Transcript: Nightly Business Report – December 7, 2016

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Charging ahead. Stocks close at records. The Dow adds 1,200 points since Election Day. And now the blue chip index is within striking distance of 20,000.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Hanging in the balance. An $85 billion deal has an uncertain future as the CEOs of AT&T and Time Warner try to make the case that the companies are better together.

HERERA: Bidding war. Why states may be getting ready to compete more intensely for business.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday, December 7th.

MATHISEN: Good evening, everyone. And welcome.

A burst of buying led to a record day for stocks today. The Dow gained nearly 300 points, but it wasn’t just the big blue chips that made those records. The S&P 500 hit all-time highs. Small caps did, as well. And the transports surged.

Here are the numbers. The Dow advanced 297 points to 19,549. The NASDAQ added 60, the S&P 500 gained 29. As for the small cap Russell 2000 index, it pushed further into record territory.

And as Bob Pisani explains, there are some powerful market forces at work.


BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The market tone is changing. In November, the market theme was buy Trump sector winners. The banks and the industrials, for example.

Right after the election, there was an extraordinary shift into those banks, the industrials and materials and out of utilities, real estate and consumer staples. Financials, for example, outperformed utilities by an extraordinary 20 percentage points in the three weeks after the election. That’s amazing.

That’s changing now. The December market theme is generic growth for 2017, or hopes for generic growth, GDP advancement. The market is continuing to advance, but the advances are more even with lagging sectors doing better now.

So, this month, for example, consumer staples has performed better and today, lagging groups like telecom and real estate, even technologies were notably stronger. Now, throw in a strong period for the year and you can get slow melt-offs. We saw over 340 new highs on the New York Stock Exchange today. We haven’t seen that in a long time.

The new high list still concentrated industrials and financials, but the list is now broadening a bit. These new highs and some consumer discretionary stocks like Kohl’s and Best Buys and hotels like Marriott, Host Hotels, and even material stocks like Nucor. Throw in a midday buy program, which we had, and you have a confluence of some very powerful forces.

For NIGHTLY BUSINESS REPORT, I’m Bob Pisani at the New York Stock Exchange.


HERERA: Telecom stocks were some of the biggest gainers today and the move higher comes as a major telecom, mega telecom merger hangs in the balance. The heads of AT&T and Time Warner were on Capitol Hill today, making the case for their proposed acquisition.

And Eamon Javers was there.


EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: For Randall Stephenson and Jeffrey Bewkes, the stakes couldn’t have been higher today. An $85 billion deal up in the air and its fate to be decided in a Washington roiled by Donald Trump’s populist campaign victory.

Do you think the mood of populism in this country is going to affect the possibility of this deal happening?

JEFFREY BEWKES, TIME WARNER CHAIRMAN & CEO: No, I don’t. I think the facts should become clear to everybody, and I think it will be good for consumers and good for competition.

JAVERS: What do you make of Donald Trump tweeting out his criticism of individual companies that he doesn’t like or thinks have done something wrong? Are you worried about that as a leader in business, that this is something you have to focus on going forward?

BEWKES: Well, it’s a complicated issue. I think we should discuss in the committee.

JAVERS: But for the most part, the Senate subcommittee rolled out the welcome mat.

UNIDENTIFIED MALE: Welcome to the Subcommittee on Antitrust Competition Policy and Consumer Rights.

JAVERS: Stephenson and Bewkes laid out why they think their deal will be good for consumers. But one Democratic senator openly worried that the executives would soften news coverage, particularly on Time Warner-owned CNN in order to curry favor with the incoming Trump administration to approve the deal.

SEN. RICHARD BLUMENTHAL (D), CONNECTICUT: Will you commit that your news coverage will in no way be influenced or impacted by what the president of the United States says about this transaction?


BLUMENTHAL: Mr. Stephenson?

RANDALL STEPHENSON, AT&T CEO: Yes, sir, of course.

JAVERS: Senator Amy Klobuchar, the ranking Democrat on the committee, said after the hearing that it wasn’t designed to necessarily support or oppose the deal, but to get senators on the record and to get some questions answered. Now it will be up to Donald Trump’s Department of Justice to decide the fate of the deal.

For NIGHTLY BUSINESS REPORT, I’m Eamon Javers in Washington.


HERERA: And a bit later in our program, we’ll look at some of the changes that could come to the media sector under the Trump administration.

MATHISEN: Well, one slice of the market that did not participate in the rally today was the drug sector. Health care shares fell on comments from Donald Trump who was named “Time Magazine’s” Person of the Year today.

