SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Not far off? Fed policy
makers meet and while no rate hike is expected tomorrow, the next one may be on their radar.
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Global hot spots. They
have been ignored recently by the markets even though they`re not cooling
HERERA: The money behind the madness. What a big win could mean for a
small school`s bottom line.
All of that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, March
MATHISEN: Good evening, everyone, and welcome.
The focus tonight on Washington. It is a crucial day in the race for the
White House. And the Federal Reserve kicked off its two-day meeting and
that is where we begin tonight.
Many expect the Central Bank to leave interest rates right where they are,
unchanged, standing pat for a second straight meeting.
But as Steve Liesman reports, a new survey of the top economists,
strategists and money managers say the next rate hike may not be too far
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The CNBC Fed survey
shows not much is expected at that meeting that began today where the
policy announcement is expected tomorrow but Wall Street still expects the
Federal Reserve to act this year in terms of raising rates.
Let`s look at the data: 95 percent of our respondents, they include
economists, bond managers, and strategists, 95 percent say the Fed will
stand pat in March and not hike.
But 12 percent think there will be a hike before June and 71 percent think
there will be a hike at the June meeting. Put those together, that`s 83
percent that expect it to come by June. Just 17 percent say there will be
a hike after June.
Looking ahead towards the rest of the year, what you see is that only two
hikes are expected. Compare that to the December survey before the whole
markets and what we have with the concerns about recessions. Three rate
hikes were expected but that came down and it remains down. Two hikes
How about the longer term? Let`s take a look. Here`s the CNBC Fed survey
looking for a 0.8 percent fund rate. It`s about 37 basis points now — 1.6
percent at 2017 and 2.7 percent over the long run.
How does that compare to where the Fed is, 1.4 percent, 2.4 percent and 3.5
percent, so the market is baking in less tightening from the Federal
Reserve than the Federal Reserve itself. One of the things we expect
tomorrow is for a new projection from Fed officials and for that to come
We`ll see how things like the recent lousy retail sales report, we got
factored into that forecast but expect those to come down and it`s
something that will be watched closely with the policy announcement
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.
HERERA: And as Steve Liesman just mentioned, retail sales fell in February
and the figures for January were revised lower. Sales at retail stores and
restaurants declined 0.1 percent last month. The figure is seen as a key
barometer for overall consumer spending, which accounts for about 2/3 of
economic output. A separate report showed producer prices decreased 2
percent in February, an indication that inflation pressures remain modest.
MATHISEN: Business inventories rose more than forecast in January. The
Commerce Department said inventory is a key component of gross domestic
product, increased 0.1 percent, but the ratio of inventories to sales
reached a post-recession high. And that is a sign that companies may not
be able to sell what they`ve been producing.
HERERA: CEOs say the economy has room to improve. A survey released by
the business round table, a group of business leaders from some of the
country`s biggest companies, finds that CEO expectations on the economy
Mary Thompson joins us with more on that.
What did the survey tell us, Mary?
MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, first of all,
their outlook improved from the fourth quarter. That`s a good thing, but
the index itself remained well below its long-term average.
A couple of high points in this survey: the CEOs are expecting to see an
increase in sales. That`s good news. And they are also expecting to
increase their capital expenditures, good news for the economy.
To the downside, though, they are all planning to dial back on hiring.
MATHISEN: Also, so they are more optimistic than they were but they are
THOMPSON: Yes, yes. They still feel that there are things that need to
happen to make the economy run at full steam.
MATHISEN: Let`s talk about trade, which has been a controversial topic on
the campaign trail. Where do these CEOs stand on where trade and free
trade in particular is a job creator or job killer?
THOMPSON: In the survey, there was a specific question about the Trans
Pacific Partnership, basically President Obama`s signature trade deal. And
they are much in favor of it. They expect it to improve their business,
make them more competitive globally and increase their exports.
Now, keep in mind, these are the largest companies and a number of critics
with the TPP say these are the companies that would most benefit from it.
So, they would naturally be inclined to favor it.
HERERA: Overall, what kind of a track record does it have? Is it a good
predictor of what is going to happen in the economy?
THOMPSON: It`s a good predictor of CEO sentiment, but not unlike what the
CEOs think about the economy. Its track record is mixed right now. So, I
wouldn`t look to this as an exact reading but certainly, it gives you a
sense of what they`re thinking —
HERERA: But it`s an indication?
