Transcript: Nightly Business Report – January 12, 2017

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

Funded in part by HSS.


With just days left in the Obama administration, the EPA says Chrysler cheated on emissions tests. The automaker furiously denies the charge but the stock falls 10 percent.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Repeal and replace. The Senate moves to dismantle Obamacare, but the GOP has not come together on what to put in its place. The latest in the high risk politics of undoing a massive law that touches tens of millions of voters.

MATHISEN: Expanding access. What`s being done to put a pricey life saving overdose medicine in the hands of those who need it most? The final part of our “Drug Price Crisis” series tonight on NIGHTLY BUSINESS REPORT for Thursday, January 12th.

HERERA: Good evening, everyone, and welcome.

It is a case of Washington versus corporate America. In one corner, regulators, in the other, an automaker, one leveling charges of cheating, the other angrily rejecting the allegations.

Today, the Environmental Protection Agency said Fiat Chrysler illegally installed software that enabled certain diesel engines to emit more pollutants than the law allows. Those acquisition sent the stock tumbling, falling more than 10 percent. But Fiat Chrysler said that`s not the case.

Phil LeBeau has our story.


PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Shares of Fiat Chrysler under pressure today after the Environmental Protection Agency accused the automaker of having diesel emissions that exceed regulations.
It sounds very similar to what we saw with the EPA and Volkswagen, but Fiat Chrysler says this is a far different situation.

A hundred and four thousand vehicles are impacted. We`re talking about
2014-2016 Jeep Grand Cherokee (NASDAQ:CHKE) and Ram 1500 pickups. These are the 3.0 liter diesel models, and the EPA says the software in those vehicles allows excess emissions. It also says that it was unaware of that software.

That is an allegation that Fiat Chrysler CEO Sergio Marchionne denies. He also says his vehicles are in compliance with regulations.

SERGIO MARCHIONNE, FIAT CHRYSLER CEO: We have been unnecessarily maligned with a desire or a wish or an intent on our part to try and defraud anybody. We haven`t.

LEBEAU: Sergio Marchionne points out that Fiat Chrysler and the EPA have been negotiating this emissions issue since late 2015. However, again, the EPA says Fiat Chrysler did not disclose the emission software.

Late today, New York Attorney Eric Schneiderman said, “I am deeply troubled by the evidence presented by the EPA today concerning Fiat Chrysler`s alleged attempts to undermine our nation`s clean air laws.”

Again, Fiat Chrysler denies that it has installed software that is designed to get around emission laws here in the United States. Nonetheless, Fiat Chrysler executives will be in California next week to meet with executives from the California Air Resources Board.



MATHISEN: On Wall Street, stocks fell just an investors start to gear up for earning seasons. The three major indexes dropped sharply early in the day with the Dow at one point losing 180 points, but those losses were paired by the end of the session. The blue chip Dow index closed down 63 points to 19,891, NASDAQ lost 16 and the S&P 500 off four.

With today`s decline, it appears as if the big rally in stocks since the election is taking a somewhat extended breather.

Bob Pisani explains why.


BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The markets are weak today going into earning season and for a very good reason. I`ve called the market a coiled spring several times in the past week because the markets are essentially priced for perfection. Stocks are essentially at new highs, but consumer sentiments at a new high and investor sentiment is also high.

On top of that, there are very high expectations that earnings will expand in 2017. Some are saying the S&P 500 could put up a 20 percent increase in overall earnings. That`s an awful lot to ask from the stock market. And you throw in the well-known Trump tweet risk, and the difficulty of knowing the final impact of the Trump campaign promise, lower taxes, less regulation and fiscal stimulus, and it`s plenty of reasons for the market to take a bit of pause.

However, we`ve already seen down components like Disney (NYSE:DIS) and Boeing (NYSE:BA), and Coca Cola and Goldman Sachs (NYSE:GS) and Procter Gamble, get various downgrades this week. Several major bank earnings are out tomorrow, including J.P. Morgan, Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC) and PNC.

And while most industries are not seeing any real increase in 2017 earnings expectations since the election, earnings for big banks have seen modest bumps up. The problem is the prices have run up really big, so the bank index for example, is up over 20 percent since the election. They`re all pricing in higher earnings.

J.P. Morgan CEO Jamie Dimon will likely give up the comments on the economy, but don`t expect much in the way of guidance. He doesn`t do that.
The bottom line is earnings will get a nice boost this year, maybe not 20 percent but 10 percent certainly doable. But the markets need to take a breath and believe the data will be forthcoming.

