Transcript: Nightly Business Report – November 23, 2016

NBR-ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Holiday records. The Dow and the S&P 500 close at new highs for the third straight day as Americans head into a long weekend, thankful for the markets and so much more.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Big hint. The Federal Reserve just gave investors its clearest signal yet that a rate hike could come soon. Very soon.

HERERA: Major hurdles. The one thing that could possibly stand in the way of the president-elect’s proposed spending and tax cuts plan.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thanksgiving Eve, Wednesday, November 23rd.

MATHISEN: Good evening, everyone, and happy Thanksgiving Eve.

And on this day, investors were gobbling up stocks. The Dow climbing further above 19,000. The S&P pushing deeper into record territory. It’s the third straight day that those two indexes, arguably, the most recognizable market gauges in the world, finished at records.

Here are the final numbers. The blue chip Dow Index added 59 points to 19,083. The NASDAQ took a breather, it fell 5. But the S&P 500 tacked on a penny, $1.78 to be exact.

We reported on the sectors and stocks that propelled the market to new highs. Tonight, Dominic Chu looks at the turkeys, the ones the rally has left behind.

(BEGIN VIDEOTAPE)

DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: As families and friends gather around the dinner table to talk and eat turkey, some investors will be talking a different kind of turkey and that’s the stocks that have gone foul in their portfolios. Yes, that bad pun was intended.

Around 30 stocks in the large cap S&P have lost 20 percent or more of their value in 2016. And among the big names on that list, you got drugstore and pharmacy benefits company, CVS Health, which is down 24 percent year-to-date, also athletic apparel maker Under Armour down 27 percent, and solar power company First Solar has lost over half its value in that time.

But there are also other types of turkeys in the market, as well — stocks that have gone little in the way of capital appreciation and have provided no dividend to investors, whatsoever. More than 80 stocks in the S&P 500 have no current dividends payment. Approximately 13 of those stocks haven’t really gone up or down by more than 5 percent this year. Some would argue that those stocks have been dead money because of that.

So, among the stocks hitting those criteria: online streaming company, Netflix, up 3 percent, drug company Biogen, which is down 1 percent, and Google parent company, Alphabet, which is pretty much flat for the year.

So, a big question is how many of these companies can turn things around and get that spark to move them in the right direction? In the meantime, maybe think about talking more stocks at the Thanksgiving dinner table and less about politics. Gobble, gobble.

For NIGHTLY BUSINESS REPORT, I’m Dominic Chu here at the New York Stock Exchange.

(END VIDEOTAPE)

HERERA: Gobble, gobble indeed.

Fed policymakers appear ready to do something they haven’t done in about a year — raise interest rates.

Hampton Pearson dives into the minutes of the central banks’ last meeting.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Just-released minutes from the November Fed meeting show monetary policymakers moving closer to raising key short term interest rates for the first time in nearly a year. With some even suggesting if they didn’t raise rates in December, there was the risk of losing credibility, given all the signals about an impending hike.

DANIELLE DIMARTINO BOOTH, FORMER DALLAS FED ADVISOR: They’re shifting the goalpost for I think the investing public to begin to concentrate on what signals we’re going to get in December at the press conference that follows the December meeting about the number of rate hikes we might see in 2017.

PEARSON: Last week, Fed chair Janet Yellen told lawmakers the election of Donald Trump has not changed the Fed’s thinking on the timing of a rate hike.

But private economists argue the combination of a Trump presidency and Republican control of Congress could change that trajectory. Financial markets have already pushed up long-term interest rates in anticipation of possible tax cuts and spending on infrastructure projects.

DOUGLAS HOLTZ-EAKIN, AMERICAN ACTION FORUM: So the Fed in looking at its first rate hike is really not interested in that rate hike. It’s interested in everything that follows after that — how fast and how high will it have to go.

PEARSON: There was absolutely no discussion of the presidential election inside that Fed meeting, but the market reaction in the three weeks since Donald Trump’s surprise victory may cause monetary policymakers to rewrite their notion of a new normal.