MATHISEN: No political questions there. They don`t ask who they favor,
THOMPSON: Occasionally they do. You know, they throw a different question
every once in a while, but no — not this time. It was all about trade
which, of course, is a —
THOMPSON: It`s a political hot potato these days.
MATHISEN: All right. Mary, thank you very much.
MATHISEN: And from there, we go to politics and the five battleground
states. Ohio, North Carolina, Florida, Illinois, Missouri, they hold their
Republican and Democratic primaries today, and there`s a lot of on the
line, especially in Ohio and Florida, which are winner-take-all contests
for the GOP.
We`ve got two reports tonight. Eamon Javers in Palm Beach, but we begin
with Scott Cohn in the Buckeye State.
SCOTT COHN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Ohio is big and diverse
with a long history of picking presidents. But tonight, it could also
decide the direction of a party.
GOV. JOHN KASICH (R-OH), PRESIDENTIAL CANDIDATE: This country is about us
coming together. This country is not about us tearing one another down.
COHN: Republicans trying to block the rise of Donald Trump are pinning all
their hopes tonight on popular Ohio Governor John Kasich, considered the
narrow favorite here. But Trump is conceding nothing.
DONALD TRUMP (R), PRESIDENTIAL CANDIDATE: You`ve got to beat Kasich. He`s
not going to be a great president. He`s not going to be strong.
HILLARY CLINTON (D), PRESIDENTIAL CANDIDATE: I am very clear, I want to
build on the progress we`ve made.
COHN: On the Democratic side, Hillary Clinton, who beat Barack Obama here
in 2008, is the odds-on favorite again. But Bernie Sanders is aiming for
another upset by hitting free trade agreement that he claims have cost Ohio
SEN. BERNIE SANDERS (I-VT), PRESIDENTIAL CANDIDATE: It is time, brothers
and sisters, that we create an economy that work for all of us.
UNIDENTIFIED FEMALE: Crazy busy. Massive turnout.
COHN: At this precinct near Columbus, voters are well aware of what`s on
UNIDENTIFIED FEMALE: It seems like it always comes down to Ohio. So, you
know, it`s always Ohio, Ohio, Ohio.
COHN: A potential wildcard, Democrats crossing over to vote Republican,
like this woman near Youngstown voting for Trump.
UNIDENTIFIED FEMALE: Really, there was no choice in the Democrats. I
mean, no option there at all.
COHN: How high are the stakes? For the Republicans, no candidate has ever
lost the Ohio primary and then gone on to win the nomination but for both
parties the fate of the entire campaign could rest right here.
Scott Cohn, NIGHTLY BUSINESS REPORT, Blacklick, Ohio.
UNIDENTIFIED MALE: Do you solemnly swear we will perform —
EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Primary in Florida,
one of the five states voting today, which means swearing in poll workers,
putting up signs and waiting are to the voters to make up their minds.
There`s an enormous amount at stake here, 99 delegates go on the Republican
side and 214-plus-32 superdelegates for the Democrats.
Hillary Clinton has a commanding lead on the Democratic side and Donald
Trump is well ahead of home state Senator Marco Rubio for the Republicans
But the polls have been wrong before in this wild political year and some
of the people we`ve talked to said they have made up their minds just
within the past several days.
UNIDENTIFIED MALE: After a lot of consideration, I`m going to vote for
JAVERS: And why is that?
UNIDENTIFIED MALE: He`s — I think in retrospect, he`s the most qualified
at this point. It`s time to clean up Washington.
UNIDENTIFIED MALE: Well, I`m a Clinton person so that`s who I`m going to
JAVERS: She`s expected to carry the state.
UNIDENTIFIED MALE: Well, she should. She has the most experience. She`s
the only one that I`ve heard policy from, real, actual policy.
JAVERS: What the voters here in Florida do today could be a key piece of
an insurmountable lead for one of the front-runners, or it could mean we`re
headed for a much longer primary fight.
For NIGHTLY BUSINESS REPORT, I`m Eamon Javers in Palm Beach, Florida.
