>> announcer: this is "nightly business report" with tyler mathisen and sue herera. black and blue. ibm's revenue has declined for 20 straight quarters, pressuring the stock after hours and potentially impacting trading tomorrow. deal breaker. why the insurance industry could find itself at the center of the next budget battle in washington. odds of an audit. what are the chances uncle sam will come after you? those stories and more tonight on "nightly business report" for tuesday, april 18th. good evening, everyone, i'm sue herera. tyler mathisen is off tonight. lousy earnings reports drove stocks lower today. we'll have more on that in just a moment. but we begin with quarterly

results from do w component ibm. hurt by weak demand in its technology services business. ibm earned $2.38 a share, three cents better than estimates, thanks to gains in its cloud services business. revenue missed estimates and was down nearly 3% from a year ago. investors were not happy. sending shares down initially in afterhours trading. deirdre bosa takes a look at ibm's quarterly results. >> reporter: this was ibm's 20th straight quarter of declining revenue. the company has been growing at so-called strategic imperative unit, as well as watson, its artificial intelligence unit. this unit makes up 42% of its revenue but not enough to make up for ibm's declining legacy software and services business. bottom line, this past quarter's results indicate that the

company's transformation is going to take more time. for "nightly business report," i'm deirdre bosa, san francisco. >> ibm wasn't the only dow component to report. goldman sachs surprised investors with a rare earnings miss. johnson & johnson also disappointed, while united health care reported an upbeat quarter. but the results pressured the broader market. the dow jones industrial average fell 113 points to 25,523. nasdaq lost seven. and the s&p 500 was off six. and of those three dow earnings, the rise in united health care was not enough to offset the losses in johnson & johnson and goldman sachs. goldman's big stumbling block, trading revenues, down from a year earlier. the main culprits, equities down 6%, and fixed income flat. trading was a bright spot, however, for other big banks. jp morgan chase and citibank both posted double digit increases last week. and bank of america,ing, t repo

today did even better. one analyst believes it's time to pick individual stocks rather than investing in the entire financial sector, which did get a boost following november's election. >> we're pretty neutral across this space. we thought that expectations about policy, whether it was rate policy or fiscal stimulus or regulatory policy, had just gotten too constructive. and we've been more focused on single names where we think there's some earnings possibility rather than the space as a whole, which we think may be sideways until there's evidence of stronger macro conditions. >> johnson & johnson also disappointed, despite improvements from year-earlier numbers. sales of blood thinner zorelto were lower than expected. still, j&j is raising its guidance, hoping to restock its

pipeline with a $30 billion deal for european biotech atelion, expected to close in q2. unitedhealth group put up better than expected numbers citing its pullback from the affordable care act exchanges and its growing medicare business. revenues rose almost 10% or nearly $49 billion. the nation's largest health care insurer continues to call for a repeal of the aca health insurer tax, already on hold for 2017, and greater freedom for insurers to tie premiums to the likely health costs of its customers, a touchy subject because older, less healthy customers don't feel they should be charged higher rates. the health insurers were at the white house today meeting with trump administration officials to discuss whether the president will pull funding from companies that sell plans on the affordable care act exchanges. and as kayla tausche reports

from washington, the problem could end up at the center of a potential government standoff. >> reporter: as the government barrels toward an april 28th funding deadline, one hot button issue is emerging as a potential deal breaker. so-called cost sharing reductions. $7 billion paid by the federal government to help shoulder the cost of insuring lower income americans enrolled on the health care exchanges. without a new deal on health care reform, the trump administration may choose to stop making those payments after a may 22nd deadline set by a judge. democrats want those subsidies included in next week's spending bill, otherwise risking a government shutdown. here is senator chuck schumer today. >> we're working hard to get it in the bill. and we're very hopeful. negotiations seem to be going quite well. and i'm very hopeful we can come to an agreement that everyone can be proud of. >> reporter: that would take leverage away from the white house on wholesale health care

