Transcript: Nightly Business Report – December 27, 2016


ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue

Funded in part by HSS.


toward Dow 20,000 stalled. And the question now, will the Santa Claus
rally ride to the rescue?

stock and home prices have consumers feeling the best about the economy in
more than a decade.

BREWER: And New Year`s picks. Where our market monitor thinks you should
put your money in 2017.

MATHISEN: All that and more for Tuesday, December 27th.

BREWER: Good evening, everyone. I`m Contessa Brewer, in for Sue Herera.

MATHISEN: And I`m Tyler Mathisen. Welcome, everybody.

Well, `twas the first market day after Christmas. And all over the street,
many a trader was thinking or sending tweet, if only we could hit 20,000,
2016 would be complete. But, alas, it did not happen. And as the sunlight
faded away, many an investor was looking for a Santa Claus rally to come in
and save the day.

All right. You get the idea, folks. Despite small gains, the Dow could
not claw its way above the 20,000 mark, but the NASDAQ did hit an all-time

Here`s how the dust settled. The Dow climbed 11 points to 19,945, NASDAQ
rose 24 and the S&P 500 added 5.

Bob Pisani, he won`t rhyme, but he`ll take a look at today in the markets.


quite. The Dow finished the day just about 50 points away from the 20,000
mark. Very light volume. We`re entering the final stretch trading in

This is ten trading days in a row we`ve gone right up to the threshold but
we haven`t walked through it. Traders have been anticipating the Dow would
break 20,000 before the end of the year because of the momentum from the
elections, but mostly because the markets tend to rise in the last two
weeks of the year. The Dow on average is up a little bit more than 1
percent in this period, typically, and that`s more enough to get us over
Dow 20,000.

But since the middle of the month, the momentum has essentially stopped.
Market leaders like the banks and industrials, they have stopped going up.
And there really hasn`t been any consistent leadership to take their place.

So, what`s wrong? Well, really nothing`s wrong. The markets have had a
big move up. The S&P 500 is up more than 6 percent since the election and
it`s perfectly natural for markets to pause and consolidate their gains
after such a big move. The problem is, the markets have paused with the
Dow just shy of its big round number and it`s the last little bit of
suspense for the year.

One key point: don`t expect big gains in your portfolio this quarter if you
have a balance waiting in stocks and bonds. So, the S&P 500 is up a little
less than 5 percent this quarter, but the overall bond market is down a
little less than 5 percent. So, if you have half your assets in stocks and
half in bonds, you`re basically flat for the quarter. Think about that.

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


MATHISEN: And on that cherry note, and to help us think about what`s next
in the market, we welcome Gina Bolvin. She`s president of Bolvin Health

And she thinks stocks have run pretty far since the election and wouldn`t
be surprised if they take a break soon — which is basically, Gina, what
Bob Pisani just said. We`ve come a long way since November 8th. A lot of
momentum built in, a lot of anticipation about what a Trump administration
could or might not mean for business.

What do you think about the next few months?

investors in the stock market should be long term. We have seen the Dow
risen almost — about 9 percent since the election and we really have to
stop and think, you know, how much gas do we have in the tank at this

BREWER: So, what are you thinking now, Gina? If we hit 20,000, that there
might not be gas to go to 22,000 or 23,000?

BOLVIN: Well, I think it`s really important to take a look at where we are
right now and we`ve seen a tremendous run up in the market. I think
investors are betting a lot on a Trump administration and it will be good
to stocks. And I don`t think there`s a lot of room for error.

We think 2017 may be similar to 2016 and there might be some volatility.
We have interest rates rising and we have elections overseas in Europe and
there could be some volatility along the way.

MATHISEN: So, let`s talk about that point that Bob made or concluded with,
and that is the idea that if you have a diversified portfolio whether it`s
50 percent stocks and 50 percent bonds or 60/40 as is a more classic mix,
the bonds have not done very well this quarter.

How should I feel about that? And should I make a move to lighten up on
bonds and move more to stocks or what?

BOLVIN: Well, we would be very cautious to chase the run up in the market,
and it may be a good time to do the opposite of that and rebalance your
portfolio and take some profits off your stock positions or your stock
mutual funds and add a little bit of money into the bond market that has
had a correction here.

