerages across the country, hundreds of thousands of ordinary investors have been caught off guard by all the volatility.
Many of them have suffered catastrophic losses.
Yang bought a train ticket to Beijing. Like many investors, he traveled to the offices of the leadership and the stocks regulator but was turned away.
“I don`t know what to do. I trusted the government too much,” he says. “I won`t touch stocks again.”
Returning home empty-handed, the full weight of the family crisis sinks in, “I have ruined everyone in my family.”
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon, in Panzhihua.
MATHISEN: So, the pain is universal.
Well, coming up, hitting the road. Why Americans are keeping their old cars longer than ever.
MATHISEN: Here`s what to watch tomorrow. Earnings from the Dow component Proctor and Gamble, among others, a read on second quarter gross domestic product closely watched since it`s the broadest measure of activity. And also on the data front, the weekly jobless claims report and that is what to watch Thursday.
HERERA: Some positive news for Herbalife (NYSE:HLF) today. A federal judge dismissed the lawsuit accusing the company of being a pyramid scheme. The judge said the lawsuit failed to show that Herbalife (NYSE:HLF) and its CEO defrauded shareholders by concealing the company`s inability to track retail sales.
Shares of Herbalife (NYSE:HLF) rose more than 2.5 percent.
MATHISEN: And a nice report from Marathon Petroleum. The firm announced a nearly 30 percent hike in its quarterly dividend. The payout of 32 cents a share will be paid in September to shareholders of record, as of August 19th. The yield now on that dividend is around 2 percent.
HERERA: More layoffs in the energy sector. Chevron (NYSE:CVX) says it will cut 1,500 jobs or about 2 percent of its workforce. The move is an effort to trim its cost to offset those tumbling crude prices. Nearly all the layoffs will be in Texas.
MATHISEN: So, you drive an old car? If so, you are not alone. A new study shows the average age for a vehicle in the United States on the roads is now at an all time high of 11 1/2 years. It is the latest sign that many Americans are sticking with their old cars, or maybe that those old cars are better than old cars were, even as others push new car sales to near record levels.
Phil LeBeau has more.
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Behold the old beater, cars built before navigation systems or wireless connectivity were features we took for granted behind the wheel. A new study finds the average age of vehicles in America which was once you understand nine years, has now climbed to 11 1/2 years.
MARK SENG, IHS (NYSE:IHS) AUTOMOTIVE: There are people driving these older vehicles and they continue to hang on to them longer. Whether it`s economic factors that keep people from purchasing a new vehicle, all the way to simply better quality vehicles. And they don`t need to scrap them out if you will at the rate we did in the past.
LEBEAU: In fact, almost one out of every four vehicles out on the road was built before the year 2000.
Why are these old cars still so popular? One reason is, they`re paid for.
The owner is no longer have a monthly loan payment. But another factor is the quality and reliability of vehicles has dramatically improved over the last 25 years. So, they last longer.
It`s not uncommon to see cars with well over 100,000 miles on the odometer.
Still, as new models become more advanced, offering buyers the latest in connectivity, entertainment and safety, analysts admit that days for old vehicles may be limited.
SENG: One of the big things will be forcing consumers to make a choice before the life of the vehicle is over is the new technology that`s available on new vehicles today. And that could drive consumers to perhaps turn cars over faster than we`re seeing right now.
LEBEAU: Experts believe the average age for cars in America is unlikely to climb much higher. Primarily because new models are selling at close to a record level and increasingly, even the people driving old vehicles are convinced, it`s time to buy a new one.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.
HERERA: Driving three kids around in a while. It`s time to buy a new one.
MATHISEN: Puts some age on a car in a hurry.
HERERA: And with the juice boxes, the cheerios.
HERERA: All right. That does it for NIGHTLY BUSINESS REPORT for tonight.
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 hope you`ll join us again tomorrow night.
Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. The program is transcribed by CQRC Transcriptions, LLC. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Nightly Business Report, or CNBC, Inc. Information presented on Nightly Business Report is not and should not be considered as investment advice. (c) 2015 CNBC, Inc.