For NIGHTLY BUSINESS REPORT, I’m Hampton Pearson in Washington.

(END VIDEOTAPE)

MATHISEN: Sticking with the economy, orders for big-ticket manufactured goods recorded their biggest increase in a year. The man for durable goods — products designed to last longer than three years, like washing machines, trucks, computers and the like — rose nearly 5 percent, according to the Commerce Department. The advance driven by a near doubling in orders for civilian aircraft. Overall, orders have increased for four straight months.

HERERA: The number of Americans who applied for first time unemployment benefits rose last week from a multi decade low. Initial jobless claims a proxy for layoffs, were up 18,000 to a seasonally adjusted 251,000. Despite the weekly rise, claims remain at historically low levels. In fact, they have remained below 300,000 for 90 straight weeks, the longest stretch since 1970.

MATHISEN: Sales of newly built homes were weaker than expected. The biggest surprise in the most recent report is that the drop came in October, before mortgage rates started to elevate.

And as Diana Olick reports, the culprit may be rising costs.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: After a huge jump in home construction activity last month, the expectation was that strong sales would follow, but the numbers disappointed. Sales of newly built homes fell in October and even September sales were revised down. The only thing that went up was price. Builders are spending more on labor due to a severe shortage, a shortage that will likely get worse.

SVENJA GUDELL, ZILLOW CHIEF ECONOMIST: Here we’re expecting that president-elect who has taken a much harder stance on immigration policy will have an effect on the labor pool. They’ll have to compete much harder in order to attract talent, which means higher wages.

OLICK: Housing is already getting more expensive, thanks to the sharp rise in mortgage rates post election. The average rate on the popular 30-year fixed is still climbing.

That jump in rates could be behind an even sharper spike in mortgage applications to buy a home, up 19 percent in just one week. Potential buyers on the fence may have jumped into deals fearing rates would go even higher.

GUDELL: In the long run, as we see mortgage rates increase further and further, and by the end of 2017, we might end up with a mortgage rate of closer to 5 percent. That will certainly have an impact in some of these more expensive markets.

OLICK: Rising rates will certainly make housing more expensive, but they’re unlikely to put much of a chill on home prices. With so few homes for sale and so much demand, competition will eclipse cost.

For NIGHTLY BUSINESS REPORT, I’m Diana Olick in Washington.

(END VIDEOTAPE)

HERERA: A new report today shows that Americans started to feel more optimistic about their finances amid Donald Trump’s White House win. According to the University of Michigan’s sentiment survey, the sense of optimism was partly because the election was finally over. The survey included interviews done both before and after November 8th, and it measures attitudes towards personal finances, employment and government policy.

MATHISEN: That sense of enthusiasm also extended to the stock market, which has been driven in part by the belief that President-elect Trump will adopt a far-reaching tax cut and stimulus programs and ignite growth. But there may be one thing standing in the way — deficits.

Steve Liesman explains.

(BEGIN VIDEOTAPE)

DONALD TRUMP (R), PRESIDENT-ELECT: Thank you very much, everybody.

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: President-elect Donald Trump has defied the odds so much that betting against him seems like a quick way to the poor house.

When it comes to his plans to enact a multitrillion dollar tax cut and massive spending programs, the question is whether the deal-maker can take on one of the oldest foes in Washington, the national debt and the deficit.

JOHN RYDING, RDQ ECONOMICS: We’re looking at a potential reality that a fiscal deficit will be $1 trillion to $1.5 trillion a year for the next four years, $586 billion last year. And somebody has to buy that debt.

LIESMAN: The public no longer ranks the deficit as a major issue the way it did in 2013. That gives Trump some leeway. Politicians often switch sides when they’re in power so Democrats could suddenly become deficit hawks and Republicans, even Tea Party members might become doves.