BREWER: So, Gina, since we`re all on this watch for the Dow to hit 20,000
— I mean, I don`t know, personally I`m planning a ticker tape parade.
What does it really mean for the market?

BOLVIN: You know, I think it`s a very short-term milestone and it
certainly is exciting, but I don`t in any way think it`s very important or
any type of indication of what`s going to happen in 2017.

MATHISEN: Give me a sector, Gina, quickly that you think might outperform
the overall market in 2017. Do you have one in mind?

BOLVIN: Well, we do like technology. One of the reasons why we like
technology is because over the past couple of years the NASDAQ has not done
as well as S&P and Dow-like stocks and we like financial services. We
think they`ll do well under a Trump administration as there`s less
regulation and the reason we like technology is because financial services
spent a lot of money on technology.

MATHISEN: Gina, thanks very much. Gina Bolvin, happy New Year. Gina
Bolvin is with Bolvin —

BOLVIN: Thank you. Happy New Year to you. Thanks for having me.

MATHISEN: You bet.

BREWER: Home prices hit a new high in October according to a widely
watched market index. The S&P Case-Shiller National Home Price Index rose
more than 5.5 percent from the previous year. Its biggest gain since July
2014 but the strong pace of increases raised concerns over affordability
and sustainability.

MATHISEN: And with home prices rising, Americans might be feeling a little
wealthier. Consumer confidence surged in December, climbing to its highest
level since 2001. The monthly survey by the conference board also showed
Americans were upbeat, the most upbeat about the economy in 13 years. Also
cited were a rise in post-election optimism over jobs and income prospects,
as well as stocks at record levels.

BREWER: Millions of gifts were open this holiday weekend and now, it`s
time for the returns. The flood of returns has become a fast-growing
business, fueling some of the biggest transportation deals of the past few
years. But retailers are also hoping to use returns as a way to get more
people back into the stores.

Morgan Brennan takes a look at the rise of the returns.


shopping has led to what shipping firms now call the second part of peak
season — the return season.

UNIDENTIFIED MALE: Most of our shopping this year was done online but we
came into New York today, just walked around a little bit and returned some
items but also maybe buy some additional items.

UNIDENTIFIED FEMALE: I`m back here to return a coat I bought last Friday
and I`m hoping to pick up another coat that she likes this time.

BRENNAN: Retailers and shippers have their work cut out for them. It
makes up for 1/3 of online sales. And companies must find ways to handle
those shipments.

The trend has made logistics firms that collect, process and often resell
returns sought after. The reason FedEx (NYSE:FDX) bought GENCO last year,
and UPS announced an investment on Optoro earlier this month. UPS alone
expects to ship almost 6 million packages back to retailers next week.

It`s still a small fraction of the overall peak season volume, which hit
record levels again this year, but a fraction that`s growing at a double
digit rate compared to last year. But with just four full shopping days
left in 2016 and consumer confidence at 15 year highs, retailers are also
ramping up efforts to get people through their doors with after-Christmas
sales, since consumers tend to spend more once they`re there.

MasterCard (NYSE:MA) spending poll says total holiday retail spending
excluding autos and gas is up 4 percent versus last year, from November 1st
to December 24th, the high end of many forecasts. Total holiday ecommerce
surged about 19 percent.

to appreciate everybody spends across the board. In other words, there
wasn`t one sector that people that didn`t spend, it really was everybody
feeling confident and actually spending a bit more than they were spending
last year.

BRENNAN: But it`s all about getting post holiday shoppers into stores this
week and returns will be especially important. If retailers can get
consumers to do that in person, it will drive foot traffic and set the the
stage for more profitable exchange and quite possibly more sales.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan in New York City.


MATHISEN: Coming up, why our next guest thinks betting on the consumer
might be a win for you in 2017.


MATHISEN: Well, several of President-elect Trump pick`s for cabinet post
may have some tough sledding through the confirmation election process and
that has the potential to be a drag on any market momentum.

John Harwood joins us now from Washington.

John, welcome.

