Transcript: Nightly Business Report – January 3, 2017

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

averages close at records, as investors focus on fundamentals and turn a
blind eye to some remarkable assertions about the president`s inner circle.

cars and trucks remains very healthy, even as shoppers pay more and more
for them.

HERERA: New therapy. A medication for a rare disease comes with a hefty
price tag, but also some new ideas on how to pay for it.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
January 3rd.

MATHISEN: Good evening, everyone, and welcome.

It may be cold outside, but Wall Street is hot. The Dow is closing in on
25,000. It`s within 80 points of it, in fact. The S&P 500 today traded
above 2,700 for the first ever. And the Nasdaq solidified its position
well above 7,000.

So why? Well, the latest readings on the economy were strong. And there
is optimism that corporate profits will rise again this year. Now, that`s
what investors focused on today, brushing off a double dose of drama in

First came controversy over presidential tweets about nuclear buttons.
Next was a bombshell White House statement in which Mr. Trump excoriated
and basically excommunicated his former chief strategist Steve Bannon.

Bannon`s offense? Giving incendiary quotes to the author of an upcoming
tell-all book about Trump`s first year in office.

But market jitters? Uh-uh, no way. The so-called fear gauge on Wall
Street fell to record lows as stocks hit new highs. The Dow Jones
Industrial Average rose 28 points to 24922. Nasdaq added 58. The S&P 500
gained 17.

So, what comes next for stocks?

Bob Pisani takes a look.


time for stocks to pause, and that would be not unreasonable given the big
run-up we`ve had. The S&P was up 20 percent last year.

But that`s not the prevailing opinion. The street is mostly bullish. You
can`t blame them. All of the textbook conditions for higher stocks are
still in place — a global economic expansion, strong employment, low
inflation and low interest rates, with the Federal Reserve expected to
continue on a very slow path toward higher rates.

So, the traders are mostly expecting the good news to continue. There`s
talk of infrastructure spending plan now. There`s talk that wages may
finally start to move up, but not too much, and some strategists even
believe the U.S. could see 3 percent GDP growth this year. That hasn`t
happened since 2005.

Now, there`s still bears out there, but they`re down to argue that the
valuations are too high. And that`s true, stocks are expensive. But if
the economy keeps expanding, it`s not hard to argue that it could stay
expensive. They also worry about some external event like a terrorist
attack or a blow-up in North Korea sometime. But until it happens, the
market is showing no signs of worry.

And, finally, inflation is a worry but many argue even with economic
growth, inflation is likely to remain relatively muted. Finally, despite
all of the castle intrigue in Washington, the market continues to tune all
of that out.

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


HERERA: Wall Street may have sidestepped past today`s D.C. drama, but in
Washington, it was impossible to ignore. Not just because of the gloves-
off brawl between the president and his former chief strategist, but
because of what that upheaval could mean for the Trump White House and its

Steve Bannon was considered an architect of the Trump campaign, and of the
White House`s nationalist economic prescriptions. But in a new book
written by author Michael Wolff, Bannon calls the 2016 meeting between top
campaign aides and a Russian lawyer treasonous. He also predicts that
financial crimes like money laundering would be the downfall of several
members of the president`s inner circle. And in a reference to the
president`s son, Bannon said, quote, they`re going to crack Don Jr. like an
egg on national TV, end quote.

The president says Bannon, whom he fired, has lost his mind.

John Harwood is in Washington tonight to kind of sift through the
donnybrook and what it might mean for the president`s plans on immigration
and infrastructure and much more.

John, there was a lot of political drama in Washington today. Let`s first
start with why this book is getting attention. And part of it is because
of its author, Michael Wolff.

good word for it, Sue. Michael Wolff is a long time journalist. He`s a
guy who`s got some attitude. He`s drawn criticism in the past for
embellishing stories that he`s told.

However, he gained enough trust from Steve Bannon and others in the White
House that he got extensive access, spent a lot of time as a fly on the
wall in White House meetings. And that is going to lend the anecdotes he
has and the brutal depiction he makes of President Trump, it`s going to
invest that with a little bit more credibility.

MATHISEN: Why would the White House such access to a known sort of gossipy

HARWOOD: Well, it`s an interesting question. Michael Wolff is somebody
who had done a lot of reporting and was intimately familiar with Rupert
Murdoch. Rupert Murdoch is a very important person to Donald Trump. And
so, I imagine that that lent him some credibility that helped him gain

But Sarah sanders, the White House press secretary, said today that it was
Steve Bannon who in the end provided most of the entree to the White House
to Michael Wolff. But there`s no disputing that there was a lot of entree.