DOUG HOLTZ-EAKING, AMERICAN ACTION FORUM PRESIDENT: When a president comes into office, they have a lot of political capital, and that political capital will be enough to erase deficit fears for a year, maybe two. But once you get into the midterm election, get into the latter part of any president’s term, the opposition to some of these things is going to start to rear its head politically and if markets react, it will be strong.

LIESMAN: Yet, there are already signs establishment Republicans could balk at massive deficit increases and leaving, as Trump has promised, entitlement spending untouched.

REP. TOM COLE (R), OKLAHOMA: If you want to deal with the debt and the deficit, you’ve got to deal with entitlement reform. There’s just no way around it. Over 60 percent of all federal spending, Social Security, Medicare and Medicaid.

LIESMAN: And there is the Fed, which has given mixed reviews to the idea of ramping up the deficit.

Fed Chair Janet Yellen suggested it could lead to inflation and higher interest rates.

But Fed Vice Chair Stanley Fischer was more welcoming.

STANLEY FISCHER, FEDERAL RESERVE VICE CHAIRMAN: Certain fiscal policies, particularly those that increase productivity, can increase the potential of the economy and help confront some of our longer-term economic challenges.

LIESMAN: The Fed could put the brakes on the economy if it feels the president is moving too fast and stoking inflation. The most important factor, though, maybe markets. They have given up treasury yields in anticipation of more inflation, more growth and bigger deficits from the new president.

And markets have a way of letting policymakers know when they’re going too far on the debt. That is, deficits often don’t matter until markets say they do.

For NIGHTLY BUSINESS REPORT, I’m Steve Liesman.

(END VIDEOTAPE)

HERERA: As we have been reporting, the president-elect has business dealings all over the world. During the campaign, he said he would distance himself from them, but so far, he has not. And just yesterday, in a meeting with “The New York Times,” Donald Trump is quoted as saying, “In theory, I could run my business perfectly and then run the country perfectly. The president can’t have a conflict of interest.”

Robert Frank explains how Trump could separate his business from his presidency.

(BEGIN VIDEOTAPE)

ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Trump is correct. The law is on his side. All of the ethics and conflict of interest rules that prevent public officials from participating in matters that could personally benefit them or their families do not apply to the president.

The theory being that the president’s decisions are so far-reaching that any rule would restrict his or her power.

Now, the rules did not ponder a president with a multibillion-dollar global business empire. Trump has got properties in 18 countries from golf courses in Dubai and Scotland and Ireland, to buildings in India, South Korea, Canada and the Philippines. He’s got hotels in Brazil and Vancouver. And the risks from all of that property are already apparent.

Three days after he talked to Argentina’s new president, a Trump Tower in Buenos Aires that had been held up for years suddenly got construction permits. And his Indian business partners who visited last week said they would expand their businesses with Donald Trump now that he is president. That’s not to mention, his dealings with the U.S. government. That new D.C. hotel that he owns is leased from the federal government by an agency whose chief, Trump, will be able to appoint.

Now, he’s got three basic choices. He could have his kids run the company, and separate them from the White House and from politics. He could put the whole company into a blind trust run by a truly independent trustee who he has never had business dealings with. Or the third option, he could simply sell the entire company, liquidate it and put those proceeds into a blind trust.

Now, all of those solutions are imperfect. And that’s why once he becomes president, all the public attention will turn to an obscure provision of the Constitution called the Emoluments Clause. Now, this says that no officeholder can accept any compensation or gift from a foreign state or leader. This is up to Congress to enforce. And there is some disagreement on whether this could actually limit Trump’s activities.

But already, there are bills by members of Congress calling on Trump to convert his assets into a conflict-free holding or cash to make sure he meets all of the standards of the Emoluments Clause.

Now, the last statement we have from the Trump Organization said they would hand the company to Trump’s children and that, quote, “the structure that is ultimately selected will comply with all applicable rules and regulations.”

For NIGHTLY BUSINESS REPORT, I’m Robert Frank.

(END VIDEOTAPE)

MATHISEN: Still ahead, the Republican prescription for health care reform.