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


HERERA: It was a dramatic day on Capitol Hill. Donald Trump`s nominee to lead the Department of Housing and Urban Development faced intense questioning by a Senate panel and it led to some very heated exchanges.

Diana Olick reports.


DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Dr. Ben Carson, a neurosurgeon by trade, told a Senate panel that he was well-qualified to lead the nation`s housing agency and oversee its nearly $50 billion budget.

DR. BEN CARSON, HUD SECRETARY DESIGNATE: A good CEO doesn`t necessarily know everything about the business, but he knows how to pick those people and how to use them, and that is one of the marks of good leadership.

OLICK: But running an agency that directly effects the president-elect`s business the real estate industry, was a top concern for Massachusetts Democratic Senator Elizabeth Warren. She pressed Carson to make a promise that no HUD money would go to the Trump Empire.

Carson said he would use his moral judgment but would not rule it out.

CARSON: If there happens to be an extraordinarily good program that`s working for millions of people, and it turns out that someone that you`re targeting is going to gain, you know, $10 from it, am I going to say, no, the rest of you Americans can`t have it — I think logic and common sense probably would be the best way.

SEN. ELIZABETH WARREN (D), MASSACHUSETTS: The problem is that you can`t assure us that HUD money not of $10 varieties but of multi-million dollar varieties will not end up in the president-elect`s pockets. And the reason you can`t assure us of that is because the president-elect is hiding his family`s business interests from you, from me, from the rest of America.

OLICK: At the end of the hearing, another Senate Democrat, Sherrod Brown, asked Dr. Carson if he would report back to the committee any time in the future when he did it see conflicts of interest between HUD money and Trump businesses. Dr. Carson said he would, he`d be delighted.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick on Capitol Hill.


MATHISEN: To Defense, and the confirmation hearing for retired Marine General James Mattis, who is President-elect Trump`s nominee to lead the Defense Department. Today`s hearing provided a first look into potential policies and whether military spending will start to ramp up.

Morgan Brennan has our report.


MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: National security and defense were on the docket today as Defense Secretary nomine James Mattis met with the Senate Armed Services Committee.

SEN. JOHN MCCAIN (R), ARIZONA: I do believe that world order is now under more strain than its ever been.

RET. GEN. JAMES MATTIS, DEFENSE SECRETARY-DESIGNATE: I think it`s under the biggest attack since World War II, sir, and that`s from Russia, from terrorist groups and with what China is doing in the South China Sea. I think deterrence is critical right now, sir, absolutely. And that requires the strongest military.

MCCAIN: Do you think we have the strong enough military today in order to achieve that goal?

MATTIS: No, sir.

BRENNAN: The retired four-star Marine Corps General said, quote, “We can afford survival”, outlining priorities to improve military readiness, strengthen alliances and take a disciplined approach to the budget.

The former head of U.S. Central Command also became the latest cabinet nominee to diverge from President-elect Trump promise to improve ties with Putin, instead calling Russia a principal threat to the U.S.

MATTIS: I`m all for engagement, but we also have to recognize reality and what Russia is up to, and there`s a decreasing number of areas where we can engage cooperatively and an increasing numbers of area where we`re going to have to confront Russia.

BRENNAN: Also in focus, the need for more aggressive policies against ISIS, and for modernization of the nuclear triad, including the land-based missile system, which contractors are vying to develop.

But the hearing wasn`t without talk of cost-cutting, including Trump`s recent criticism of the F-35 Joint Strike Fighter as overbudget and behind schedule.

Mattis backed the program, adding that Trump has quote, “in no way shown a lack of support” but rather a desire to, quote, “get the best bang for the buck.” That resonated with analysts who continue to believe the president will be a boon for the sector.

RICHARD SAFRAN, BUCKINGHAM RESEARCH: Over the long term, I think that Trump and his team are going to be very good for defense spending.

BRENNAN: But as the world watch the “Warrior Monk” on the Hill, Lockheed Martin (NYSE:LMT), the F35`s contractor, met with Pentagon to negotiate its next contract. One factor that has helped to push defense stocks lower on the day.

I`m Morgan Brennan.


HERERA: The CEO of AT&T (NYSE:T) was at Trump Tower today. Randall Stephenson met with president-elect to discuss job creation in the U.S., and ways to make American companies more competitively globally. According to AT&T (NYSE:T), the two did not discuss the company`s proposed $85 billion merger with Time Warner (NYSE:TWX), which owns CNN.

