TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: The magic number is two.
The Federal Reserve slashes its rate hike forecast implying just two raises
this year as its view of the global economy darkens.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Happy holidays. Yep. You
heard right. FedEx (NYSE:FDX) had a jolly season and shareholders may be
starting to reap the benefits. >
MATHISEN: Strange success. The entrepreneur who saw the profit potential
in a rundown abandoned prison.
All that and more tonight on NIGHTLY BUSINESS REPORT for Wednesday, March
HERERA: Good evening, everyone, and welcome.
The Federal Reserve is in no rush to raise interest rates. The Central
Bank held rates steady for the second straight meeting and said it would
increases them more gradually than previously forecast. Policymakers say
soft global growth and financial market volatility pose risks to their
economic outlook. This as even recent economic data shows some firming.
Just this morning, we learned core consumer prices which exclude food and
energy rose 0.3 percent last month, that was more than expected and the
notion that the Fed will delay some rate increases sent stocks higher and
bond yields lower. The Dow Jones industrial average gained 74 points to
17,325. The NASDAQ added 35 and the S&P 500 rose 11 to its highest level
Steve Liesman reports on why the fed seems uncertain about the economic
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: A dovish Federal
Reserve kept interest rates unchanged in its march meeting and suggested it
would be very cautious about future rate hikes. In fact, it slashed the
number of hikes it forecast this year with the average number of rate-
setting Federal Open Market Committee now seeing just two rate hikes this
year down from four.
The Fed gave a fairly upbeat assessment of the U.S. economy and jobs but
was clearly concerned about recent global economic weakness.
JANET YELLEN, FEDERAL RESERVE CHAIR: You have seen a shift this time in
most participants` assessments of the appropriate path for policy. And as
I tried to indicate, I think that largely reflects a somewhat slower
projected path for global growth.
LIESMAN: But Yellen did not rule the chance of future rate hikes
underscoring Fed officials forecast two more rate rises this year and said
every meeting including the one in April is locked.
YELLEN: Most participants do continue to envision that if economic
developments unfold as they expect, that further increases in the federal
funds rate will prove appropriate over time and that the pace will be
LIESMAN: Of course, Yellen could not escape a question on the heated
presidential election and whether it had any influence on the Fed and
Federal Reserve interest rate policy.
YELLEN: We are a nonpartisan independent institution devoted to pursuing
our congressionally mandated objectives and I have never seen a political
views in any way influence the policy judgments that are made inside the
LIESMAN: With the Fed not hiking after a strong unemployment report and
two months of rising inflation, it remains unclear what it will take for
the Fed to raise rates again. The suggestion from Yellen today was, if she
was less concerned about global growth and had more confidence in rising
U.S. jobs and inflation.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman in Washington.
MATHISEN: Let`s turn now to Scott Minerd for more analysis on the Fed and
the economy and what it will mean for you. He`s chief investment officer
at Guggenheim Partners.
Scott, welcome. Good to have you with us.
SCOTT MINERD, GUGGENHEI M PARTNERS: Thank you for having me.
MATHISEN: Steve just hinted at something and it is this. Is the Fed
remaining true to what it said it was going to do if unemployment did this
and inflation did that?
MINERD: Absolutely not. The Fed is basically violating its own parameters
for raising rates. Based on their guidelines, data dependency, we should
have increased rates today but they chose not to because I think they
realize the market would have had a tantrum if they had raised rates. They
were not expecting it.
HERERA: Mrs. Yellen pointed to economic uncertainty overseas,
specifically. But that really falls outside of their mandate as well. I
mean, they should be, according to many, anyway, they should be regulating
rates based on the U.S. economy versus the global economy. Others would
argue, however, that it is one economy, globally.
MINERD: Well, I think that the Fed gets its get-out-of-jail card here by
basically saying, look, if the U.S. market goes into turmoil, if we raise
rates, if the dollar strengthens that will cascade into the emerging
markets and to other countries which then will create more financial stress
into the United States. So, at the end of the day, we really are thinking
about the U.S. economy.
MATHISEN: There are critics who said that the Fed should have raised in
September and they cited the global situation, global turmoil at that time.
Then, again, here in March.
How many times do you — do you think they`re going to start playing catch-
up or did they basically telegraph that they`re going to go at a very slow
pace, maybe two hikes this year, June and December?