If Republicans control the Senate and Democrats can`t really filibuster
cabinet nominees, what`s the big hang-up?

question, Tyler, because it used to be that you could — with 60 — it
would require 60 votes to stop another president from the other party from
nominating someone. Now, it only takes 51 votes to cast somebody which —
with the Vice President Pence to break the tie, Republicans could do it
with 50.

Now, the challenge is, though, because Donald Trump is an unconventional
candidate, because he`s relatively unpopular, if Democrats hold together,
they can only need to pick off a couple of Republicans, three, in fact, to
sink a cabinet nominee. And so, the challenge for Democrats is going to
be, who is the weakest among the herd of nominees and pick off one or two
and stop them with Republican moderate votes?

BREWER: Well, we`ve already heard Senators Lindsey Graham and John McCain
express concern about some of Trump`s nominees. Which of his cabinet
nominees appear most vulnerable, John?

HARWOOD: Contessa, I would say that, first of all, Rex Tillerson is going
to face major scrutiny because of his status as chief executive of
ExxonMobil (NYSE:XOM) and his ties to Russia, which is a proxy for the
larger issue of Donald Trump and Russia. Secondly, Steve Mnuchin, I think
he will be confirmed in the end, but he`s going to get a lot of tough
questioning about the fact that he`s a financial executive, former Goldman
executive, and at a time when Donald Trump ran saying he was going to stand
up to Wall Street.

And I think the most vulnerable of all the Republican nominees is Tom
Price, the nominee for health and human services secretary. He has
favored, along with Paul Ryan, the House speaker, structural changes to
Medicare that would be very controversial. Donald Trump said in the
campaign he wasn`t going to touch Medicare. Tom Price is going to get
grilled on what exactly his intentions are and the administration`s
intentions on that issue.

MATHISEN: How much, quickly, John, could these confirmation battles slow
down the Trump agenda?

HARWOOD: It`s a distraction, potentially. It could slow down some things
and gum up the works. However, because Donald Trump has got a cooperative
Republican Congress, his efforts to, say, repeal Obamacare, cut taxes, all
of those are going to proceed independently of the fate of any particular
cabinet nominee.

MATHISEN: All right. John, thank you very much. What an interesting
month ahead it will be.

BREWER: Well, Abbott Labs gets antitrust approval for its proposed
takeover of St. Jude Medical (NYSE:STJ). And that`s where we begin
tonight`s “Market Focus”.

The Federal Trade Commission said it cleared the $25 billion deal on the
condition the combined company would sell two of its medical device
businesses in an effort to ease competition concerns. Shares of Abbott
Laboratories (NYSE:ABT) rose fractionally to 38.60 while shares of St. Jude
Medical (NYSE:STJ) were up 32 cents to $80.15.

The Food & Drug Administration has halted some studies of an experimental
blood cancer treatment, after the drug`s developer, Seattle Genetics
(NASDAQ:SGEN), said four patients died during trial testing. All four
deaths were a result of liver damage, something Seattle Genetics
(NASDAQ:SGEN) is investigating to see if it was caused by the treatment.
Shares plunged 15 percent to $52.36.

And Endologix (NASDAQ:ELGX), which makes medical technologies for aortic
disorders, is placing a temporary hold on shipments of one of its devices,
as it investigates a manufacturing issue. The device was responsible for
more than 60 percent of the company`s approximate shares for this year.
Shares were punished following the news falling as much as 26 percent to

MATHISEN: Over the weekend, biotech companies Biogen and Ionis
Pharmaceuticals said they received FDA approval for their spinal muscular
atrophy drug. This marks the nation`s first ever approved treatment for
the rare and even fatal genetic disorder.

Biogen shares rose 1 percent to $291.12. Shares of Ionis Pharmaceuticals
were up more than 3 percent. They finish at $55.12.

Amazon (NASDAQ:AMZN) says it had its best holiday season yet. The
ecommerce giant said it shipped more than a billion items worldwide in the
holiday period. Nine hundred million of them came to my house with the
voice assistant echo devices powering results. The company also noted that
more people signed up for its prime membership service than ever before.
Shares rose a percent today. They finished at $771.40.