reform. trump said, "the democrats will start calling me and negotiating." today, there are days in some states and weeks in others over whether to participate in exchanges. withholding payments to insurers could make payments expensive or force some insurers to leave completely. some answers my come next week when lawmakers return from recess. for "nightly business report," kayla tausche, washington. a closely watched special election is taking place in georgia, just north of atlanta. the seat in question was vacated by tom price when he was appointed health and human services secretary. the polls late today show a pretty close race. john harwood comes to us tonight from atlanta, good to see you, john, as always. how close is this race? >> reporter: well, when you

combine, sue, the closeness of the race with jon ossoff being at 45% in pre-election polls, and the unpredictability of special elections, which are such irregular events, you never know what turnout will be, everyone is watching and nervous. that's why president trump has been tweeting multiple times today, trying to get republicans out to prevent this blow to his political momentum. >> if the democratic candidate does win, what does that mean for his agenda, like tax reform and the other pillars, really, of what he's set forward? >> reporter: what it means, sue, is that republicans in congress are going to be very nervous. they're increasingly, if jon ossoff is able to win, especially to get 50% in this crowded field, they'll be worried that they could lose control of the house next november, in 2018. they hadn't really been worried about that before. if that is the case, that means for president trump, getting

cooperation on legislative issues like tax reform, on health care, on the budget, is going to be increasingly difficult, and that fractured republican party will get more fractured. >> the polls have been a little bit unreliable as of late, as you well know. >> reporter: that's right. >> yes. mr. ossoff's message was to get out and cast your vote, basically almost an anti-trump vote. do we have any sense as to whether that is resonating or not resonating with the population there? >> reporter: well, it's certainly gotten him up within striking distance of that 50%. at this high school, where people have been voting today, turnout in person is already as high as it was in last november's general election. so that indicates there's a significant amount of interest. and, you know, what jon ossoff is saying is, even though this district has been in republican hands for 40 years, even though tom price won it by more than 20

points in 2016, that because there are so many college-educated voters, which is the most skeptical white constituency of trump, he's trying to rally them. he's got a shot to do it. >> all right, john, we'll see. thank you so much for joining us, john harwood in atlanta tonight. >> reporter: you bet. now to the economy and the latest report on housing. builders broke ground on fewer homes in march. according to the commerce department, housing starts fell nearly 7% last month. that decline came after strong gains during a warm february. despite the pullback, the pace of construction so far this year is stronger than in 2016. the list of fed officials calling for the central bank to trim its bond holdings is getting longer. today esther george, head of the kansas city fed, warned against waiting too long to do so. she's urged the fed to hike interest rates in the past. minutes from the last meeting show that most policymakers do expect to begin selling treasury

and mortgage-backed bonds this year, which many say will raise yields. the feds purchased the bonds to shore up the economy during the financial crisis. in europe, in london specifically, uk supreme minister theresa may is calling for early national elections nearly three years before required. she is seeking a stronger mandate for brexit, the process by which the united kingdom will exit the european union. >> despite predictions of immediate financial and economic danger, since the referendum, we have seen consumer service remain high. record numbers of jobs and economic growth that has exceeded all expectations. we have also delivered on the mandate that we were handed by the referendum result. britain is leaving the european union. and there can be no turning back. >> the upcoming brexit negotiations will center on two issues -- continued access to

european markets, and immigration. the international monetary fund raised its growth forecast for britain's economy and for global growth overall. the organization cited better prospects for emerging markets and a rise in confidence here in the u.s. but it also warned about the rise of protectionism. >> the report we did on trade in our october world economic outlook did estimate that this was negatively affecting the growth of world trade. so a further escalation of trade measures with retaliation by some countries could take a chunk out of world trade, and therefore out of world growth. >> the imf left its forecast for u.s. growth unchanged and said much depends on the policies coming out of washington. still ahead, facebook's ceo takes the stage at a company conference, and talks about the cleveland murder.

dow component verizon is spending at least $1 billion to improve its wireless infrastructure. the largest u.s. wireless carrier will buy more than 12 million miles of optical fiber from corning. verizon sees fiber as critical for a faster next generation broadband network. >> we view fiber as the cornerstone building block for the network, the next generation network. and that network is going to look very different than what we've built in the past. if you look at 2g and third generation and fourth generation of wireless, it was about capacity and throughput.