MATHISEN: One company that plans to create more U.S. jobs is Amazon (NASDAQ:AMZN). The ecommerce will create more than 100,000 new full-time positions, it says, in the next 18 months. The hiring will take place at its Seattle`s headquarters in Silicon Valley and at fulfillment centers across the country.

Donald Trump`s transition team said the decision was made after the president-elect`s high profile meeting with tech executives and that he is pleased to have played a role in Amazon`s hiring strategy.

HERERA: The Senate took the first step toward repealing the Affordable Care Act after a marathon overnight voting session. The bill now goes to the House. And this morning, House Speaker Paul Ryan said the law is collapsing.


REP. PAUL RYAN (R), HOUSE SPEAKER: We want to make sure that we move these things concurrently at the same time, repeal and replace. We need to show that there`s a better way forward. We need to show that even though this law is collapsing, we can bridge ourselves to a much, much better system.
The pillars that we stand upon with replacing Obamacare — more choices, more options, lower prices and more control over your own health care — those are the things that we all believe in, we`re completely in sync planning with the daily basis on the administration for how to roll all this out and that`s what we`re doing.


MATHISEN: But the race to repeal that law could result in a side effect that benefits the wealthiest Americans.

John Harwood explains.


JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Senate Republicans have taken a strong first step toward repealing Obamacare and cutting taxes for the wealthiest investors. The budget resolution this passed early this morning allows them to erase Obamacare`s tax and spending provisions by simple majority vote, which means they don`t need any help from Democrats.

Now, while debate is mostly centered around health insurance issues, the tax implications are substantial. Obamacare relies for much of its financing on extra hospital insurance and Medicare taxes on incomes above $200,000. Eliminating them would mean a tax cut averaging $49,000 for households with incomes of a million dollars or more.

And for the top 400 U.S. earners, the tax cut would average $7 million, according to new calculations by the Center on Budget and Policy Priorities. That could set up a collision with this principle offered by Steven Mnuchin, president-elect`s choice to be treasury secretary.

STEVEN MNUCHIN, TREASURY SECRETARY NOMINEE: Any reductions we have in upper income taxes will be offset by less deductions, so that there will be no tax — absolute tax cut for the upper class. There will be a big tax cut for the middle class but any tax cuts we have for the upper class will be offset by less deductions to pay for it.

HARWOOD: Though Mr. Mnuchin was talking about a broader tax reform effort, his remarks underscore one political vulnerability of the Obamacare repeal report. President-elect promises to reveal his replacement health care plan once his pick for health secretary wins confirmation, but there`s no consensus within the Republican Party yet.

For NIGHTLY BUSINESS REPORT, I`m John Harwood in Washington.


MATHISEN: Still ahead, an influential tech execute says Apple`s best days are behind it. What Apple (NASDAQ:AAPL) is doing to make sure that isn`t the case?


MATHISEN: Shares of Netflix (NASDAQ:NFLX) have run up nearly 5 percent this year alone and adding to gains a big ones over the past two years.
Investors now wonder if the climb will continue when Netflix (NASDAQ:NFLX) reports quarterly results next week.

Julia Boorstin takes a look.


UNIDENTIFIED FEMALE: Why do you hate us so much?

CHARACTER: Because it`s fun.

(NASDAQ:NFLX) is launching new exclusive content, Lemony Snicket`s “A Series of Unfortunate Events”, based on a bestselling book series and starring Neil Patrick Harris (NYSE:HRS). This ahead of Netflix`s earnings Wednesday, when investors will look to see how this kind of original content is driving subscriber growth.

The big question is whether shares will follow in the pattern of last year`s 8 percent gain where the massive 134 percent growth the prior year, thanks to subscriber growth.

BARTON CROCKETT, FBR CAPITAL MARKETS: Our check suggests the consumer was a little bit more interested in Netflix (NASDAQ:NFLX) perhaps in the fourth quarter than they were in the third quarter.

BOORSTIN: Netflix (NASDAQ:NFLX) shares were already up nearly 5 percent this year. J.P. Morgan added Netflix (NASDAQ:NFLX) to its U.S. focus list.
Drexel Hamilton raised its price target on the stock. And Liberty Media`s John Malone praised CEO Reed Hastings, saying he broke the mold.

And Sunday night, Netflix (NASDAQ:NFLX) won two Golden Globes for its new series, “The Crown”.