MINERD: Well, I think they`re going to go very slow. I don`t think
they`re going to play catch-up. I think the expectation, which they set
today, which is that they`ll do four rate increases in 2017 will not be
met. They will go slower than that. And as I likened it earlier today,
this is like going to the bar and it`s — you`re having a good time and
it`s now closing time.
And so, we`ve decided to extend the hours of being open. We`re going to
keep serving up the liquidity and the good times are going to roll.
HERERA: One of the issues for the Fed has been the lack of inflation and a
lot of that has been linked to declining oil prices. You don`t think we
quite hit bottom yet but looking for substantially higher prices later in
MINERD: That`s right. If you look at our target which we think oil will
be somewhere between $40 and $50 at the end of the year, based upon that,
just the stability of oil, and the modest rise in oil, that we will see
inflation tick up significantly over the next six to 12 months and that
will be a problem for the fed.
MATHISEN: Where can I make a little money this year, Scott?
MINERD: You know, the place today based on what the Fed did told us that
it`s OK to take risk and so my favorite place right now is in high-yield
bonds and bank loans.
MATHISEN: High-yield bonds and bank loans.
All right. Scott Minerd, thank you very much. Appreciate you being here.
MINERD: Thank you, Tyler.
MATHISEN: Appreciate it. Guggenheim Partners, Scott Minerd.
HERERA: Housing starts rebound hitting their highest level in five months.
That happens as builders ramped up construction of single-family homes.
The Commerce Department reports a more than 5 percent increase in February
which some economists attribute to warmer than usual temperatures.
MATHISEN: The slump in energy prices weighed on U.S. industrial
production, broad gauge of output across factories — well, mines and power
plants, factories, Federal Reserve reports a decline of 0.5 percent in
February from the prior month. Much of the weakness was concentrated in
the mining sector and utilities. Manufacturing production increased for a
second consecutive month.
HERERA: Federal Express (NYSE:EXPR), FedEx (NYSE:FDX), is often considered
a barometer of the economy and topped Wall Street`s earnings estimates. A
surge in online shopping during the holiday season, people like me, helped
drive its ground business. The shipping company reported fiscal third-
quarter earnings of $2.51 a share better than the $2.34 expected. Revenue
of $12.7 billion was better than estimates and 8 percent higher from a year
ago. Investors like those results, sending shares higher in initial after-
Morgan Brennan has more on FedEx`s quarterly results.
MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: FedEx (NYSE:FDX)
delivering a beat on its peak holiday season quarter and narrowing full-
year guidance to the upper end of a previously cited range. The number two
U.S. package delivery company crediting its better than expected results to
yield management effort, something we`ve seen playing out in its express
segment, which it has been restructuring, as well as U.S. domestic volume
growth, basically more packages being shipped around the country.
Also helping the bottom line: lower fuel costs and more favorable currency
exchange rates. Basically, FedEx (NYSE:FDX) saved money last quarter and
for the most part was more efficient. The one area where there were some
hiccups, the ground segment which thanks to stronger than anticipated
holiday season demand saw package volumes and package sizes eclipse the
company`s expectations. That sent sales soaring but the higher costs also
put pressure on that segment`s operating results.
Overall, however, a strong quarter for the parcel carrier. The reason
shares have taken to the skies in after-hours trading.
For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.
MATHISEN: In Washington, President Obama nominated Merrick Garland to the
Supreme Court today.
(BEGIN VIDEO CLIP)
MERRICK GARLAND, SUPREME COURT JUDGE NOMINEE: For a judge to be worthy of
such trust, he or she must be faithful to the Constitution and the statutes
passed by the Congress. He or she must put aside his personal views of
preferences and follow the law, not make it.
(END VIDEO CLIP)
MATHISEN: The 63-year-old judge is the chief judge of the federal appeals
court in Washington. Much of its caseload has focused on regulating
government agencies and on national security. Legal experts say Garland`s
rulings over the years have favored government regulatory agencies
including the EPA and the SEC and the National Labor Relations Board.
Senate Majority Leader Mitch McConnell has vowed to block the nomination.
HERERA: In the race for the White House, the leading candidates all have
different plans for defense spending. Some want more. Others want less.
But as Jane Wells reports, no matter who wins, the Pentagon is arming
itself for change.
DONALD TRUMP (R), PRESIDENTIAL CANDIDATE: Our military is in a very bad
JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Such a statement would
lead one to think a Trump win would be good for the defense industry, but
maybe not. Trump has said he wants more for less. Something the Pentagon
was already trying to do but never with a commander-in-chief known for the
art of the deal.