In his interview with “Time,” the president-elect said, “I’m going to bring down drug prices. I don’t like what has happened with drug prices” and that sent shares of Pfizer and Johnson & Johnson and Merck, only three components to fall in today’s session.

HERERA: Reforming the health care industry is one of the top priorities of the new Congress. Donald Trump has appointed a fierce critic of the Affordable Care Act to lead the Department of Health and Human Services.

And House Speaker Paul Ryan said that repealing the law will be one of Congress’ first acts.


REP. PAUL RYAN (R-WI), SPEAKER OF THE HOUSE: We have a very, very bold regulatory reform platform we’re going to be moving on in the very near part of the year. We’re going to be doing, you know, our Obamacare legislation.

You have to remember, this law is getting much worse. It is what actuaries say entering a death spiral, high, high premium increases, high deductibles, no choices. So, we have to fix this problem.


MATHISEN: The hospital industry, meantime, says a total repeal is not the answer. Two main trade groups today issued a warning that repealing the Affordable Care Act could trigger, quote, “an unprecedented public health crisis.” They also said a surge in uninsured payments to hospitals could cost hospitals $165 billion by the middle of the next decade.

HERERA: The nation’s health insurers certainly have their list of demands for the Trump administration. The insurers want a clear commitment that the government will continue offsetting costs for low-income people and that the young and healthy will continue to be able to use the health care exchanges if the Affordable Care Act is killed.

Ipsita Smolinski is a health care policy expert at Capitol Street. She joins us now to discuss what lies ahead.

Welcome. It’s so nice to have you back with us, Ipsita.


HERERA: Let’s start, first of all, with how you see this playing out. The Trump administration has said that they are going to do away with the Affordable Care Act. But on the other hand, there’s a political mine field if in doing that, they end up with 20 million uninsured Americans.

How could you — could you handicap how you think it’s going to play out in Congress?

SMOLINSKI: Sure. I think that there’s going to be a really fast repeal vote that will go down, because you’re not going to have 60 votes in the Senate. And then what will happen is, through this budget reconciliation exercise, you can gut major, major portions of the law.

So, subsidies that help poor people by insurance, the Medicaid expansion, the mandate penalties, other industry taxes. So, I think it’s going to go away pretty soon. But there’ll have to be a transition of maybe up to two to three years, where the current Affordable Care Act actually stays in place before a new program comes through.

And as you point out, it’s very likely that any new GOP plan will cover as many as 20 million individuals.

MATHISEN: Let’s talk a little bit about the hospital business. They are very, very worried, Ipsita, obviously, that they would be hit with an influx of uninsured people very quickly. How dire a situation would that be for them?

SMOLINSKI: It’s not great. And, in fact, if you look at the statements that the hospital groups gave versus the insurance groups gave this week in their letters to Congress and to Trump, the hospital message was much more dire. We want our cuts back, we agree to $155 billion in reductions to fund the stream of the Affordable Care Act.

So, the hospitals are really much more detrimentally hurt by this new program that will come in, and that’s largely because of Medicaid. It’s both exchanges and Medicaid. But they certainly are much more, I would say, worse off than the insurers may be in this new GOP world.

HERERA: House Speaker Ryan on CNBC this morning basically indicating that they have a plan, that they are going to try and put in place. Do we have any details of what is in that plan and how it might impact health care providers?

SMOLINSKI: Sure. Paul Ryan does have a plan. It’s called “The Better Way.” It’s not legislation. It is a policy paper.

But if you look at the common elements of a lot of these major Republican replace plans, there’s five or six elements. There’s the purchase and sale of insurance across state lines. There’s high-risk pools. There is price transparency. There are things that we can pretty much expect to see in any new program.

Again, will it cover 20 million? Probably not. But it gives the individual a tax credit to purchase insurance so that the responsibility is on them.

HERERA: I think we’re going to be talking to you a lot in the near future, Ipsita. Thanks for joining us tonight.

SMOLINSKI: Thank you.

HERERA: Ipsita is with Capitol Street.

MATHISEN: And Congress today passed a bill aimed at speeding up the drug and medical device approval process. The industry praised the bill as a way to bring about more innovation and get the necessary treatments to patients quicker. The incoming administration also has pledged to cut red tape at the FDA.

HERERA: Well, the CEO of Boeing spoke by phone with the president-elect. Dennis Muilenburg congratulated Donald Trump on his election victory and said that he was committed to working with the new administration to control costs for the new Air Force One planes. As we reported yesterday, Mr. Trump tweeted that the cost for Boeing’s new Air Force One are out of control. The two also discussed the importance of American manufacturing jobs.