fifth generation is about both things. we're going to see 100 times faster throughput. but we're going to see things like latency of a network that the network will go out and come back and respond in less than the time it takes to blink your eye. >> both verizon and rival at&t have been buying assets in preparation for a next generation network as competition in the industry increases. cardinal health adds to its portfolio. the drug distributor is buying device maker medtronnics for more than $6 billion. in addition, cardinal said falling generic drug prices would cause adjusted earnings for the year to come in at the low end of its guidance. shares of cardinal plunged while medtronnics shares dropped a

little. new customer loyalty programs at gnc increased shares 43% to $9.03. profits and sales fell at harley-davidson. that softness due to dropping demand is expected to continue in 2017. shares fell 4% to $56.91. charles schwab said a rise in new account openings helped its results, noting it also saw strength in its retail business and adviser services division. but shares fell nonetheless, ending the day down marginally to $39.91. facebook hosted one of its biggest annual events. the company's developer

conference gives ceo mark zuckerberg a chance to share his vision for the social media firm and to talk about new technologies. but today he also used the opportunity to address the cleveland murder and facebook's ability to handle offensive and violent videos. julia boorstin reports from san jose. >> reporter: more than 4,000 developers flocked to san jose to hear about facebook's latest inventions and new tools they'll be able to access. but ceo mark zuckerberg kicked off his keynote by addressing uproar surrounding a video shared on facebook sunday of a murder and demand for stricter controls. >> we have a lot more to do here. and we're reminded of this, this week, by the tragedy in cleveland. and our hearts go out to the family and friends of robert godwin sr. and we have a lot of work, and we'll keep doing all we can to

prevent tragedies like this from happening. >> reporter: but zuckerberg tried to focus on augmented relat reality and the growing power of artificial intelligence. >> we're making the camera the first augmented reality platform. >> reporter: while zuckerberg talked about bringing people together with augmented reality, many of these features won't go mainstream for years. but now facebook messenger is already implementing the latest artificial intelligence, to give users tools and experiences within that messenger app that they never swipe away. bots on facebook will be open to group conversations, to enable gaming and sharing of music. an ai virtual assistant will make suggestions. >> there will be a lot more things you can do like booking a

restaurant table, organizdering, buying movie tickets, and find out when the movie will play, and many more launching, starting today. >> reporter: it all fits into his ten-year plan to connect the world, bringing people together, whether it's a virtual space or a group chat on messenger. for "nightly business report," i'm julia boorstin in san jose, california. coming up, why sometimes you're better off not being wealthy. we'll explain.

here is a look at what to watch tomorrow. dow component american express reports earnings after the closing bell. the federal reserve releases the beige book. and the shanghai auto show is under way as china remains the growth engine of the auto industry. that's what to watch for on wedn it is tax day and there's a well-known phenomenon that takes place in the markets right around this time of year. as we've reported, stocks tend to dip right before taxes come due. but is the end of tax season typically a boost for the bulls? dominic chu takes a look. >> reporter: two certainties in life -- death and taxes. for investors, tax season doesn't have to feel like death. at least if history ends up repeating itself. the month of april has long been

regarded one of the strongest months in the year for stock returns. over the past 20 years, the s&p has averaged a gain of 2% during the month. but the gains are typically stacked during the second half of the month, which just happens to be in the time typically following each year's tax filing deadline. market bulls have a lot going for them. >> if you isolate all the international geopolitical risks and look at the united states, i would say absent those risks, it is a positive situation, and it would be some positive seasonali seasonality, giv the fact that it's spring, that the u.s. consumer has recovered, and earnings do seem to be on a growth trajectory. >> reporter: during tax season, there is historical data that suggests certain stocks tend to outperform. since 1980, biggest winners have been hasbro and industrial tools company snap-on in the 20 trading days following the tax

deadline. just because something has trended one way historically, doesn't necessarily mean it will repeat itself. there are lots of reasons to be cautious in the weeks ahead. >> the largest risks to the stock market rally are the investor need to know everything and have everything right now. investors become so shortsighted in our view, they want the new policies from washington, they want earnings, they want this, they want that. it's going to take time. >> reporter: investors will spend the coming weeks processing loads of information and trying to come to an investment conclusion. while seasonal trends in the stock market may be part of the discussion, they shouldn't be the only consideration. for "nightly business report," i'm dominic chu. >> now that you've hopefully paid your tax bill, do you ever wonder where that money goes? the former ceo of microsoft had that same question. so a few years ago, steve ballmer decided to do something about it. he's been working on a database that makes government financial information accessible in the same way that companies do.