(MUSIC)

MATHISEN: We said last night, we were going to bring you a two-part series on Alzheimer’s. We didn’t think it would end this way. Tonight, instead of exploring Eli Lilly’s quest to make a dent in the disease, we have word that Lilly and not the disease took the dent. Today came news of test results on Lilly’s experimental Alzheimer’s drug and they’re disappointing. In a final stage trial, the treatment failed to slow the progression of the neurodegenerative disease.

Eli Lilly’s outgoing and incoming CEO said the results were not what they had hoped for.

(BEGIN VIDEO CLIP)

JOHN LECHLEITER, ELI LILLY CHAIRMAN & CEO: You should expect we’re going to look carefully at these results. That will take weeks or months to really ferret out all of the information in this study that involved more than 2,000 patients, learn everything we can from this trial and go back and apply that to the other development programs we have.

DAVE RICKS, ELI LILLY BIO-MEDICINES SVP: We have been planning for our future with or without sola for some time. We knew it was a high-risk and high-reward program. We’re just disappointed with the result, this result. But we have a lot going on beyond Alzheimer’s.

(END VIDEO CLIP)

MATHISEN: Shares of Eli Lilly fell more than 10 percent in trading today.

HERERA: A big question facing the health care industry is what insurance coverage will look like under a Trump White House. On the campaign trail, the president-elect said that he wanted to repeal and replace the law. Now, he says there are parts of it that he likes. But will Donald Trump buy into the prescriptions Republicans have for health reform?

Bertha Coombs takes a look.

(BEGIN VIDEOTAPE)

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Republicans have been promising to repeal and replace the Affordable Care Act since it was passed in 2010. It is one of the top items on President-elect Donald Trump’s to do list.

But it won’t be easy, especially with more than 20 million Americans depending on the ACA now for health coverage.

ROBERT LASZEWSKI, HPSA PRESIDENT: The bottom line here is the Trump administration owns Obamacare for the next two years. They’re going to have to implement it as it is, because the kind of replacement plan they’re talking about is so significantly different, you can’t just pull the little pieces out of this.

COOMBS: Speaker Paul Ryan’s a “Better Way” plan offers one replacement road map.

REP. PAUL RYAN (R-WI), SPEAKER OF THE HOUSE: Our plan gives you more control.

COOMBS: It includes Republican proposals endorsed by President-elect Trump, like tax credits, health savings accounts and allowing insurance to be sold across state lines to increase competition.

DR. DAVID FRIEND, BDO CENTER FOR HEALTHCARE EXCELLENCE & INNOVATION: They have stressed they want to have freedom of choice. So, as you know, the plans have been very structured as to what they offer and not. There’s a desire to change that, to create more freedom of choice.

COOMBS: Ryan and others from the GOP repeal the controversial individual mandate, while keeping the popular ACA ban on insurers, discriminating against those with preexisting conditions. For those who maintain insurance coverage. They drop health plan requirements to cover things like annual screenings and birth control to allow more basic plans, but insurers could also charge older, sicker patients, more.

And instead of a Cadillac tax on expensive employer health plans, they would cap how much companies can deduct for those plans.

TIM PRICHARD, WELLS FARGO INSURANCE: You needed $87 billion, or that’s what the CBO projected that you would have from the Cadillac tax to pay for many of the provisions in the health care plan.

Now, with Congressman Ryan’s plan, it is essentially a way of reducing the tax level and getting more revenue.

COOMBS: As for those ACA plan tax subsidies, a plan by Georgia Representative Tom Price, a candidate for health and human services secretary, would replace them with tax credits ranging from $1,300 to $3,000, depending on your age.

Any replacement bill will likely include a transition period, because as one consultant notes, with health reform, even when you go slow, it’s a lot easier to mess it up than get it right.

Bertha Coombs, NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

MATHISEN: Juno Therapeutics halts a clinical trial following two patient deaths, and that’s where we begin tonight’s “Market Focus”.