HERERA: What does this do to the fact that the White House wants to push
through several key initiatives, immigration reform and infrastructure?
Does the noise surrounding this book derail that effort?

HARWOOD: Well, I think all of those efforts to make legislative progress
on other issues faced an uphill fight to begin with. But the more chaos
you have in the White House, the more you have splits within the
president`s own team, not to mention splits between the president and
Republican leaders in Congress, the more difficult it is to move forward.
And that comment that you mentioned about Steve Bannon`s view that the
meeting with the Russians at Trump Tower was treasonous, that signals a
real problem with the Mueller investigation, which is ongoing, and that
could provide a bigger threat to the agenda than anything else.

HERERA: John, thank you so much.

HARWOOD: You bet.

HERERA: John Harwood in Washington tonight.

MATHISEN: Back to the economy now, and there are a number of positive
reports on it. Manufacturing expanded more than expected last month,
capping the strongest year for the sector since 2004. According to the
Institute for Supply Management, there was a surge in new orders, and an
increase in export orders. A measure of manufacturing employment, however,

HERERA: And construction spending hit a new high. Builders spent more
than expected on construction projects in November, the fourth consecutive
monthly gain. Strength in single family construction offset weakness in
apartment buildings. Not residential construction rebounded after a slide.

MATHISEN: For the first time ever, the U.S. auto industry has recorded
three straight years of sales, topping 17 million vehicles. Results for
December showed the industry ended the year on a strong note, driven by
demand for pickups and SUVs.

But as Phil LeBeau reports, in some cases, Americans are paying more than
ever for the models they`re buying.


chilly end of December for most of America. But showrooms across the
country were hot. How hot? The pace of sales last month was well above
what many were expecting. A robust economy, low unemployment, and strong
consumer confidence made it a busy end of the year at dealerships.

JESSICA CALDWELL, EDMUNDS.COM: People are feeling pretty good, maybe
there`s some bonus checks coming your way at the end of year. And there is
that mindset that starts on Black Friday and kind of goes to the end of the
year that, you know you`ve got to get in before the start of the New Year
to get a great deal.

LEBEAU: What`s selling? Ford`s F Series had its best year since 2005. GM
sold over a million crossover utility vehicles last year, an all-time high,
while Honda and Nissan both set new records for U.S. sales. The average
praise paid for a new vehicle now tops $36,000. But healthy incentives are
helping close the deal with many buyers.

CALDWELL: They`re looking at some of these deals and think, I feel good
about my job, I feel good about the overall economy. These deals seem
really great, why don`t I just buy a car. I think that`s probably driving,
you know, a lot of the sales.

LEBEAU: After seven straight years of rising sales, the auto industry
cooled off slightly in 2017. Still, sales topped 17 million vehicles for a
third straight year.

Will it be four straight in 2018? Probably not. Over the last six years,
Americans have bought almost 100 million new vehicles. So, demand is
expected to finally slow down.



HERERA: Today`s economic reports underscore the economy`s strengthening
fundamentals, something that has not gone unnoticed by the Federal Reserve.
At the Central Bank`s most recent meeting, policymakers expressed growing
confidence in the economy but they also appeared uncertain over the
potential impact of the new tax policy.

Steve Liesman is in Washington tonight.


December Federal Reserve meeting show officials debating strong but
contradictory forces affecting the economy, some of which could lead to
higher interest rates this year and some of which could lead to lower
rates. While the minute showed little change at the center of the outlook
for rates in the economy, they suggested the differences between hawks and
doves on the committee may have widened and both seem to be digging in
their heels.

The most beneficial support continuing a gradual approach to raising
interest rates and saw the outlook for growth in the labor market as both
strong and strengthening. But it was over the impact of the tax cuts and
the outlook for inflation when the two sides seemed to part ways. In fact,
a few went so far as to say they`re, quote, not comfortable with three rate
hikes this year, which is the median call for a Fed official that they
forecast for 2018.

And a hawkish few want even faster tightening because financial conditions
that is low interest rates hadn`t tightened enough and they worry that low
rates risk instability. On tax cuts, many expect them to lead to higher
consumer and capital spending by business. Most Fed officials boosted
their GDP projections because of tax cuts. Several see the possibility
that these cuts could raise potential GDP. Some were cautious on the
effects, saying that companies may use it for mergers and acquisitions or
for debt reductions and stock buybacks.