>> where the heck is the 10-k? no such document really exists, at least not the way i would want to see it, which is, where does the money come from, where does the money go, and what kind of outcomes does government get? almost three years ago we started on this endeavor. >> and his database is called usa facts. his goal is to create a foundation for a more fact-based discussion on government priorities. and since world war ii, tax revenue has come from four main sources. according to the office of management and budget, those sources are corporate taxes, excise taxes, individual taxes, and social security and medicare taxes. in 1945, personal income tax provided about 40% of government revenue. in 2015, that number has increased to just under half of total revenue, as the share from companies shrinks. how are they spending all that money? according to pew research, the federal government spent more

than $3 trillion last year, with the bulk of that going to social programs like social security and medicare as well as national defense. the co-chairman of the tax practice at eisner amper joins us to talk about that, good to see you. >> thank you very much, good to be here. >> i was kind of surprised that such a large amount of the distribution went to what are essentially social programs. >> yeah, you're absolutely correct. what's driving that is the u.s. population and longevity. social security, for example, is forecasted to go from 8% of gdp this year to just over 10% upcoming. and then you look at the u.s. demographics, where we have 17% of the u.s. population 65 or older, and that's going to jump to over 22% forecasted by 2025, 2026. >> i think most people think that the government has more

discretion in the way that it spends the tax dollars, but from the way that chart broke it down and from what you're saying, because of the change in population and growth, they really have very little leeway in discretionary spending. >> that's very insightful that you say that. when you look at the entire u.s. government spend, only about 15% can actually be directed toward discretionary projects, bridges and roads and so forth. the rest of it is dedicated to social security, social spending, health care, medicaid, medicare, military spending of course. you only have 15 cents of every dollar remaining for spending outside those areas and corridors. >> was that always the case? or does it change depending on events or things that are happening in the u.s. economy, in the u.s. government? for instance, now we have a new

administration with a fairly aggressive program for infrastructure and things like that. >> right. that's, again, a very good comment. it's not always been that way. your introductory comments about, for example, the percentage of individual tax, 40% back in the '40s, as you say, predominantly u.s. persons pay far more in income tax, for example now, than larger corporations. a lot of the research we've looked at and in talking to our clients, the way to reverse this trend is increasing investment in education, so we can create higher skilled jobs, to create tax revenue, actually grow the economy, create more discretionary spending. >> tim, thank you so much. and the question we all want answered. what are the chances that you will be audited? robert frank did some digging. >> the richer you are, the more likely you are to be audited. the million dollar earners are

more than ten times as likely to be audited as the rest of the country. where do you fall? if you make the median income, between 50,000 and $75,000 a year in adjusted gross income, your chances of being audited are 1 in 244 taxpayers or 4/10ths of 1%. if you make 100,000 to a million bucks, you have only a 2% chance. if you make $1 million or more, you have at least a 5% chance of being audited. if you're a super earner or those lucky enough to make $10 million or more a year, you have a one in five chance of being audited. what are the red flags for the irs? well, large deductions relative to your income are a big flag, so don't write off more than you earn. the irs is really focused on companies that are filed through the individual tax code, so an llc or s corp. or c corp. will attract their attention. owning a foreign bank account is

likely to get you flagged. if you're a business that always loses money, you've got bigger problems, but those too can attract the irs. for "nightly business report," i'm robert frank. >> hopefully you'll never be audited. but to read more about your chances of an audit, head to our website, nbr.com. that will do it for "nightly business report" for tonight. i'm sue herera. thanks for joining us. have a great evening and we'll se