The experimental drug was being tested to fight lymphoblastic leukemia. Earlier this year, three other patients who were enrolled in the study died because of side effects from that treatment. Juno focuses on developing immunotherapy drugs that unleash the body’s immune system to attack cancer. Shares were punished today, falling 24 percent to finish at $22.56.

The farm equipment maker, Deere, gave investors an upbeat outlook, saying it expects the slide in revenue to ease. Net income and sales fell in the most recent quarter, but not as much as analysts expected. Shares up 11 percent to $102.17.

And an investor group is asking the SEC to look into T-Mobile’s accounting practices. CTW Investment Group sent a letter to the agency saying T-Mobile made a significant change to its accounting estimates without giving shareholders an explanation. CTW alleges the move allowed T-Mobile to overstate its gap earnings during a specific time period. Shares up a tick at $54.34.

HERERA: Microsoft’s $26 billion takeover of LinkedIn may soon receive clearance from European Union regulators. That’s according to “Reuters”. The E.U. will approve the deal, as long as it makes some changes to the concessions. Those concessions address competition concerns. Microsoft shares fell 1 percent to $60.40 while shares of LinkedIn rose marginally to finish at $194.92.

MATHISEN: Facebook reportedly making a push into China, hoping its newly developed censorship tool will persuade the country to let it reenter the market after a seven-year ban. This according to the “New York Times,” which cited current and former Facebook employees. Facebook shares fell a fraction to $120.84.

Oil prices fell slightly today, amid doubts that OPEC will be able to make sizeable in roads into the global glut of crude. The cartel meets next week. It’s a big meeting.

And as Jackie DeAngelis reports, market-watchers are somewhat skeptical, as well.

(BEGIN VIDEOTAPE)

JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: After weeks of uncertainty and volatility in the oil market, OPEC will final meet next week to set new production targets. Everyone agrees, there is too much oil out there, but they don’t agree on how much OPEC will be able to convince members to cut production.

CNBC’s exclusive survey polled analysts, traders and major energy funds to get their latest views on what they’re expecting. More than 70 percent said they think there will be a deal, but half say they don’t think it will be the previously announced 750,000-barrel cut.

So what will we see? Well, it’s still unclear. But most of the respondents in the survey said they’re looking for a cut that’s bigger — something along the lines of 1 million barrels per day.

And the Iraqi oil minister seems to be in that camp, earlier today, calling for a 900,000-barrel cut.

ANTHONY GRISANTI, GRZ ENERGY PRESIDENT: OPEC floated a production ceiling of 32.5 million barrels, just a couple months ago. Right now, we know they’re producing closer to 34 million barrels. If they don’t cut production by over 1 million barrels a day, and I’m talking 1.2 million barrels, then you’re going to see the same oversupply situation in the markets that we had that led to prices in the 30 handle.

DEANGELIS: But managing supply is still the key issue and this could become even more critical — if the new Trump administration eases regulations and makes it easier for U.S. producers to ramp up production.

GRISANTI: During the Obama administration, oil producers complained about the heavy regulations that were on that industry, particularly in the Keystone Pipeline, as one of them. With a Trump presidency, he has promised to reduce those regulations, eliminate a lot of them, which means that producing oil will become a lot cheaper and a lot easier, which means that supplies are going to grow.

DEANGELIS: Meantime, more than 60 percent say they’re optimistic that the supply/demand rebalance is happening, but slower than expected.

Finally, opinions are split on where we’ll finish the year. More than half still think we could get between $50 and $59 a barrel. The rest think $40 to $49 is more realistic.

For NIGHTLY BUSINESS REPORT, I’m Jackie DeAngelis.

(END VIDEOTAPE)

HERERA: Coming up, get-away day. Are our nations roads, rails and airports ready for the travel rush?

(MUSIC)

MATHISEN: A pilot strike could impact holiday deliveries from Amazon and DHL. More than 50 pilots who work for the cargo carrier, ABX Air, walked off the job this week. ABX is owned by Air Transport Service Group, which called the action an illegal work stoppage. Amazon and DHL are some of air transport’s biggest customers. The pilots are protesting staffing and pay levels.

