Focus: The panel's work
>> president bush’s tax reform panel has just wrapped up two days of hearings in washington. the panel heard expert testimony on a variety of options for reforming the tax code. jeff kupfer is the executive director and joins us from washington with an update on the panel’s work. thank you for taking time to join us.
>> thank you, ellen.
>> in as much preciseness in terms of the topic, what are the most viable options from what you’ve heard so far in the hearings?%
>> we had a very interesting two-day meeting. we had people come in and present a variety of the proposals that have been out there in the past. flat tax, consumption tax, national retail sales tax, reforms within the existing code. today, we spent a lot of time on business taxation, looking at ways to simplify business taxation, also international transactions so we had 27 witnesses come through over the last two days and they presented a variety of options for the panel to consider.
>> are you whittling away any of the topics to narrow it down in the hearings?
>> what we wanted to do in this meeting is have everybody come in and give us the whole range of options. what the panel will do now, we have a meeting coming up next week where we will have witnesses come in to help us to begin to evaluate the options and whittle them down. the panel will then continue to meet as a group and as working groups to go through the options and hopefully come up with a smaller set of options we will then recommend to the secretary of the treasury.
>> in seems that in one form or another, each of these proposals or topics is out there with suggestions of reform. how do you address critics who say that the panel is really about the administration trying to gain political capital for a specific point of view?
>> what i would say is that when the president set this up and the secretary of the treasury appeared in front of the panel early on, they both made it clear that all options should be on the table and we should look at everything and that’s what we have done and will continue do. in first stage of the process, we heard from over 50 witnesses and not one of the witnesses came in and said, you know, the tax code is fine, don’t do anything. they all came in and said you need to change it. so what we’re doing now is looking at all those options and the panel, who have a lot of people on it, who have thought about these issues over time, will come up with recommendations and we can move forward.
>> in terms of the ones that come up the most as best suggestions, give us the top three.
>> the ones we always hear about are the flat tax, a retail sales tax, reforms within the existing code. i’m not saying those are the top three the panel will consider but those are always in the public discussion. they’ve been around if the past and we’ll continue to look at them moving forward.
>> in terms of a consumption tax, certainly there’s talk that congress is discussing this. how much consideration are you giving this idea compared to the others?
>> what we know is that the current tax code is a hybrid between an income tax and consumption tax so using a consumption tax is something that already exists in the tax system so we’re looking at other options that would also involve a consumption tax, a value-added tax, retail sales tax. we’re taking a hard look at those. a lot of witnesses have pointed to the vgating of moving towards a consumption tax base for the country.
>> you were given a deadline of july 31 for the panel. will you meet that deadline?
>> we have every intention of meeting that deadline. we are on track for that. that’s why this meeting the last few days was very important because we have the options on the table and have two months now to refine those options and write up our report but we plan to meet that deadline.
>> at that deadline, what’s the proposal going to look like? will it give a litany of suggestions? how narrow will it be?
>> what the panel has discussed―no decisions have been made yet. but we all recognize that for our report to have merit and to be useful, we need fewer rather than more options. at the same time, the president has directed us to come back with options and have at least one option that’s based on the current tax code so we’ll have a couple of options but hopefully fewer, and not one option for each panel member.
>> one option meaning?
>> well, what i’m saying is we will at least have two, three, four options, probably somewhere in that range but that hasn’t been decided yet.
>> jeff, thanks so much for joining us, we appreciate the update.
>> thank you.
>> jeffrey kupfer is executive director of the tax reform panel set up by the administration. another story to bring to your attention, america’s busiest port is so congested it may start losing business. we’re talking about los angeles, the gateway for almost half the containers that come into the u.s. last october, the port was so crowded with ships unloading that incoming vessels had to wait at sea as long as 10 days. those waits run up costs and eat into profits. as the new peak shipping season begins, companies are making% -other plans, diverting ships to other ports or moving goods by air. as the two giant discounters battle it out, target outperforming wal-mart on the stock front. the question is, will the trend continue? is that story straight ahead.
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Listen Market briefing --- Ellen (slow)
Dell --- Bob (fast)
Market activity --- Deirdre (slow)
NYSE --- Deb (fast)
Economic forecast --- Su (fast)
37 cents exactly meets the average forecast of analysts surveyed by thomson financial. dell reported revenue of $13.39 billion, a 16% increase from the same period a year ago and it misses the analysts’ estimates, it was a miss of just .22%,. the all-important operating margin came in at 8.8%, the same as last quarter. that’s better than the 8.4% from a year ago. exceeding some analysts’ estimates such as an 8.6% figure postulated earlier today on bloomberg television. highlights by unit include revenue from storage systems up 49% from dell, services revenue up 30%, software and peripheral revenue including printers, tv’s and displays up 29% and mobility product revenue up 22%. now, turning to the forecast for the current quarter. dell predicting fiscal second-quarter earnings in a range of 37 to 39 cents a share, bracketing the 38 cent analysts’ figure. revenue forecast presented at a midpoint higher than consensus. we have this comment from daniel morgan of synovus investment advisers, managing a $6.5 billion portfolio. he said the report is pretty good and the guidance is good, which is positive. dell closed the regular session at $36.51, up almost a buck in the extended hours. other p.c.-related stocks, the rally, in telecom, hewlett-packard shares up 25 cents a share. microsoftmicrosoft and intel also up in extended hours.