TRUMP: I`m going to make our military so big, so powerful, so strong, that
nobody, absolutely nobody is going to mess with us.
HILLARY CLINTON (D), PRESIDENTIAL CANDIDATE: Thank you, all, so very much.
WELLS: Meantime, Democratic front-runner Hillary Clinton has yet to
outline a defense budget, merely promising on her website to ensure the
U.S. has the strongest military the world has ever known.
Opponent Bernie Sanders previously said he`d like to cut defense spending
in half and reduce the size of the U.S. nuclear arsenal, though he
reportedly still supports the very expensive F-35 program because of the
jobs it brings to his home state of Vermont.
This week, the CEO of the company which makes the F-35, Lockheed Martin
(NYSE:LMT), addressed the media about the company`s future in uncertain
But most of Marillyn Hewson`s talk had nothing to do with the U.S., there
was no mention of the election. Instead, Lockheed is focusing on
international sales and perhaps with good reason.
Currently, military spending is about 3 percent of total GDP. Now, that`s
a percentage that`s less than half what it was during the Reagan
administration. It`s even lower than what it was during the Carter
administration. And the only vocal opponent of raising that percentage
who`s still in the race is Republican Ted Cruz.
The Texas senator reportedly wants to increase defense spending to 4
percent of GDP adding another $100 billion. John Kasich has proposed a
similar spending increase and also highlights the need for more
Cruz, though, is the most specific. He wants more troops, more ships, more
missile defense. At the same time, he wants to audit the Pentagon to
follow the money. Something that also interests Donald Trump.
TRUMP: We don`t win with our military. We can`t beat ISIS.
WELLS: If he can strike a deal to buy more for less, it could be a
win/win. It`s not impossible. The Russians and Chinese are building up
their military strength for a fraction of the cost.
For NIGHTLY BUSINESS REPORT, I`m Jane Wells.
MATHISEN: Still ahead, tensions flared in the entertainment industry and
it`s consumers who watch TV who may feel the heat.
MATHISEN: The Federal Communications Commission is reportedly close to
approving the $55 billion takeover of Time Warner (NYSE:TWX) Cable by
Charter Communications (NASDAQ:CHTR). As first reported by “The Wall
Street Journal” certain conditions will be attached including increasing
the number of families who receive high-speed Internet service. The draft
proposal approving the merger reportedly will be circulated this week.
HERERA: As the television landscape changes, it is pitting content
providers against content distributors. Two high-profile battles are
currently under way. Comcast (NASDAQ:CMCSA) (NYSE:CCS) owned NBCUniversal
is in heated contract renewal talks with Dish Network. And Comcast
(NASDAQ:CMCSA) (NYSE:CCS), which is also a pay TV provider, has been in a
contentious dispute with the Yes Network over programming fees.
And as Julia Boorstin tells us, it`s consumers who are stuck in the middle.
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: A contract
renegotiation between Dish and NBC over the fees the satellite company pays
for content has gone south. And now, Dish is suing NBC for breach of
ANNOUNCER: Dish says customers can watch everything.
BOORSTIN: After NBC launched this campaign telling Dish customers they
could suffer a blackout of NBC`s 26 channels as early as Sunday, Dish said
involving the public violated NBC`s contract.
ANDY HARGREAVES, PACIFIC CREST SECURITIES: The cable and satellite
providers like Dish are under increasing gross profit pressure because it`s
getting harder and harder to pass price increases along to consumers and
that`s partially because the price is already so high and it`s partially
because everybody already upgraded to HD and DVR so you can`t mask the fees
BOORSTIN: Dish says it expects to file for arbitration which would prevent
NBC from blacking out Dish customers and NBC says it welcomes arbitration
and believes it would win.
This lawsuit speaks to a bigger issue, growing debate over the value of
content to satellite or cable TV packages. This comes after Comcast
(NASDAQ:CMCSA) (NYSE:CCS) dropped the Yankees` Yes Network in November
after the two failed to reach an agreement.
Alex Rodriguez recently filming a video urging Yankees fans to drop Comcast
ALEX RODRIGUEZ, NEW YORK YANKEES: If you`re a Comcast (NASDAQ:CMCSA)
(NYSE:CCS) Xfinity customer, you will not be able to watch any Yankees
games on Yes this season.
