BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Mega merger? Honeywell and Dow component United Technologies (NYSE:UTX) have reportedly held merger talks, potentially creating a colossal company.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Follow the money. With Jeb Bush’s departure from the presidential race, will his donors make a big difference for someone else?
GRIFFETH: Behind the wheel. How the fast growing ride sharing company screens potential drivers.
All that and more tonight on NIGHTLY BUSINESS REPORT. It’s Monday, February the 22nd.
Good evening, everybody. I’m Bill Griffeth. Hope you had a good weekend. I’m Bill, in tonight for Tyler Mathisen.
HERERA: It’s great to have you here.
GRIFFETH: Always good to be here.
HERERA: I’m Sue Herera.
Well, stocks start the week with rally, but we begin tonight with a potential blockbuster merger. Aerospace companies Honeywell and Dow component United Technologies (NYSE:UTX) recently held talks about getting together, a combination that would create a behemoth, with sales of more than $90 billion. The news was first reported by CNBC and sent shares of United Technologies (NYSE:UTX) higher and Honeywell lower.
David Faber broke the story and has the details of an on again, off again courtship.
DAVID FABER, NIGHTLY BUSINESS REPORT CORRESPONDENT: United Technologies (NYSE:UTX) and Honeywell have had discussions about a deal in the last couple of weeks. Those discussions initiated by Honeywell which have offered a cash and largely stock deal at a premium to acquire United Technologies (NYSE:UTX). Not the first time the two companies have spoken over the last year.
In fact, early last year, United Technologies (NYSE:UTX) approached Honeywell about a potential transaction, a merger of equals. It didn’t happen in part because of concerns of social issues and because UTX stock price fell dramatically over the summer.
Fast forward, Honeywell then made an offer to acquire UTX in a letter. UTX said no. That was October. And the now, the latest discussion.
A big question mark hanging over this transaction, antitrust. The two companies provide a lot of what goes into an airplane. And the question is whether antitrust regulators in the U.S. and Europe would oppose a potential deal. That may be the position UTX takes if it decides it no longer wants to continue those discussions.
For NIGHTLY BUSINESS REPORT, I’m David Faber.
GRIFFETH: And reports of that merger, potential merger help stocks extend their gains today, kicking off the week in rally mode once again. Investors cheering a rise in oil prices and stability in China’s markets.
When all was said and done, the Dow Industrial Average climbed 228 points to close at 16,620, the NASDAQ rose by 66 and the S&P 500 gained 27.
By the way, the price of domestic crude oil rose sharply, up 6 percent in part on speculation that shale output would decline. And late today, OPEC secretary commented on the freeze talks and described them as a good first step.
HERERA: Well, despite the rise today, oil prices are near historic lows. As we’ve been reporting, many commodity companies are struggling. Well, late today BHP Billiton (NYSE:BHP) slashed its midyear dividends by 74 percent to 16 cents a share. The world’s largest mining company by market value also reported a big loss and says it expects the commodity price downturn to be prolonged.
GRIFFETH: To politics now. Following this weekend’s results in South Carolina and in Nevada, the race has been reshaped both politically and financially.
John Harwood has been following the money and the politics.
And, John, what do you think, did South Carolina put Donald Trump on track to be the Republican nominee?
JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: He’s in the driver’s seat, Bill. He won impressively across the state, every congressional district, all the delegates. He beat Marco Rubio who finished second and Ted Cruz who is a thousands point votes behind Rubio by double digit margins.
So, it is going to be tough for him to be stopped. But we have seen a shakeout in the race since then. Jeb Bush getting out. We’ll see whether that triggers resources or voters to help somebody else get some momentum.
HERERA: Yes, what do you think the odds of that are? You know, Bush has left the race. Do his voters or donors go and back another candidate such as Trump or elsewhere?
HARWOOD: Well, yes, his voters will go back another candidate. There weren’t there in of his voters. Now, his donors, they are going to scatter. Some already have.