HERERA: A federal jury found that Walmart failed to pay hundreds of truck drivers in California the minimum wage. The drivers have been awarded $54 million in damages. The lawsuit accused the world’s largest retailer of failing to pay drivers for inspecting and washing their trucks and for layovers. Walmart argued that the drivers are paid for those tasks.

MATHISEN: Federal highway safety regulators have suggested new guidelines to curb distracted driving. The National Highway Traffic Safety Administration wants smartphone makers to lock out most apps when the phone is being used by a driver. The voluntary guidelines also suggest that automakers should make it easier for their infotainment systems to pair up with smartphones.

HERERA: Well, the Thanksgiving holiday rush is on, with almost 50 million people traveling somewhere over the next five days. It is expected to be the busiest weekend since 2007.

Phil LeBeau takes a look at whether America’s roads, rails and airports are ready for the crush of people getting away.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: It’s get-away day across America. On Thanksgiving Eve, millions are hitting the roads.

UNIDENTIFIED MALE: It’s a great time to travel. I don’t want to be here at noon.

UNIDENTIFIED FEMALE: We thought it was going to be a lot crazier. So, I guess they did a good job.

UNIDENTIFIED MALE: So far, so good. I’ll tell you when I get through security.

LEBEAU: AAA estimates 48.7 million people will travel at least 50 miles this weekend. Most will drive. But Amtrak and airports will also see huge crowds.

JEANENNE TORNATORE, ORBITZ.COM: You know, I wouldn’t say this is anywhere near a nightmare. I think it’s going to be a lot of what travelers typically see over these holiday weekends. You have to also take into consideration the possibility of weather and those volume-related delays that you see.

LEBEAU: For the estimated 3.7 million Americans flying, the big concern is whether they’ll see long delays at security check points. Similar to those that caused thousands to miss flights just a few months ago. The TSA and airlines say they’ll have extra staffing and are ready for the busiest times.

PETER NEFFENGER, TSA ADMINISTRATOR: I think what caused the problems in Chicago and Minneapolis and a couple other places this past spring, I believe we have seen our way past that.

LEBEAU: While we may not like the crowded roads, this is actually a good indication of how healthy America’s economy is right now. Unemployment is low. Gas is cheap, averaging $2.13 a gallon nationwide. And consumer confidence is high. Add it up, and there’s plenty to be thankful for.

TAMRA JOHNSON, AAA SPOKESPERSON: We’re heading into the tail end of the year here. We see improvements to the economy. We see job growth and we see that consumers are actually gaining more confidence and they are spending more.

LEBEAU: There is one thing travelers cannot control this thanksgiving weekend and that’s the weather. And while there have been a few storms around the country causing some slight delays, so far, the Thanksgiving travel rush looks to be a rather smooth one.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

MATHISEN: And finally tonight, President Obama pardoned the national Thanksgiving turkey for the final time. And he wasn’t at a loss for turkey pun.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I want to take a moment to recognize the brave turkeys who weren’t so lucky, who didn’t get to ride the gravy train to freedom, who met their fate with courage and sacrifice and proved that they weren’t chicken.

(END VIDEO CLIP)

MATHISEN: Well, after speaking, the president met Tot, the turkey of clemency, and his backup, Tater, Tater and Tot. Tot flapped his wings as you see there. He’s obviously not balking at the pardon. The two birds will live at Virginia Tech University, whose mascot is the Hokie. Another name for turkey, I’m told.

HERERA: I think that is absolutely correct. That does it for us tonight. I’m Sue Herera. Thanks for watching.

MATHISEN: Have a great Thanksgiving, everybody. I’m Tyler Mathisen.

We’ll see you tomorrow for a special edition of NBR.

END

Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. The program is transcribed by CQRC Transcriptions, LLC. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Nightly Business Report, or CNBC, Inc. Information presented on Nightly Business Report is not and should not be considered as investment advice. (c) 2016 CNBC, Inc.

 

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