On inflation, again, the average Fed official thinks inflation is going to
move back towards the Fed`s 2 percent target. But the doves are worried
that inflation will stay below the Fed`s objective for longer than they
currently expected. And several concerned that low inflation has reduced
expectations for consumers. Hawks on the other hand worry about elevated
asset values in a soaring stock market and volatility in the markets. They
see these low rates could pose a risk to financial stability over time.

All this means that the job of incoming Fed Chairman Jerome Powell will be
tougher when he takes over from Janet Yellen in early February. He`ll have
to negotiate the uncertain effects of tax cuts and low inflation and work
to find a consensus between the two groups that increasingly look to be on
different sides of the debate.



MATHISEN: Still ahead, a new medicine, a steep cost, and some new ideas on
how to pay for it.


MATHISEN: Pfizer (NYSE:PFE) will partner with a biotech company to develop
a gene therapy to treat ALS, a disease that affects nerve cells and the
brain and the spinal cord. The gene therapy will also treat a related
neurodegenerative disorder. The partnership with Sangamo Therapeutics
deepens Pfizer`s investment into DNA-based treatments for rare diseases.

HERERA: The Food and Drug Administration last month approved a treatment
for a rare form of blindness, marking the first approval of a gene therapy
for an inherited disease. The cost of this one-time treatment is $850,000.
But along with the high cost comes new potential payment plans.

Meg Tirrell explains.


pursuing the promise of gene therapy for decades. The goal: to deliver
healthy copies of genes to make up for ones that cause disease.

What makes the approach revolutionary is that it`s aimed to only be
administered once to fix the problem. It was only in December that the
United States got its first gene therapy approval for a drug from Spark
Therapeutics. It`s called Luxturna. It treats a rare inherited retinal
disease that can lead to blindness, often affecting kids early in their


TIRRELL: In clinical trials, Luxturna helped improve patients` vision in
low light. It doesn`t necessarily restore perfect sight, but patients have
described major differences.

CARPER: Before, I couldn`t see snow, the little snowflakes when they were
falling. Then I went outside when it was snowing and I was like, oh, I can
see the snowflakes!

TIRRELL: And with new approaches to medicine come new prices. A key
question for gene therapies is how to pay for a treatment that`s only
administered one time, versus chronic therapies patients take for months,
years, or even their entire lives.

JEFF MARRAZZO, SPARK THERAPEUTICS CEO: As reflected over the course of the
last couple of months, we did a fair amount of work to establish what we
think is the value of Luxturna. We think the value of Luxturna is in
excess of $1 million. We`ve tried to balance the concerns about
accessibility, that patients, families, and health care professionals have
voiced the concerns about budget impact we`ve heard from payers, as well as
the need for us to build and create a path for a sustainable business

TIRRELL: Wall Street has been expecting a price of at least $1 million for
the one-time treatment. The drug`s price announced today, $850,000 in
total. It`s the highest sticker price for a medicine in the U.S.

But that doesn`t necessarily make it the most expensive to the system.
Many drugs for rare diseases are priced at many hundreds of thousands of
dollars per year and are taken chronically. Spark announced a series of
new payment models along with the price tag, including tying rebates to how
well the drug works immediately and over time, alleviating the needed for
hospitals to purchase the drugs themselves, and a proposal for the Centers
for Medicare and Medicaid Services to implement payments in installments.

The company announced an agreement with health plan Harvard Pilgrim and
said more insurance coverage announcements will come in the next weeks and

Spark is not the only company working on gene therapies. Luxturna is just
the first of this new kind of medicine to come to the U.S. Others are in
development for hemophilia, sickle cell disease, muscular dystrophy and
other maladies. So, Spark`s pricing and payment plans may lay a foundation
for what`s to come.



MATHISEN: Let`s turn our attention to the pricing and payment plans that
Meg just referenced. So, how likely is it that other drug companies will
offer installment plans, even rebates depending on a drug`s effectiveness?

Here to discuss is Vincent Chen, a senior analyst at Bernstein.

Mr. Chen, welcome. Good to have you with us.

Let`s start with the idea that a medicine`s cost might be adjusted by how
well it performs. Is that something that`s really feasible?

VINCENT CHEN, BERNSTEIN SENIOR ANALYST: I think that`s actually something
we`re starting to see a little bit more of over time. I think it`s
potentially an effective way to facilitate access. I think it`s attractive
to payers. And I think it`s something that we`re going to see more of it
as we start to see more motion towards more innovative pricing plans,
especially for these high cost drugs.