Some high profile former ambassadors in George W. Bush, his administration, and others have moved on, gone to Marco Rubio, specifically. You’ve had other people like Stan Druckenmiller and Ken Langone go to John Kasich.
But both of those candidates are so far behind Trump, it’s going to be difficult to breakthrough. They have to find states to win. And money means something, but if it meant everything, Jeb Bush wouldn’t be out this race.
GRIFFETH: Right. Quickly, though, on Nevada, now on the Democratic side, how important were the caucus results there?
HARWOOD: Significant. Hillary Clinton held off Berne Sanders’ momentum. Now, the race goes south. The South Carolina Democratic primary is next week. Southern (NYSE:SO) Super Tuesday states, lots of African-American voters who are loyal to Hillary Clinton. It’s going to be hard for Bernie Sanders to breakthrough. He’s going to give it a shot.
GRIFFETH: John Harwood in Washington, thanks as always.
HERERA: All right. Greg Valliere, let’s bring him in to the discussion tonight. He is chief global strategist with Horizon Investments.
Great to see you as always, Greg. Welcome.
GREG VALLIERE, HORIZON INVESTMENTS: Great to see you, guys. Hi.
HERERA: Let’s start with Mr. Trump and Wall Street. What do you think Wall Street would make of a possible Trump candidacy or a victory for that matter?
VALLIERE: Well, markets hate uncertainty, Sue, and this is the mother of all uncertainties, if Donald Trump — four really quick things Wall Street would hate. Number one, he’s promised a trade war which China. Number two, he’s itching for a fight with Janet Yellen. Number three, his tax and spending proposals would blow a hole in the budget. And number four, he regularly bashes Wall Street.
So, other than that, Mrs. Lincoln, is there anything — is there anything that Wall street could like about this guy? I’d say no.
GRIFFETH: But then you have the Democrats who are no fans of Wall Street to begin with. If it came down to, for example, Hillary versus Donald Trump, who do you think Wall Street would favor?
VALLIERE: I’ve talked to a lot of professional investors on this and they are torn. Needless to say, they are not big fans of hers, but they think a lot of her rhetoric against Wall Street has been for show to impress the sanders supporters. I think a surprising percentage of people would hold their nose and vote for her.
HERERA: You know, the economy, though, Greg, how is that going to play in to this whole discussion? Because Mr. Trump has been resonating with parts of America’s certainly. But the economy has not necessarily — or the strength of it has not necessarily been resonating with his supporters.
VALLIERE: Oh, you’re right. I think a lot of us in the industry look at an economy that’s starting to re-accelerate. It was a great story in Barons about an economy that could be really humming by the second half.
But I don’t think the average American appreciates that. They still worry about layoffs and foreclosures and things like that. So, that will, I think, be an advantage for the Republicans.
GRIFFETH: I have — my question, if the economy does strengthen, who does that favor more in the election, do you think? Do you think the Republicans?
VALLIERE: No, I think her. If it strengthens and perceived as strengthening, an important point, I think the voters would say, well, maybe she’s right. Maybe the Obama administration has made real strides. But she’s not there yet. In late February, she’s not there yet.
HERERA: Let’s talk about the other candidates if we could quickly, Greg. Mr. Rubio and Senator Cruz, the Senators Rubio and Cruz, what would Wall Street make of nomination for either of those two gentlemen?
VALLIERE: I think Wall Street could live with Rubio. They would view him as fairly moderate on social issues. I think on economic issues, Wall Street would certainly accept Rubio.
Cruz, though, is another story. Here is someone who does not like to compromise, boasted when he was in the Senate that he wouldn’t compromise, someone who has pledged to go right after the Federal Reserve and maybe curb some of the Fed’s authority, someone who’s not that in favor of free trade. So, I’d say the Cruz agenda could be more troublesome for Wall Street than Marco Rubio.