MATHISEN: Donald Trump’s tweets, along with his push to keep manufacturing jobs in the U.S. were a big topic of discussion at the meeting of the Business Roundtable. It’s made up of the most influential heads of some of the world’s biggest companies.


DOUG OLBERHELMAN, CATERPILLAR CEO: Nobody wants called out on headline news. Having said that, everybody knows government overspends on things. There’s efficiencies in government we can get.

I like the fact that we’re talking about job creation and keeping jobs here. Will it change our behavior? Yeah, we’ll think about it. But with that, we need some policy reform, like tax reform.

And there are things — we get that, we create jobs. Look, nobody wants to give up an American job. Not one CEO. We want to make it easier.

DOUG PARKER, AMERICAN AIRLINES CHAIRMAN & CEO: Do we have a great relationship with Boeing. Donald Trump is not the first person that’s complained about their prices. I can assure you of that. I just think that as, you know, someone trying to save money for the U.S. government, you can negotiate a price, just like we do all of the time.

MARK SUTTON, INTERNATIONAL PAPER CHAIRMAN & CEO: I don’t think anybody wants to be shamed, but I think as a leader of a public company, I think what you want to do is what’s right for the long-term benefit of all of your stakeholders, your employees, your shareholders, the communities if you’re in a business like ours. If it created a dialogue, if taxes were your problem, and that’s why you made some decisions, and that created dialogue, then I think it could be for the good.


HERERA: Other CEOs expressed concern about what the president-elect has said about trade, and the threat of retaliatory tariffs. But in an interview on the “Today” show, Mr. Trump said he’s not against all trade.


DONALD TRUMP (R), PRESIDENT-ELECT (via telephone): I believe in free trade. But I don’t believe in stupid trade. And stupid trade is when our companies move out of our country, fire their workers and then come back in, Matt. And sell their product back in with no retribution.

I’m just saying very simply, if they want to fire their workers, move to Mexico or some other country and sell their product into our country, they’re going to be paying a tax.


MATHISEN: And to avoid a potential tax, some companies may decide not to move jobs abroad, and instead look to other states where it may be less expensive to operate.

This following Carrier’s decision to keep jobs in Indiana. Many in the economic development business are taking note, because attracting and keeping jobs is their bread and butter.

Scott Cohn reports tonight on what could be a game-changer.


SCOTT COHN, NIGHTLY BUSINESS REPORT CORRESPONDENT: For Donald Trump, this deal was more art than science. A relative handful of jobs will stay in Indiana. But the message to states and to companies is huge.

TRUMP: They can leave from state to state. And they can negotiate good deals with the different states and all of that. But leaving the country is going to be very, very difficult.

UNIDENTIFIED FEMALE: Ninety-five-plus percent of all businesses in Rhode Island are small businesses.

COHN: States have been battling each other for business for years, of course, but never before with the full backing of the White House. Now, experts say the game is really on.

ROBERT ATKINSON, ITIF FOUNDER & PRESIDENT: For states, I think it puts them a little bit more in a central position. They’re now going to be seen as part of the overall national effort here to grow our economy and to make it more competitive.

COHN: In Indiana, it took subsidies to save the Carrier jobs. If that’s the new standard, the most generous states over time have been New York, Louisiana, Michigan, Washington and New Jersey.

But critics call the deals corporate welfare, and many believe all the dueling tax breaks are a thing of the past.

CHAD EVANS, U.S. COUNCIL ON COMPETITIVENESS EVP: I think states have well — moved well beyond that. So, I believe that we’re not going to see a reemergence of that sort of competition. Competition now is really based upon distinctive regional advantage assets.

COHN: Like the supply of skilled workers, the top state work forces in our most recent study, Colorado, Massachusetts, Virginia, North Dakota and Arizona. The top states for business overall, Utah, Texas, Colorado, Minnesota and North Carolina.

Look for all of them to really up their games now.

Of course, it’s early yet. The new administration hasn’t even taken office, and it’s not clear how the policies will play out. But for now, states may be feeling a little bit more empowered, and companies are weighing their options.

Scott Cohn, NIGHTLY BUSINESS REPORT, Mountain View, California.


HERERA: Foxconn, the biggest assembler of Apple products, is in preliminary discussions to expand its U.S. operations. Foxconn says the size and scope of its potential investment has not yet been determined during the campaign Mr. Trump said that he would get Apple to build their computers and devices in this country instead of overseas.

MATHISEN: Still ahead, Congress has a lot of work to do by Friday, or risk another government shutdown.