A U.S. safety regulator has opened an investigation into the safety of the
brakes into two Ford models. The National Highway Safety Administration
said the company`s Fusion and Mercury Milan models made between 2009 and
2011 have brakes that may fail in certain road conditions. So far, there
have been three reported crashes associated with this issue. Ford shares
were off a fraction. They finished at $12.39.

And speaking of automakers, the automaker Tesla and the electronics company
Panasonic (NYSE:PC) will work together to develop cells for solar panels.
Panasonic (NYSE:PC) is expected to invest more than $250 million into a New
York production facility that is owned by Tesla. Tesla shares rose nearly
3 percent to $219.53.

BREWER: Rebuilding the nation`s aging roads and bridges will likely be a
major part of the new administration`s job creation strategy. Since the
election, not only have infrastructure stocks benefitted but also tech
stocks related to things like building a smart power grid and intelligent
water company.

Deirdre Bosa explains why smart infrastructure could be an area to watch.


the big building and construction stocks have been rising on the back of
Trump`s promise to rebuild aging roads and bridges, but perhaps less known
are infrastructure tech companies that make things like smart power grids
and intelligent water systems. They also stand to benefit if we see a big
building boom in the U.S. Now, these stocks make up an index of so-called
smart grid companies tracked by Kensho, a tool that hedge funds use to
analyze historical market data.

The basket has risen about 9 percent since Trump won the election, beating
the broader markets and the major spider technology ETF. Picking out some
of the best performers, Daktronics (NASDAQ:DAKT) built election signs for
roadways and has surged more than 25 percent since the election.

Mueller Water Products does advanced water meters and is worth $2.2 billion
in market cap. It`s climbed more than 20 percent since November 8th.
Tesla is part of this index, too. The thinking is that the electric car
company which is pushing into self-driving car technology could benefit
from smarter roads and infrastructure systems. Its shares have gained
nearly 10 percent.

Of the 24 stocks in Kensho`s smart grid basket only four have traded lower
and only two of those less than 2 percent. So, if you think Trump will
make rebuilding the nation`s infrastructure a priority during his
presidency, these could be interesting picks for your New Year`s portfolio.
On the other hand, if you think Trump may not follow through on his
promise, they could be getting ready for a pull back.

For NIGHTLY BUSINESS REPORT, I`m Deirdre Bosa, Vancouver, Canada.


MATHISEN: All right. Wondering what stocks should be in your portfolio in
the New Year? Well, every night this week, we`re going to feature a
special market monitor to talk about stock picks for 2017.

And we begin with Hank Smith, chief investment officer at Haverford Trust.

Hank, nice to have you back. I like your pick.


MATHISEN: Let`s begin with Anheuser-Busch. What`s not to like there?

SMITH: Well, look, it`s a fabulous high quality company with great
management. The stock, though, is down 25 percent over the past two months
on some temporary headwinds in our opinion. The stronger dollar hasn`t
helped, Brazil being in a recession hasn`t helped, and then this Trump
trade out of yield and consumer staples. But all these factors are
temporary and to us create a great buying opportunity with Anheuser-Busch.

BREWER: OK. And then you are also liking right now Nike (NYSE:NKE). But
Nike`s had a really difficult year. What do you like about it?

SMITH: It sure has. It`s the worst performing Dow stock this year and,
you know, they`ve had competition with Adidas and Under Armour (NYSE:UA)
for sure. There have been some bankruptcies in some of the retailers that
have affected them temporarily.

But this is a really well-managed company with a huge spend in R&D and
marketing. They outspend all of their competition and so, the valuation
has coming down to almost a market moldable and we haven`t seen that in
several years. So, we`re taking advantage of that.

MATHISEN: I was speaking earlier today, Hank, to a couple of retail
analysts and they, like you, love your third pick and that`s T.J.Maxx. Why
is it so hot?

SMITH: Well, look, this is a retailer for all seasons. I say that
figuratively and literally, fall, winter, spring, summer. But also for all
parts of the business cycle whether we`re in an expansion or whether we`re
in a recession.

Shoppers love T.J.Maxx. They love the treasure hunt. It appeals to the
DNA of all shoppers and they have great product. And you really have to
come there often.