BOORSTIN: And while Yes is unique because it`s such a niche network, this
is just the beginning.
HARGREAVES: And I think we will see at some point over the next 12 months,
maybe it`s a little bit longer than that, but we will start to see a big
channels get dropped and the outcome from these, I think, will get more and
BOORSTIN: Hargreaves warns that content companies push for higher fees
which are passed along for customers and likely to drive what`s called
cord-shaving. Customers choosing smaller less expensive TV packages.
For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.
HERERA: Comcast (NASDAQ:CMCSA) (NYSE:CCS) is the parent company of
NBCUniversal and CNBC which produces this program.
MATHISEN: Peabody Energy (NYSE:BTU) warns it may have to file for Chapter
11 bankruptcy protection, and that is where we begin tonight`s “Market
Focus.” If Peabody proceeds, it joins a growing number of coal producers
who recently filed for bankruptcy. The company has been hit hard by low
energy prices and the continuing shift away from coal power plants. Shares
of the company down more than 45 percent to $12.19.
Two solar energy companies announcing today they`re delaying the release of
their 10k financial report for the second time. Both SunEdison and
Terraform power cited, quote, “material weakness” with their financial
reporting as a reason for the delay. SunEdison ending the day unchanged
$2.08, while Terraform dropped nearly 8 percent to $9.72.
Amgen (NASDAQ:AMGN) wins a patent lawsuit decision against Regeneron
Pharmaceuticals (NASDAQ:REGN) and Sanofi. The suit revolved around a new
kind of cholesterol lowering drug that Amgen (NASDAQ:AMGN) had initially
developed. Amgen (NASDAQ:AMGN) up a fraction to $143.98. Regeneron also a
little bit higher $368.46 the close there. Sanofi dropped nearly 1 percent
HERERA: Caesars Entertainment and private equity owners could be facing up
to $5 billion in potential damages after a court examiner said a series of
corporate deals led to this casino company`s operating unit filing for
bankruptcy. The bankruptcy court had been looking into whether the company
and its backers stripped away assets leaving the unit unable to pay its
debts. Shares of Caesars Entertainment were down more than 13 percent to
Apple (NASDAQ:AAPL) has responded yet again to the FBI with a court filing
last night, further entrenching itself in the privacy battle against the
government. The tech company claims that the FBI has not exhausted all
options to unlock the phone used by one of the alleged terrorists in the
San Bernardino attacks last year and it maintains it will not develop a
backdoor into its mobile operating system. Shares of Apple (NASDAQ:AAPL)
rose more than 1 percent to $105.97.
Retailer Williams-Sonoma (NYSE:WSM) reporting weaker than expected fourth
quarter earnings after the bell today as well as lowering its full-year
guidance. The company did, however, raise its dividend and authorize a
$500 million share buyback. Shares initially fell in extended trading
after gaining more than 2 percent during the day to close at $59.46.
MATHISEN: Virtual reality could redefine many businesses but none no so
than the $100 billion video game industry. So, it`s no wonder many tech
companies are trying to capitalize on this opportunity which comes with its
own set of unique challenges.
Josh Lipton reports from one of the world`s largest gaming industry events.
JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Virtual reality is the
shiny new toy at this year`s game developers` conference in San Francisco.
And in less than ten years, VR video cams could bring in nearly $12 billion
in revenue according to Goldman Sachs (NYSE:GS).
Now, that kind of money has tech companies fighting hard to win over
gamers. Sony (NYSE:SNE) announcing that its PlayStation VR system will be
available in October for $399.
ANDREW HOUSE, SONY COMPUTER ENTERTAINMENT CEO: We are on the cusp of what
will be a brand new form of games, a brand new form even of storytelling
and that`s going to be a very, very long road.
LIPTON: Now, Sony (NYSE:SNE) does have plenty of competition. Facebook`s
Oculus Rift which ships on March 28th is priced at $599 and includes 2
games, remote and an Xbox One controller.
Also at the high end is HTC`s Vive priced at $799 and a lower-end headset
from Samsung retailing for about $100.
But it`s developers who are now going to help drive adoption of this
technology. They now have to create compelling games which does come with
its own challenges. VR if not designed correctly can make users dizzy.
THERESA DURINGER, TEMPLE GATES GAMES CEO: As a VR designer, I have to
spend 50 percent of my time focused on both performance and comfort. So, I
don`t have the luxury of purely focusing on designing mechanics. And
that`s because if you make someone sick in VR, you can ruin their whole
LIPTON: Developers also say that creating VR games can be a lot more
expensive than designing traditional titles. Still, they`re convinced that
this technology will upend and redefine the industry.