If we think about the arguments around drug pricing, one of the constant
areas of debate is this idea of how can you better align the price paid to
the value that`s actually delivered in terms of health care. And rebates
or some sort of outcomes based pricing, tying the actual price to the drug
to the outcome achieved, that`s certainly one way to do that.

We`ve actually seen a few examples already in the United States. I would
point to Novartis has a cell therapy for cancer that was recently approved,
and the price there is $475,000 per year, but CMS will only pay if patients
actually respond.

HERERA: Right.

CHEN: Another example would be, some of the high priced cholesterol drugs.
Some companies have deals in place, full price only if patients see the
lowering of cholesterol we`ve seen in trials.

HERERA: I was also interested in I guess you would equate it to almost an
annuity system for drug payments, where you would pay — the insurer would
pay every year a certain amount as long as the patient kept responding.
So, it almost amortizes out their cost and it allows them to plan and it
allows the patient to know that they`re going to get their treatment.

CHEN: Yes, so the installment plan that Spark announced today, that`s
interesting, because it essentially allows payers to spread out the payment
over multiple years. So, rather than paying $850,000 up front, maybe you
pay $425,000 this year and $425,000 the next year.

That`s useful because of two reasons. The first is if you`re a smaller
plan and you may not be able to foot the bill for an $850,000 drug this
year. That allows you to space it out and actually absorb that blow a
little better.

The second would be, once we get to gene therapies that treat broader
populations —

HERERA: Right. Can I ask you, Mr. Chan, does it also to a certain extent
shield the company from criticism over the high price of the drug if they
offer these types of alternatives?

CHEN: My sense is it does a little bit in terms of — it helps — there`s
only some positive publicity that comes for both the payer and the pharmaco
in terms of better aligning the value delivered to the price paid. I think
at this case, the bigger impact probably is in terms of the greater access
it affords Spark in terms of more plans being willing to open the gates to
patients who have this rare disease.

MATHISEN: All right. Vincent, thank you very much. Vincent Chen with

CHEN: Thank you.

HERERA: Dominion Energy will buy its struggling rival and that`s where we
begin tonight`s “Market Focus”.

Dominion says it will buy SCANA for more than $8 billion, taking on costs
associated with SCANA`s failed nuclear project. Last year, SCANA abandoned
plans to finish two half built nuclear reactors in a move that sparked a
federal investigation. Under the deal, Dominion will pay more than $1
billion to customers who were forced to pay for the unfinished plant.
Dominion energy shares off nearly 4 percent to $77.19. While shares of
SCANA popped 22 percent to $47.65.

An online report alleged Intel (NASDAQ:INTC) chips found in millions of
computers around world carry a flaw that could allow hackers access to
personal information. Tech Website register reported programmers are
rushing to fix the vulnerability. But there`s a cost. The updates are
expected to slow down computers by about as much as 30 percent.

Now, Intel (NASDAQ:INTC) has refuted the news, saying it was inaccurate,
and was planning to disclose the issue next week. Shares of Intel
(NASDAQ:INTC) fell 3 percent on the news to $45.26. Meanwhile, AMD shares
popped 5 percent as that chip maker is believed not to be impacted by this
particular security issue.

MATHISEN: American Express (NYSE:EXPR) (NYSE:AXP) says it expects to
report a fourth quarter loss as tax reform takes a more than $2 billion
bite out of profits. The credit card company also sees earnings for the
year below initial estimates. Shares rose fractionally nonetheless to

And Tesla delivered about 1,500 of its newest Model 3 vehicles in this
latest quarter, and that missed Wall Street`s estimate by a mile. Wall
Street figured on more than 4,000 deliveries. The automaker said it
achieved record deliveries in total when you include other models. Tesla
shares initially fail in after hours trading. They ended the regular day
down 1 percent to $317.25.

HERERA: A deep freeze has gripped large portions of the U.S. Last night,
we told you how the cold is creating record demand for natural gas. Today,
there was even snow in Tallahassee, Florida, for the first in three
decades. And even Orlando, where people usually go to escape winter
headaches, is feeling that chill.

Eric Chemi is there.


Orlando, Florida, as the place for sunshine, hot temperatures, and fun
vacations, but not this week. Freezing temperatures in Orlando have led to
many closures, in particular the three major water parks in town, Aquatica,
Volcano (NASDAQ:VOLC) Bay, and the Typhoon Lagoon.

That`s a big blow for an Orlando economy that revolves around tourism.
Last year, the city welcomed 68 million visitors who had a $64 billion
economic impact.