HERERA: All right. On that note, Greg, as always, thank you.
GRIFFETH: Thanks, Greg.
VALLIERE: You bet.
HERERA: Greg Valliere with Horizon Investments.
GRIFFETH: And from the presidential race to state politics where New Jersey has now threatened to take over Atlantic City which has been, of course, struggling for years. But today, the mayor of the city denounced those plans.
And as Morgan Brennan reports today, he did not mince words.
MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: In response to new legislation proposing a state takeover, Atlantic City officials had some strong language for New Jersey lawmakers.
DON GUARDIAN, ATLANTIC CITY MAYOR: The final piece of legislation that the state presented to us was far from a partnership. It was much worse. It was absolutely a fascist dictatorship. This is an insult to democracy and to American citizens living in Atlantic City.
BRENNAN: The recently introduced bill would give New Jersey vast control over the city’s finances, including the right to cancel union contracts, sell city assets and land, and declare bankruptcy.
The city’s mayor vowing to line up other state lawmakers to introduce different financial recovery bill. But the clock is ticking. Atlantic City is set to run out of money within two months.
A spokesperson for Governor Chris Christie dismissing the comments as, quote, “nothing more than political posturing”, adding that New Jersey taxpayers can no longer be asked to bail out A.C. when it, quote, “continues to tax and spend so irresponsibly.”
The East Coast one time gambling Mecca has struggled for years, as casinos have sprung up in neighboring states, and gaming revenue has plunged by more than half over the past decade.
For NIGHTLY BUSINESS REPORT, I’m Morgan Brennan.
HERERA: And political drama is also playing out across the Atlantic, in the United Kingdom, where just days reaching a deal with the European Union, Prime Minister David Cameron is facing some tough opposition in his own country, from those who want to exit the bloc.
Seema Mody has more on the possible — possibility, I should say, of a so-called “Brexit”.
SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT: British Prime Minister David Cameron already facing the defection of six cabinet members came face-to-face with London’s Mayor Boris Johnson.
BORIS JOHNSON, LONDON MAYOR: Prime minister to explain to the house and to the country exactly what way this deal returns sovereignty over any field of lawmaking to the houses of parliament.
DAVID CAMERON, BRITISH PRIME MINISTER: This deal brings back some welfare powers. It brings back some immigration powers.
MODY: Cameron has four months to argue his case. If he can’t convince Britain to stay in the European Union, other countries could follow — meaning the mere existence of the E.U. is in doubt.
Johnson is the highest profile politician to back the campaign for Britain’s departure.
JOHNSON: Of course, because I want a better deal for the people of this country.
MODY: Skeptics like Johnson doubt the U.K. can gain any rights back from the E.U. The British have debates the merits of E.U. membership for years, but tensions are rising as the ongoing migrant crisis stretches the limit of a slow growth and sometimes no growth Europe.
Today, tensions rose more as the British pound suffered its biggest single day drop in almost six years.
XAVIER ROLET, LONDON STOCK EXCHANGE CEO: It’s important that the certainty of continued job creation, that this certainty can continue. I think it’s also message for Europe and I do believe that were the U.K. to leave, the challenge for the European Union would be a mess.
MODY: Financial insiders are pointing to business leaders, about half the CEOs of the FTSE 100 companies, that’s the U.K.’s signature stock index, who are supporting Cameron. The top execs at Royal Dutch Shell and GlaxoSmithKline are among those expected to sign a letter saying the departure from the European Union could put Britain’s economy at risk.
Britain’s political fissures echo a populist outcry here and now, it appears Wall Street is getting involved too. Goldman Sachs (NYSE:GS) has reportedly given more than $700,000 to a group called Britain Stronger in Europe.
Seema Mody for NIGHTLY BUSINESS REPORT.
GRIFFETH: Still ahead, a company that’s no stranger to controversy sees its stock price plunge today after a revised cancer warning from the CDC.