>> looking at what happened during the regular trading session, stocks fell on concern the federal reserve may step up interest rate increases after a stronger-than-expected retail% -sales report. the closing numbers -- the stronger-than-expected retail sales report led to a rally in the dollar, surging to a six-month high against the euro and gaining against the yen after the retail sales jumped in april. traders saying the bearish sentiment seems to have lessened. crude falling below $49 a barrel on easing of supply worries. reports show rising of u.s. inventories and slowing growth in chinese demand, at close, crude down 3.8% to $48.54, a three-month low. the prices down 15% from the record high set on april 1. deirdre bolton has more on what moved or failed to move in stocks today. many factors behind the activity.
>> you mentioned the oil prices and then, in fact, oil prices at their lowest level since february, not enough to lift the major stock indices. among the reasons, investor fears of higher interest rates sparked by the retail sales report, also disappointing earnings from wal-mart. wal-mart’s first-quarter sales suffered as gasoline prices rose causing the world’s biggest retailer to fall short of wall street’s earnings estimates. sending the stock to its biggest decline in more than five months. yet, overall april retail sales came in higher than economists expected, giving investors a mixed picture of the consumer’s strength.
>> the good news is there’s two consumers out there, folks that shop at wal-mart and the rest of the retail sales.
>> indeed, shares of target closed higher after the company’s first-quarter earnings rose 15%, helped by sales of fashionable private brands. aside from wal-mart, exxon-mobil pushed the dow lower. energy stocks, including valero and conocophillips were the biggest weight on the market , falling after reports of rising inventories and slower demand. other losers included steel stocks can with u.s. steel stocks plunging after cutting its forecast of domestic shipments. that gave investors another reason to question the outlook for economic growth and corporate profits.
>> investors are getting mixed signals out there and what’s driving investor sentiment is the complete lack of transparency about the direction we’re headed in and what the fed does in terms of magnitude and frequency of interest rate increases.
>> interest-rate-sensitive stock including banking stocks and financials closed lower, both of these groups underperforming the s&p 500 year to date. back to you.
>> thank you very much. you talked about oil and its impact on stocks today. energy stocks were the main drag on the s&p 500. here’s a report on today’s trading with details on the energy shares from deborah kostroun.
>> the dow jones industrial average closing near its lowest level of the day and a confusing market , according to peter henderson with bank of america specialists. he said the fact you had oil down didn’t inspire the market and good news in the market like retail sales, coming in better than expected, couldn’t help the markets . but in a sense that concern, we did see concern because retail sales may actually force the hand of the fed to keep increasing interest rates. looking at the oil stocks, oil closing at its lowest level in three months. laggards in the s&p 500, energy at the top of the list, the biggest drag all day long. material stocks, also transportation stocks. oil refiners and integrated oil stocks like conocophillips, it was down 5.5%, its biggest loss in 3 1/2 years. oil services, that index had its biggest drop since january of 2003, all 15 members of that index were lower, some of the components of that really kind of seeing big percentage moves lower. gold stocks lower and that, along with the fact that gold, the commodity, fell to a three-month low. that as we saw an increase in the value of the dollar and in fact that was on the rise mainly because retails were on the rise so you saw gold producers lower. freeport mcmoran, owner of the world’s biggest gold mine, down 6%. other material stocks and steel stocks lower. u.s. steel down, its biggest drop in one year. that after the biggest u.s. steelmaker cut its forecast for domestic shipments this year and cut that forecast for the second time in only three weeks. other material stocks lower, phelps dodge, the second biggest copper pursue, producer, was lower, mainly as the price of copper fell to the lowest level in seven weeks. 3m buying cuno, i’m deborah kostroun at new york stock exchange for bloomberg news.
>> more on that report showing u.s. retail sales last month rose twice as much as forecast. economists say it is the latest sign a consumer rebound is helping power economic growth. su keenan has more on the report and the story.
>> ellen, many economists echo the view of christopher low who says the latest report is far better than anyone thought possible, especially in the face of those big gasoline price increases. the amount spent last month jumped twice as much as the forecast. this as americans were spending more on cars, on clothes and restaurant meals. 1.4% surge is the biggest since september. if you back out autos, april’s jump in retail sales was also double the median estimate of economists surveyed by bloomberg. in both cases, the commerce department revised the two previous months’ sales figures higher, which delaware investment’s analyst finds encouraging.
>> it’s erraticidatesa we’ve been seeing. the quarter started off strong. march was a big disappointment, one of the worst numbers we’ve seen in a year and now april was a big sigh of relief the consumer is not slowing as much as we thought.
>> not, indeed. susquehanna financial group’s analyst saying the retailers catering to the teenage customer showing real strength.
>> the big change has been that the gap and players like express have walked away from this business, walked away from the casual young customer and missed the boat and opened up the doors for players like american eagle to establish themselves as well as abercrombie & fitch so at this point in time we don’t see a crack in the armor but the momentum will continue through the selling season and these stocks should outperform.
>> two factors powering consumer spending, employment growth and rising incomes am 11 of 13 retail industries tracked by the government showed sales gains last month compared with eight in march. the increase in service station receipts shows gasoline is a big factor in the sales increase.
>> thanks so much. taking a break and when we return, a progress report on the bush tax reform panel. we’ll be joined by the executive director.