MATHISEN: The government funding deadline looming this Friday, congressional lawmakers plan to move quickly on a so-called continuing resolution that would continue funding the government through the end of April of 2017. But could there be special attachments to the bill?

Ed Mills is a senior financial and policy analyst of FBR Capital Market. He joins us now to discuss.

What do you say, Ed? I mean, I thought we got past that point where we sort of put all kinds of Christmas tree ornaments on bills.

ED MILLS, SENIOR FINANCIAL POLICY ANALYST: Well, I don’t think it’s going to be Christmas trees on this bill. But the very fact we’re only going to extend this into the spring is all about having kind of Christmas in April, if you will. Because what the Trump administration, the incoming Trump administration wants is they want a must-pass bill early on in his administration, where they can pass a number of things that would be vetoed today by President Obama, signed into law by President Trump, and, you know, that’s six years of House Republican riders that have been sitting dormant, waiting for that bus to leave the station.

HERERA: So, what can we expect? He’s talked about tax reform. He’s talked about infrastructure spending.

And what about the honeymoon period? How much will he be able to get done and will Congress be able to get done in this period?

MILLS: Yes, I’m looking at the first half of next year, a real concerted effort to get the infrastructure bill done. They’re going to first attempt to get that with 60 votes in the Senate. There are ten Democratic senators up for re-election in 2018 that are from Trump state. So, they’re going to want to have something that they voted with him on. And, you know, having that deadline of sometime in April for the spending bill might be that vehicle.

But soon after that, the honeymoon ends. Because in two years, they’re going to want to say, here’s where I worked with them. And here’s where I opposed him.

MATHISEN: Is there any possibility that there’s going to be a government shutdown between now and April, number one? And what, if anything, could be attached to this continuing resolution that needs to get done by the end of the week?

MILLS: Yes, I think there is — if we go into the next couple of days and we’re not able to cut a deal that gets us into April, you’ll get a week or so. There is zero chance, basically, that the government is going to shut down in the near-term. Pretty soon, the most powerful kind of caucus or influence in D.C. kicks into gear, which is the congressional spouse caucus. These members of Congress will start hearing from their husbands, start hearing from their wives. It’s time to get home for Christmas and they’ll get something done punted to next year.

In terms of what’s get added on to the bill, probably a rider that eases the confirmation process for the secretary of defense, you know, nominee, General Mattis. He has not been out of the military for more than seven years. That’s going to require a waiver. They’re going to try to see if they can get that in this bill.

MATHISEN: All right.

MILLS: So, that they can hit the ground running early in January.

MATHISEN: Ed, thank you very much for helping us through that. Ed Mills with FBR Capital Markets.

MILLS: Thank you.

HERERA: Abbott Labs wants to call off its plan to take over Avalere. And that’s where we begin tonight’s “Market Focus”.

Abbott has filed a suit seeking to end its nearly $6 billion acquisition of the diagnostic test company, saying Alere has suffered a series of damaging business developments and is no longer the company Abbott agreed to buy ten months ago. Alere says the lawsuit is without merit and will take all necessary actions to compel Abbott to finalize that merger. Alere shares fell to $36.67, and shares of Abbott up a tick to $38.48.

Xerox says it expects to lay off more employees once the companies splits into two businesses, which is by the end of this year. The company also said it’s optimistic sales will pick momentum into the second half of 2017. Shares rose nearly 2 percent to $9.48.

MATHISEN: Royal Caribbean will add Cuba to its list of travel destinations. The cruise operator was given the green light by Cuban authorities to begin establishing routes from the U.S. Royal Caribbean rose almost 2 1/2 percent to $83.15.

Meantime, SunPower will lay off a quarter of its total work force. The solar panel maker said it plans to cut about 2,500 jobs and shut down an overseas factory as it works to slash costs. Shares of SunPower spiked 14 percent to $7.95.

Profit and sales rose at Lululemon in its latest quarter with results topping analysts’ estimates. The yoga apparel maker said it was launching a $100 million share buyback. Following the news, shares initially soared in after-hours trading on top of finishing the regular session up 4 percent at $59.84.

HERERA: We reported earlier in our program that the CEOs of AT&T and Time Warner were on Capitol Hill today, defending their proposed merger. But what happens next depends on the incoming administration. And many in the industry are trying to figure out what changes may be coming for the broader sector.

Julia Boorstin explains.


JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: President-elect Donald Trump brings some big question marks for media giants, especially as he vowed during the campaign to block AT&T’s acquisition of Time Warner, which would put a chill on other media deals.

Now, industry watchers say Trump could actually prompt a wave of deal-making.