HERERA: The number of Takata air bag recalls may quadruple. The Japanese manufacturer maybe forced to recall an additional 70 million to 90 million airbag inflators. As first reported by “Reuters”, roughly 29 million inflators have been recalled in the U.S. And safety regulators are investigating a wider potential safety hazard.
GRIFFETH: New phones and gadgets and virtual reality, they dominate the start of the Mobile World Congress. This is the mobile world’s biggest event. This year, there was a new issue dominating the conference, one that has grabbed the world’s attention.
Jon Fortt reports tonight from Barcelona, Spain.
JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT: It’s the tech world’s biggest global stage where East and West come together to launch products and do deals.
Global World Congress attracts 95,000 attendees and CEOs from around the world. Product-wise, the biggest news traditionally comes from smartphone makers like Samsung which made a big splash with its Galaxy S7.
In a surprise twist, day one wasn’t just about phones. Facebook (NASDAQ:FB) CEO Mark Zuckerberg actually joined Samsung on stage to talk about how these Galaxy phones are the best enabler of mobile virtual reality.
For the third year in a row, Zuckerberg came to Barcelona to drive a two-part agenda for richer countries. He pushed the idea that virtual reality will create demand for faster, fifth generation wireless networks. For poorer countries, he drove home Facebook’s commitment to providing Internet access to communities that don’t have it today.
MARK ZUCKERBERG, FACEBOOK CEO: One of the things that I’ve heard at MWC so far this year, that I think it’s personally been a little bit disappointing is this idea that 4G was about giving people a good experience and 5G is about connecting things. What I personally hope is that we don’t just do that, but we also kind of finish the job of making sure that everyone in the world gets Internet access.
FORTT: Zuckerberg also voiced support for Apple’s fight against the FBI, which wants the company to crack the iPhone security system. He wasn’t alone. Intel (NASDAQ:INTC) CEO also spoke out.
BRIAN KRZANICH, INTEL CEO: I think there’s a balance between those two. I’m absolutely not in favor and don’t believe we should do back doors and be forced to do back doors. But there probably is a way that working together with agencies, we can find way to really protect the citizens from the terrorists. I think it’s best when the engineers get together and actually solve the problem rather than the escalation.
FORTT: The overall lesson from this year’s Congress, in 2016, top tier smartphones themselves are no longer the stars of the show. They paved the way for new forms of virtual entertainment and new security headaches that have seized be world’s attention.
For NIGHTLY BUSINESS REPORT, I’m Jon Fortt in Barcelona.
HERERA: Shares at flooring company Lumber Liquidators fall sharply, and that’s where we begin tonight’s “Market Focus”.
The Centers for Disease Control and Prevention said certain kinds of laminate flooring sold by Lumber Liquidators carries a three times higher risk of causing cancer than previously thought. The CDC had originally issued a report two weeks ago, saying that the carcinogen formaldehyde found in the flooding posed a, quote, “low risk of cancer”, end quote. The CDC, though, said it used an incorrect value for ceiling height, leading to inaccurate results.
Shares of Lumber Liquidators were down nearly 20 percent today to $11.40.
Dean Foods (NYSE:DF) saw its profit triple in its fourth quarter as the dairy producer benefitted from allow lower milk cost. Revenue however lagged and missed analysts’ estimates. The food and beverage company also issued first quarter guidance that topped expectations. Nonetheless, shares were off nearly 8 percent to $18.88.
And profit and revenue at pharmaceutical company Allergan (NYSE:AGN) beat estimates, thanks in part to strong sales from its cosmetic drug, Botox. The company is expected to complete a $160 billion merger with rival Pfizer (NYSE:PFE) by the end of year. Allergan (NYSE:AGN) shares were up more than 3 percent today to $285.82.