HERERA: And back on Wall Street, stocks were mixed as oil prices declined
and investors await that decision from the Federal Reserve. The Dow Jones
Industrial Average gained 22 points to close at 17,251, the NASDAQ lost 21,
and S&P 500 fell more than three.
Oil prices retreated as the focus returned to the global supply glut.
Domestic crude fell more than 2 percent.
MATHISEN: The White House is reversing its stance on drilling in the
Atlantic. The Interior Department said today it will not auction off
drilling rights off the coast of Virginia, North Carolina, South Carolina,
Georgia and Florida. The decision, a blow to some energy companies.
HERERA: The Treasury Department is loosening more sanctions on Cuba. The
new measures will make it easier for Americans to visit that country and it
allows nonimmigrant Cubans who are in the U.S. legally to earn salaries.
Mail service between the two countries will also resume for the first time
in 50 years.
MATHISEN: For the moment, it seems, geopolitics have taken a back seat to
domestic politics, at least as far as the markets are concerned. But the
issues that those markets fretted about at the start of the year are still
percolating, so maybe investors should keep an eye on them, too.
MATHISEN: Fighting in the Middle East. The hunt for terror suspects in
the Middle East and missile testing by North Korea. World markets have
largely ignored geopolitics, while rebounding in recent weeks. But nothing
has really happened to cool off any of those hot spots.
In the past 36 hours, a surprise in Syria. Russian began pulling back its
military presence, sending several military jets home. A sign the cease-
fire is holding? Perhaps. But no one is sure how long Vladimir Putin
intends to keep troops in Syria or what effect the pullout will have on
U.N.-led peace talks taking place in Geneva.
Turkey launched airstrikes armed at Kurdish rebels in Northern Iraq
following this Sunday`s deadly bomb attack in Ankara. Kurds also claimed
responsibility for the last month`s bombing of a military convoy in that
city. And last October, a suicide bombing at a peace rally, also in
The airstrikes come just days before Turkish President Erdogan is scheduled
to begin talks with German chancellor Angela Merkel on how to deal with
Syrian migrants. Turkey is a flash point in the migrant crisis.
In 15 months, a million migrants, many fleeing the civil war in Syria, have
departed from Turkey by sea headed to Europe, especially Cyprus and Greece.
Recently, several Balkan countries have closed their borders, leaving tens
of thousands stranded.
In Brussels meantime, shots were fired today, reportedly injuring three
officers conducting counterterrorism raids linked to November`s attacks in
Paris. Police said at least two suspects escaped over rooftops, 11 people
have been arrested in Belgium and another eight are being detained there in
connection with those Paris incidents.
Also today, North Korean leader Kim Jong-un said his country would soon
test a nuclear warhead and ballistic missiles capable of carrying them.
Such tests would violate U.N. resolutions backed by North Korea`s chief
MATHISEN: And this week`s test of a ballistic missile by Iran to the mix
and you wonder how long the markets can keep their window of relative calm
HERERA: Still ahead, what the private and public sectors are doing to
change transportation as we know it.
MATHISEN: The big enterprise software company Oracle (NASDAQ:ORCL) beat
earnings expectations and increased its share buyback by $10 billion. The
company, which is moving more of its Cloud, pulled down 64 cents a share in
profit, that`s 2 cents better than forecast. Revenue off, though, 3
percent to a little more than $9 billion on weak database software sales.
Stronger dollar didn`t help either, but revenue from its Cloud business was
strong and that, say most people, is the future. And that helped send
shares higher in initial afterhours trading as you see there.
HERERA: Shares of beleaguered pharma company Valeant were cut in half
today, and that is where we begin tonight`s “Market Focus”.
Valeant lowered its earning guidance and cut its revenue outlook by about
$1.5 billion, citing weaker than expected sales in its gastrointestinal and
women`s health segments. The news sent shares plunging. In addition,
Valeant may also delay filing it`s annual report, putting it in danger of
possibility defaulting on some of its debt. Shares of Valeant lost more
than 51 percent to $33.51.
Steep discounting at DFW caused its quarterly profit to fall by more than
half, but the shoe retail still manage to top estimates and comparable
store sales rose despite the street expecting a decline. The company
issued an upbeat revenue outlook for the year while expecting earnings to
fall in line with expectations. Shares rose 3 percent to $28.34.