CRAIG MOFFETT, MOFFETTNATHANSON: Are we going to see the Republican deregulatory Trump or are we going to see the populist Trump? It looks like in the communications arena, we are more likely to see the Republican deregulatory Donald Trump. And if that’s the case, it’s especially good news for the infrastructure providers in media less clear that it’s good news for the Internet companies.

BOORSTIN: Randall Stephenson, the CEO of AT&T, one of the companies that provides that infrastructure agrees, saying just yesterday that the new administration will drive investment in the distribution of media, the way companies like AT&T get content into our homes and on to our phones.

Another big question for media companies is how Trump approaches regulation of net neutrality. He rolls back the regulations mandating broadband companies to treat all content equally that could raise costs for Netflix, Hulu and YouTube and other digital companies.

Media veteran Barry Diller, whose IAC owns streaming video company Vimeo, says media innovation would be dealt a big blow if net neutrality is rolled back.

BARRY DILLER, IAC & EXPEDIA CHAIRMAN: It created a level playing field. Now, of course, big companies like AT&T who want to control things as communications have been controlled prior to the Internet for close to 100 years. That — they hope this will be tossed. And that they will again put their pincer movement on media, consolidated more, and control it more. That’s terrible.

BOORSTIN: The other wild card, whether Trump maintains his aggressive tone with the media outlets that cover him from attacking “Saturday Night Live” on Twitter, to threatening to sue the “New York Times,” to criticizing CNN. This is all certainly uncharted territory for those outlets and their media giant parents.



HERERA: Coming up, behind closed doors. How does FedEx handle 2 million packages a day, and get them where they need to be? We’ll show you.


MATHISEN: Chase’s new credit card may be just a bit too popular, and it is costing the bank a lot of money. According to Bloomberg, the sapphire card will reduce J.P. Morgan Chase’s profit by $200 million to $300 million in the fourth quarter. The losses are due to the lavish awards offered to entice users to take the cards. One analyst estimates it will take more than five years before Chase breaks even on the card.

HERERA: As we told you, the Dow Transportation Index reached its highest level today in more than two years. That milestone comes at one of the busiest times for the sector, especially for shipping and delivery companies like FedEx.

Morgan Brennan gives us a mind the scenes look at the company’s high-tech complex in Memphis.


MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: After dark, this is the busiest airport in the world. And during the peak holiday season, it gets even busier — 160 FedEx planes land here at the global hub each night, carrying 2 million express packages destined for door steps.

WALTER KIRKEMINDE, MEMPHIS HUB SR. MANAGER: The planning process started literally as soon as we were done and now headed into our Super Bowl. That’s what this is.

BRENNAN: Between Thanksgiving and Christmas Eve, FedEx expects to handle more than 355 million packages, 10 percent more than last year. Many will pass through here, sorted along 32 miles of conveyor belts in what’s come to be known as The Matrix.

Leading up to Christmas, this hub will operate around the clock with even longer sort times and even more planes coming through. As last-minute online shopping spikes, and with it, demand for express service.

But will it all be enough to get packages delivered on time and without company costs climbing? That’s a challenge that plagued both FedEx and UPS in recent years, helping fuel a fierce competition for business.

DONALD BROUGHTON, AVONDALE PARTNERS: The battle between FedEx and UPS continues. And FedEx continues to win market share. The most recent quarter, UPS’ volumes were up 5 percent. That’s very strong in the current economic conditions. But FedEx’s were up 10 percent.

BRENNAN: But all the investments and planning in the world can’t change the weather. To minimize Mother Nature’s impact, FedEx has a team of 15 meteorologists watching the globe.

KORY GEMPLER, METEOROLOGY DEPT. MANAGER: We’re called upon to give forecasts days in advance. So, if we see there is going to be a major event, say in Indianapolis in one of our hub locations, we do have some flexibility to divert some of the packages.

BRENNAN: Right now, FedEx forecasts relatively mild weather in what it expects to be another record-breaking peak season.

For NIGHTLY BUSINESS REPORT, I’m Morgan Brennan in Memphis, Tennessee.


MATHISEN: How do they get all of those packages in the overhead bins?

HERERA: I don’t know, Ty.

MATHISEN: I can’t get my bag in there.

HERERA: Fifteen meteorologists on set, wow.

All right. That does it for NIGHTLY BUSINESS REPORT tonight, I’m Sue Herera. Thanks for joining us.

MATHISEN: I’m Tyler Mathisen. Thanks from me, as well. Have a great evening, everybody. We’ll see you back here tomorrow night.


Nightly Business Report transcripts and video are available on-line post broadcast at 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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