BREWER: And if you were just judging by the traffic, Hank, you walk into
those stores, you see so much traffic compared to especially the big
department stores, the malls for sure. And you know what I loved about it
most, you go toy shopping in there, and those toys are at a discount 50
percent off what you could see them for on Amazon (NASDAQ:AMZN).

MATHISEN: Yes, my wife`s favorite store, Hank, I think is Home Goods.


BREWER: That`s part of the TJX family, right.

SMITH: Yes. They`re doing very well. And, you know, they`re not —
they`re not being Amazoned as many retailers are.

MATHISEN: All right. Hank, thanks very much. Appreciate it. Have a
happy New Year.

SMITH: Yes, same to you.

MATHISEN: May all your stock picks come true. Haverford Trust, we
appreciate it.

BREWER: Well, this was supposed to be the year of virtual reality went
mainstream, but it didn`t happen. So, will virtual reality ever get real?
That`s next.


BREWER: Well, Hollywood has lost another of its well-known faces. Actress
Carrie Fisher who`s very famous for playing Princess Leia in the “Star
Wars” films died today. Fisher suffered a heart attack Friday on a flight
from London to Los Angeles, and she has been in a hospital ever since. She
was 60 years old.

MATHISEN: Well, the latest film in the “Star Wars” saga that Fisher helped
launch pulled in $96 million over the long holiday weekend, easily taking
the top spot. “Rogue One” topped the animated musical “Sing” and the two
are part of another banner year for the North American box office, which
broke the $11 billion mark and is now on pace to top last year`s record of
11.1 billion.

BREWER: Well, Snapchat has reportedly bought an Israeli maker of augmented
reality software. The startup allows businesses or consumers to visualize
what items might look like in a different environment. You`d say you want
to know how that looks in your living room. So far, Snapchat has yet to

MATHISEN: 2016 was expected to be the year that virtual reality broke into
the mainstream but it did not quite work out that way. And now, as Julia
Boorstin tells us, the companies that invested heavily in the new
technology are hoping the turnaround in the year ahead.


MARK ZUCKERBERG, FACEBOOK CEO: We`re here to make virtual reality the next
major computing platform.

Facebook`s Oculus, HTC`s Vive and PlayStation VR launched a range of
headsets, looking to bring VR to the mainstream. But now, Superdata
research has slashed its VR estimates from over $5 billion this year to
just $2.7 billion as headset makers struggle with supply constraints. The
fact that not many people have computers required for high end headsets
like Facebook`s Oculus Rift and the challenge of convincing consumers it`s
worth investing in an entirely new device.

getting headsets into the hands of consumers and giving them a chance to
experience it, because it`s almost impossible to understand what virtual
reality is without actually being part of it and having that experience.

BOORSTIN: Sony`s PlayStation VR was considered well positioned because of
the 50 million plus VR compatible PlayStation consoles in homes. Superdata
cut its sales estimates for Sony`s VR headsets this year from 2.3 million
to less than 750,000.

As Sony (NYSE:SNE) has taken a cautious approach to marketing and
production. One reason Sony (NYSE:SNE) and others have moved slowly is
that there hasn`t been an explosion of content or must-have apps for these
new devices. To convince consumers it`s worth investing in one fields like
the very early days of a new industry.

LLAMAS: They need to attract content providers and content creators and
they need to do that by showing them that the consumer is actually
interested, but it`s sort of a chicken and the egg sort of situation
because you need content to drive consumption but you need consumers to
drive content.

BOORSTIN: While a critical mass of consumer content builds up, there`s
been an explosion of business VR applications from industrial manufacturing
to architecture and design, sports training to medical stimulation.

And consumer VR should continue its rise next year, especially if it gets a
boost from Google`s Daydream. It costs $80 but includes a controller.
Google (NASDAQ:GOOG) is expected to make a big push for it as more Android
phones that work in the Daydream enter the market.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in San Francisco.


BREWER: And that is NIGHTLY BUSINESS REPORT for tonight, I`m Contessa
Brewer. Thank you for watching.

MATHISEN: And thanks from me as well. I`m Tyler Mathisen. Have a great
evening, everybody, and we`ll see you right 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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