And Avon is cutting more than 2,000 jobs as it plans to move its New York
headquarters to the U.K., in an effort to reduce costs. The news comes
after the cosmetic company sold its North American business to a private
equity firm two weeks ago. Shares of Avon fell 8 percent to $4.02.
MATHISEN: Children`s Place saw its shares rise after the clothing retailer
beat earnings and revenue targets. The company also issued a positive
full-year outlook and raised its quarterly dividend to 20 cents a share, up
from 15. Shares rose 8 percent to $76.48.
Alere (NYSE:ALR), which makes diagnostic has received a grand jury subpoena
from the Department of Justice regarding the company sales practices
outside of the U.S. Alere (NYSE:ALR) also said it will delay filing its
annual report. Shares dropped nearly 8 percent to $49.32.
During February, same-store sales declined at Chipotle began to recover
just a bit, but the restaurant chain expects a worse than expected loss of
a dollar or more per share for its first quarter, and that caused shares to
fall initially following that after-the-bell news. That was on top of a
nearly 2 1/2 point decline during the regular session. Shares there closed
at $503 even.
HERERA: South by Southwest, you`ll find musicians, entrepreneurs and tech
industry leaders at the annual gathering. It might be surprising to hear
that one of the big discussions this year had to do with overhauling our
Julia Boorstin is in Austin.
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Department of
Transportation wants to help cities become smarter by embracing everything
from driverless cars to electric vehicles to ride sharing. Transportation
Secretary Anthony Foxx unveiled the seven finalist cities in this Smart
City Challenge, a competition to generate high-tech solutions for the
future of transportation.
ANTHONY FOXX, U.S. SECRETARY OF TRANSPORTATION: This is not about just
having one city win. This is about having our incubators of innovation,
our cities across the country actually thinking about the future, making
plans for the future that can be actually done and although we only have
one winner, we`re going to work with all 77 of the other cities to give
them a pathway to move forward as much as we can with what they have
BOORSTIN: The winning city gets $40 million from the government, plus $10
million from Paul Allen`s Vulcan to invest in electric car infrastructure.
Austin, one of the finalists, would use the funding to continue its
initiatives already under way to solve what Mayor Steve Adler calls a
severe mobility challenge.
STEVE ADLER, AUSTIN, TX MAYOR: We are the only city outside of California
that has autonomous vehicles operating right now on our streets being
tested, more excited about that. Electrification of cars is the way of the
future. This is a city that owns its own electric utility. So, we have
opportunities that exist there that are unique to Austin, Texas.
BOORSTIN: And here in Austin at South by Southwest, there is particular
focus on how local governments and companies can work together.
FOXX: In technology and transportation, there`s no way the public sector
can solve all of the transportation problems on its own. We are
chronically under-investing, for one thing, and I think our imaginations
have been stunted by the lack of resources.
On the other hand, you`ve got the technology and innovation world coming up
with solutions that could be practically applied to solve these challenges.
BOORSTIN: Finalist Denver already has a number of companies on board.
MICHAEL HANCOCK, DENVER MAYOR: We`re competitive and one of the finalists
because we had over 55 partners, public and private companies, companies
like Panasonic (NYSE:PC) and Toyota (NYSE:TM). Companies you will remember
and know from their brands, national renewable energy laboratory, who came
to the table and said, we`re in this, let`s make this happen.
BOORSTIN: And with the Department of Transportation reaching out to
developers and entrepreneurs here at this festival, the goal is to drive
innovation nationwide and to bring in a range of voices and it won`t end
when the winner of the challenge is announced in June but it aims to
continue for years to come. For NIGHTLY BUSINESS REPORT, I`m Julia
Boorstin in Austin, Texas.
HERERA: And while we`re talking about transportation, Americans were stuck
in traffic for 8 billion hours last year and Ty was one of them. The city
with the worst traffic was Los Angeles where commuters spent 81 hours in
traffic in 2015. Washington, D.C., and San Francisco are close behind.
But the analytics who did the study said it`s not all bad news. Increased
traffic often means the economy is getting stronger.
MATHISEN: Coming up, what a big win in the big dance could mean for a
MATHISEN: The Federal Reserve releases its statement on interest rates and
economic forecasts followed by a news conference with chair Janet Yellen.