UNIDENTIFIED MALE: It`s big waste to buy sunscreen this week. It`s a lot
more rain and a lot frost than I was expecting.

CHEMI: The three water parks are owned by major companies, SeaWorld,
Disney (NYSE:DIS), and Universal (NYSE:UVV), who can handle the temporary
closures. Each company still has kept open their traditional theme parks
in Orlando despite fewer visitors. And the companies have their locations
around the country and the world to offset any losses here.

But it`s a lot of the smaller businesses, local in town, that don`t have
the ability to withstand as much of this decline.

UNIDENTIFIED FEMALE: It really shot down after a while, just because like
it`s raining, nobody really wants to come out and like get out of their
houses. It`s really cold, it`s really wet.

CHEMI: Local residents are not used to this type of cold. Some said they
plan to stream Netflix (NASDAQ:NFLX) until the weather got better. Schools
across the state have closed. There is fear about damage to citrus crops
and major airlines are letting fliers cancel or reschedule flights without

UNIDENTIFIED MALE: I`m not really prepared if there is none. I guess if
there is, I`ll just stay put. Netflix (NASDAQ:NFLX), you know, some
covers, and we have fun.

CHEMI: Forty-five degree high temperatures might seem like a nice day in
most of the country, but that`s not what residents in Orlando are used to.
We talked to the local manager at a Home Depot (NYSE:HD) store and he said
they`re almost completely sold out of space heaters and they`re almost sold
out of fireworks.

For NIGHTLY BUSINESS REPORT, I`m Eric Chemi in Orlando, Florida.


HERERA: Coming up, Amazon`s search for a home.


(NASDAQ:AMZN) says it wants a second home that`s not unlike its first home
in Seattle. Denver has a lot in common with Seattle. That`s good and bad.
Is this the place? We`ll have the story coming up on NIGHTLY BUSINESS



HERERA: Sometime in this New Year, no one`s saying quite when, Amazon
(NASDAQ:AMZN) plans to announce the location of its $5 billion second
headquarters. More than 200 cities have submitted bids, and Scott Cohn is
traveling to as many of them as possible before the big announcement.

Today, he`s in the mile high city of Denver.


COHN: Amazon (NASDAQ:AMZN) says it wants its second headquarters to
replicate the original in Seattle. And no city is more similar than this
one. Both have mountains. Seattle has the Cascades. Denver the front
range of the Rockies.

Both have skilled workers. Washington state, with the largest
concentration of STEM workers, Colorado with the most educated workforce
overall, according to the Census Bureau. Both even have legalized

Colorado Governor John Hickenlooper, a former Denver mayor, thinks this
city is a natural.

GOV. JOHN HICKENLOOPER (D), COLORADO: Denver is one of the top cities in
America. Plus, we`re a can-do, that kind of Western attitude that`s
exemplified Amazon (NASDAQ:AMZN).

COHN: The state`s 75-page bid, submitted in October, touts Denver`s
workforce, clean energy, and mass transit, including the nation`s fifth
busiest airport. There is no better place for Amazon`s second home than
Colorado, the governor writes.

Others agree. Back in September, before anyone submitted a bid, “The New
York Times (NYSE:NYT)” declared Denver the winner, citing the city`s
lifestyle and affordability, coupled with the supply of tech talent from
nearby universities.

But the article and Colorado`s proposal don`t mention some of the other
similarities between Seattle and Denver. In fact, Denver has many of the
same issues that forced Amazon (NASDAQ:AMZN) to look outside Seattle to
begin with.

Those skilled workers are in short supply. Unemployment in Denver is just
2.6 percent, driving wages to among the highest in the nation. And just
like Washington, Colorado has an infrastructure problem, with more than
two-thirds of roads in mediocre or poor condition.

Add to that, a nagging pension shortfall in state and the governor is
working to control expectations about the Amazon (NASDAQ:AMZN) bid.

HICKENLOOPER: There are a lot of great cities in America. There are a lot
of — I mean, it`s a healthy competition in that sense.

COHN: For now, Denver is among 238 cities vying for 50,000 jobs. Amazon
(NASDAQ:AMZN) has them all right where it wants them.

For NIGHTLY BUSINESS REPORT, I`m Scott Cohn in Denver.


HERERA: And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera.
Thanks for joining us.

MATHISEN: I`m Tyler Mathisen. Thanks from me as well. Have a great
evening, everybody, and we will see you back here tomorrow.



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