Developers say it`s too soon to tell which tech titan is going to lead this
executed revolution but they do say it`s going to come down to which
company offers them the best and easiest tools for making games accessible
to the most people.
For NIGHTLY BUSINESS REPORT, I`m Josh Lipton in San Francisco.
HERERA: Coming up, from prison to play. How a former correctional
facility was transformed into a profitable business.
MATHISEN: Major automakers are expected to announce tomorrow that they
have agreed to install automatic emergency braking systems in most U.S.
vehicles by 2022. According to “Reuters”, the final deal follows an
agreement in principle with safety regulators who was reached last fall.
The automakers include Toyota (NYSE:TM), GM, Ford, Fiat Chrysler, Honda,
HERERA: Entrepreneurs have big ideas but it takes a certain amount of
vision to see the potential in a rundown abandoned prison.
Kate Rogers (NYSE:ROG) has the story of a man who saw an opportunity beyond
the barbed wire.
KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: No, we`re not in a
prison. At least not anymore.
TONY ABBATINE, THE YARD SPORTS VILLAGE FOUNDER: When you hear the door
gates lock, it`s OK, I`m in here now, and we`re going to work hard, we`re
going to work smart, we`re going to believe in what we`re doing then when
we get a chance to leave, we`re going to leave all our doubts behind us.
I was a New York state prosecutor for many years. I put bad people in jail
then I represented criminals so how apropos is it now in 2016, we`re
sitting that prison?
ROGERS: You were meant to buy the prison.
ABBATINE: I guess so, possibly.
ROGERS: These rolling 38 acres used to be part of a correctional facility
in Warwick, New York, but today, the property is being turned into, of all
things, a successful athletic facility and fitness center called The Yard.
The concept was created by entrepreneur, Tony Abbatine. To open The Yard,
Abbatine drew on his experience as a Major League Baseball consultant and
running pros and ropes in national franchise baseball and softball
ABBATINE: I was a logical choice to come here and see the property and my
first gut reaction, Kate, was I`m walking into a prison. I mean, the razor
wire was all over the place. Because it was an overwhelming sight
initially, it took four visits before I realize, OK, I see the light.
ROGERS: OK. So, you saw the light and then what, you decided you`re going
to buy it?
ABBATINE: You just do it. You hold your breath, you talk to people. But
it really gets down to your gut. It`s that divine intervention. It`s that
one moment when they walk into a place like this and say, yes.
ROGERS: Tony`s vision has worked out for him. Since opening last year,
The Yard is already profitable and hosted nearly 500 teams for tournaments
and even prison-themed athletic classes.
UNIDENTIFIED MALE: Keep moving, keep moving.
ROGERS: I`m dying down here.
Can I sit this out, please?
UNIDENTIFIED MALE: No, you got it.
ABBATINE: This is a passion that I`ve always wanted to do and I think a
lot of people are afraid of that. You know, because it is scary. You kind
of go through that uncertainty then you wake up in the morning and say, you
know what, if this is what you believe, if you work really hard, and you
focus on what needs to be done, yes, that`s what entrepreneurs do. They
don`t spend a lot of time thinking about the what-ifs.
ROGERS: For NIGHTLY BUSINESS REPORT, in Warwick, New York, I`m Kate Rogers
MATHISEN: I think one of the exercises they should do, Sue, is the escape
MATHISEN: Who gets out the fastest there.
HERERA: You go, Kate.
MATHISEN: Yes, go, Kate.
Before we go, let`s take another look at how stocks closed after the Fed`s
decision to keep interest rates standing right where they are. The Dow
Industrials up 75-ish at 17,325, NASDAQ up 35, and the S&P 500 at 2,027.
That`s an 11 1/2 point gain or thereabouts.
HERERA: And that does it for NIGHTLY BUSINESS REPORT tonight. I`m Sue
Herera. Thanks for watching, and we want to remind you this is the time of
year your public television station seeks your support.
MATHISEN: And I`m Tyler Mathisen. Thank you for your support. Have a
great evening, everybody. And we`ll see you tomorrow, St. Patrick`s Day.
HERERA: Oh, wear green.
MATHISEN: Yes, I shall.
HERERA: A green tie.
MATHISEN: I shall.