Reports on consumer prices, housing starts and industrial production all
due out and FedEx (NYSE:FDX) often considered a barometer for the economy
releases its earnings and that is what to watch Wednesday.
HERERA: Spending on prescription drugs rose more than 5 percent last year.
According to pharmacy benefits manager Express (NYSE:EXPR) Scripts, the
increase was driven mostly by the use of specialty medicines. Spending on
such drugs rose 18 percent while spending on standard prescription drugs
rose less than 1 percent.
MATHISEN: Well, March Madness is upon us again and that means exciting
basketball games and lots of money flowing from television networks to the
NCAA and its member schools. So, where does all of that money actually go?
Andrew Zimbalist is a sports economist at Smith College and joins us.
Mr. Zimbalist, welcome. Good to have you with us.
ANDREW ZIMBALIST, SMITH COLLEGE SPORTS ECONOMIST: Good to be with you.
MATHISEN: When we`re talking about the NCAA men`s basketball tournament,
how much money are we talking about?
ZIMBALIST: So, they bring in about $770 million on their television
contract and maybe another $100 million, $150 million on ticket sales and
So, altogether, somewhere in the neighborhood of $850 million to $900
million each year. And of that they distribute about $200 million to the
teams that are participating in the tournament, according to how well the
HERERA: So, that`s their primary source of income?
ZIMBALIST: The NCAA gets about 90 percent to 95 percent of all of its
revenue from the March Madness tournament.
ZIMBALIST: The football championship playoff that started two years ago is
privately run by the power five conferences within division one. They get
all of the revenue from that. They share bits and pieces of it with other
schools, but that never goes to the NCAA. So, it`s the basketball money
that really keeps the association going.
MATHISEN: Boy, that`s a little known fact, that the college football
playoffs aren`t owned by the NCAA. I assume they are sanctioned by them,
or the NCAA schools couldn`t do it.
MATHISEN: So, $200 million of that roughly $900 million go to the
participating team. The other $700 million goes where? To the NCAA or to
ZIMBALIST: Well, it doesn`t all go to Mark Emmert`s pocket. He has a
healthy salary but it`s not that large. They give out most of it to the
schools. There are roughly 1,100 schools in the NCAA. The NCAA supports
85 different championship tournaments. Not the football tournament in
division one, but all of the other ones that it supports.
They have scholarship funds they give out to the schools. They have grants
that they give to the schools based upon the number of athletic
competitions that they have. So they are supporting the general athletic
enterprise in college sports. They also have the administrative expenses.
So, probably somewhere in the order of $100 million is for legal expenses
and administrative expenses, organizational expenses within the NCAA.
HERERA: I would assume for some of the smaller schools especially, the
better you do in this tournament, the higher the profile you would achieve
and therefore, it allows you to do alumni fundraising, outside fundraising
in addition to the money that you get from the NCAA?
ZIMBALIST: So here — more or less, here`s how it works. The NCAA gives
roughly $260,000 for each game that you win in the tournament. You get
that not only this year but you get it in five subsequent years. So, each
game ends up being worth somewhere in the neighborhood of $1.5 million or a
little bit more, and we`re talking about the men`s tournament, by the way.
There`s also women`s tournament going on, and they don`t distribute
anything to the women who win their games. But, for the men`s tournament,
roughly $260,000 for each game that you win. So, you can — over a period
of six years, it could be worth $1.5 billion.
Now, that goes to the conference that the school is. It doesn`t go to the
MATHISEN: It doesn`t go to the schools.
ZIMBALIST: The conference — correct. The conference then generally what
most conferences do is to pay the school for the expenses that they had to
be at the tournament and then they take the rest of it and they distribute
it equally to all of the members of the conference. Now, in terms of —
MATHISEN: I`m sorry. We have to leave it there.
This is a fascinating conversation. So, if little Hampton beats my big
Virginia, they`re going to — on Thursday night, they`re going to get 260
grand for their conference for the next five years.
ZIMBALIST: There you go.
MATHISEN: Andrew Zimbalist, thank you.
ZIMBALIST: Yes, don`t give them any money.
HERERA: That does it for us for NIGHTLY BUSINESS REPORT. I`m Sue Herera.
MATHISEN: And I`m Tyler Mathisen. Thanks for watching. We`ll see you
back here tomorrow night.
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