GRIFFETH: Meantime, Cisco (NASDAQ:CSCO) System says it will collaborate with Ericcson and Intel (NASDAQ:INTC) to create a new generation of routers. The companies will also work with Verizon (NYSE:VZ) to make that happen. The new router will allow for faster networking speeds. Cisco (NASDAQ:CSCO) shares were up a fraction as a result today at $26.61.
Shares of Valeant were getting hit in an extended hours tonight, after a Dow Jones report citing sources said the pharmaceutical company is expected to restate earnings following an internal review. That report also says they restatement is likely over sales to its former drug distributor Philidor.
On Friday, shares fell by 10 percent following an analyst report slamming the company. And today, the company was off another 10 percent to $75.92. And that was before this report added to the freefall after hours.
HERERA: Coming up, who’s driving? A look at how the popular ride-hailing company Uber vets its drivers.
GRIFFETH: Uber is standing by its driver screening process after one of its drivers screening process tonight, after one of its drivers admitted to a shooting spree over the weekend that killed six people in Kalamazoo, Michigan. And now, users of the popular ride-hailing company want to know more about the company’s background check process.
Kate Rogers (NYSE:ROG) reports for us tonight.
KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: While Kalamazoo shooting suspect Jason Dalton did not have a reported criminal history, the incident raises the question of just how safe are passengers when traveling with Uber.
According to its website, Uber screening does not include fingerprints, live scan or check with the DOJ or FBI databases. Instead, Uber drivers have to provide license, vehicle documentation and Social Security numbers for third party background checks that comb through criminal records at county, state and federal levels.
In New York City, the Taxi and Limousine Commission conducts DMV and criminal background checks on drivers and also has TLC rep confirmed. This includes fingerprinting and drug testing.
The fingerprinting issue has been a hot button one across the country with advocates, regulators and unions saying there should be an even playing field between how establishment drivers are screened and how Uber, Lyft and other sharing economy players screen their drivers.
DAVE SUTTON, WHO IS DRIVING YOU?” SPOKESPERSON: Government conducted criminal background checks that involve fingerprinting are the only way that you can see an individual’s criminal history. Private background checks that use names cannot access an individual’s full criminal history. In addition, people can sign up with fake names and then the background check is completely worthless.
ROGERS: Critics like “Who is Driving You?” say foregoing fingerprinting and government background check allows Uber to scale up more quickly and continue its expansion. Less than two weeks ago, Uber also agreed to pay $28.5 million to around 25 million riders in a class action settlement over the term “safe ride fee”. Two lawsuits took issue with the claims the background checks are industry leading and as part of the settlement the fee would be renamed a booking fee.
ROGERS: On a conference call this afternoon, Uber defended its current policy of not using fingerprint and police background checks, and said that in light of this weekend’s tragic event, it would not be changing its current policy of using third party background checks in their place.
Now, spokespeople for the company also said, given the fact that the suspect did not have a criminal history, a background check would not have caught him.
GRIFFETH: Why not change the policy, though? If for no other reason, PR, to reassure people, you think.
ROGERS: You would think they would want to update it. But they were very adamant on this conference call this afternoon. They basically said fingerprinting can be discriminatory. When you cross check through this police databases, they may have someone who was arrested for a crime, but not necessarily charged, and they’re not always updated and current.
And so, they feel by going through the local, county, state and federal level on their own and county, in particular, they really said it was very important to them. They feel that their background checks are more current and more up-to-date and more fair to the people that want to drive for them.
HERERA: In India, they actually have panic button on the app. Might they bring that to the app here in the United States or no?
ROGERS: They said we have the ultimate panic button here in our 911 system, and that it’s so vast and it works so quickly and it work so well that we don’t need a panic button here. Instead, they encourage people who are unhappy or feel they are in danger rather on any trip to just call 911. They feel that’s the better way to do it.
They said there’s been reports they had tested this in Chicago. They shot those down on the conference call. They said this has not been tested here in the United States and we do not plan to bring it at this time.
So, something to watch for sure.
ROGERS: Thank you, guys.
GRIFFETH: Thanks, Kate Rogers (NYSE:ROG), very much.
HERERA: So, will the tragic Uber shooting spree over the weekend change the way that people feel about the sharing economy?
Let’s turn to David Reiss for his thoughts. He’s professor of law at Brooklyn’s Law School Center for Urban Business Entrepreneurs.
Nice to have you here, David. Welcome back.
DAVID REISS, BROOKLYN LAW SCHOOL PROF. OF LAW: Thank you.
HERERA: I guess that is the question. Do you think it will change the way people feel about the sharing economy, this case in particular?
REISS: I think we have to look at the short term and long term. In the short term, we’ll see people will think twice about it. But in the long term, and as I think people think about their experience with sharing economy services and seeing how frequently terrible and tragic incidents like this occur, I think we’re going to see a return to probably some growth in that area as people put this into perspective.
GRIFFETH: Are you surprised as our reporter Kate Rogers (NYSE:ROG) pointing out here that in their conference call just now, they seem to be digging in their heels on not changing their background check policies here. Why not, as I said, do that if only for PR reasons just to reassure the public? I mean, this is a PR problem for them right now, isn’t it?
REISS: It is. And I think they’re probably in crisis response mode. They’re probably not wanting to make big promises about big changes to acknowledge that their business model is intrinsically flawed and they will probably want to make changes on their own time.
HERERA: There have been more calls for more regulation of the sharing economy, specifically by those who are impacted in a negative way by the sharing economy. We have to put that out there. But do you think it opens the door a little bit wider for regulation?
REISS: I certainly do. I think there’s been this attitude of it’s better to ask forgiveness than to ask permission and an incident like this and all of its tragic consequences raise the argument that maybe that’s not the right way to go, that getting it right the first time is better than kind of seeing how it unfolds.
GRIFFETH: Growing pains in the sharing economy or is this a real dent? What do you think?
REISS: I think it’s growing pains. I think the sharing economy has been growing so rapidly with so many innovations. But I think it’s here to stay. I think people are voting with their feet in terms of using the services and government is trying to figure out how to adapt and how to regulate and what’s the appropriate level of regulation.
HERERA: Does it change, though, their liability? Do they have to change some of their policies, all of their policies because there’s a liability issue? And the weekend’s horrible events really point that out.
REISS: I think businesses react to lawsuits and to large judgments, and if courts and juries find that this behavior was negligent or reckless, they will get a clear message and they will change to adapt. I think that regulators are going to look carefully at them. So, I think a lot of this is in flux and I’m sure there’s going to be changes. I don’t know what they will be.
GRIFFETH: Have you used Uber and will you think twice, if not?
REISS: I’ve used Lyft, and I would continue to do.
HERERA: All right. On that note, David, good to see you again. Thanks for joining us.
David Reiss with Brooklyn Law School’s Center for Urban Business Entrepreneurs.
GRIFFETH: Finally tonight, NASA has received a record number of applications for its next class of astronauts. Earlier this month, we reported on NASA’s efforts to recruit and train future explorers in space. This time around, more than 18,000 people applied. That’s roughly three times as many as the last go around.
But landing that job will be very difficult. NASA estimates it will choose between 8 and 14 selected candidates from the most recent batch of applications. That’s a very small number.
HERERA: It sure is.
All right. Before we go, another look at the rally on Wall Street. The Dow Jones Industrial Average climbed 228 points, 16,620, the NASDAQ rose 66 and the S&P 500 gained 27.
GRIFFETH: Thanks to that rally in oil today again.
Were you on the NASA list?
GRIFFETH: Not this time around.
HERERA: Not this time, right? He loves space.
GRIFFETH: I do.
HERERA: All right. That’s NIGHTLY BUSINESS REPORT for tonight. I’m Sue Herera. Thanks for watching.
GRIFFETH: I’m Bill Griffeth. Have a great evening, everybody. We’ll see you tomorrow.