Though, Netflix (NASDAQ:NFLX) doesn`t report ratings, it shows continues to dominate in viewing. Twenty-one of the 25 most popular original streaming programs last year were Netflix (NASDAQ:NFLX) originals, with “Orange is the New Black” and “Stranger Things” in first and second place, according to Symphony Advanced Media.

This despite rivals Amazon (NASDAQ:AMZN) and Hulu also investing in originals. The question now, will Netflix (NASDAQ:NFLX) face a massive threat from Apple (NASDAQ:AAPL), which reportedly is about to make a big investment in original content as well?

CROCKETT: Netflix (NASDAQ:NFLX) has proven remarkable adept at dealing with a range of threats. So, what we hear from Apple (NASDAQ:AAPL) is probably one of the lesser threats.

BOORSTIN: While Netflix (NASDAQ:NFLX) has the advantage of a head start on Apple (NASDAQ:AAPL) and all its streaming rivals, analyst Crockett says there`s another key risk to watch — regulatory challenges in the Trump administration.


HERERA: And Julia joins us now to talk more about Apple`s move to take on Hollywood.

Good to see you, Julia, as always.

BOORSTIN: Great to be here, Sue.

HERERA: Apple (NASDAQ:AAPL) would have to spend an awful lot of money to keep pace with rivals Netflix (NASDAQ:NFLX). They do have a lot of money certainly, but some say they may be late to this game.

BOORSTIN: Well, Apple (NASDAQ:AAPL) certainly has the resources if they want to quickly ramp up spending and original content. There are a couple of challenges, though, when it comes to licensing content, the movies and TV shows that Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) have licensed, a lot of those rights are already tied up and when it comes to investing in new original content, there`s just a little bit of lag time. It takes quite a while to produce and get new shows on the air or rather on Apple`s new service or baked into Apple (NASDAQ:AAPL) subscription service.

MATHISEN: They have a good relationship with Disney (NYSE:DIS) I`m aware of and of course that could be an interesting pipeline for them.

Separately, the billionaire investor Peter Thiel told the “The New York Times (NYSE:NYT)” that Apple`s golden age is over. What`s he talking about? What`s the reaction been to that?

BOORSTIN: Well, Apple (NASDAQ:AAPL) was such a game changer in inventing the iPhone and inventing the iPad and the question now is really whether they`re going to have another massive invention that`s going to change the game. Just look at the number of companies that live within that Apple
(NASDAQ:AAPL) ecosystem that can only really exist because apple invented the iPhone, and the App Store.

The question now is whether they`re going to keep on doing what they`re doing, selling computers and iPads and phones, and making incremental changes or whether they`re really capable of having another came changer.
Right now, analysts don`t see another massive game changer on the horizon, but they`re certainly very good at doing what they`re doing and making more smaller incremental changes.

HERERA: Indeed they are. Julia, thanks so much. Julia Boorstin in L.A.

MATHISEN: Delta Airlines (NYSE:DAL) said a strong holiday season helped sales takeoff. And that is where we begin tonight`s “Market Focus”.

The airline posted better than expected sales numbers while its lower profit fell in line with estimates. Delta CEO said he expects a key metric to improve this quarter.


ED BASTIAN, DELTA AIR LINES CEO: The last two years, our fares have been down. In fact, cumulatively, over the last two years, we`ve been down about 8 percent. And while fuel prices have been down, which is a good pass through for consumers, as fuel prices start to rise, labor costs have started to increase. We need to be able to improve our fares. Fares are stabilizing, and we think in the first quarter, our unit revenues are going to be up somewhere between zero and 2 percent.


MATHISEN: Delta shares were off 1 percent at $50.89.

The drugstore chain CVS (NYSE:CVS) said it is selling Impax Laboratories
(NASDAQ:IPXL) generic alternative to Mylan`s EpiPen for a much lower cost.
CVS (NYSE:CVS) said customers across the country can now buy a two pack of the life saving treatment for about $110, a fraction of EpiPen`s $600 list
price tag.

CVS (NYSE:CVS) shares off a fraction to $82.60. Impax shares rose nearly 3 percent to $12.75. And Mylan (NASDAQ:MYL) was off more than 1 percent at $36.77.

Meantime, Eli Lily says it won a patent case against rival Teva Pharmaceuticals. The federal appeals court upheld a previous ruling that Teva`s proposed generic version of Eli Lilly`s top selling cancer treatment would infringe on one of Lilly`s patents. Shares of Lilly up two and a half percent at $77.15.

HERERA: Straight Path Communications reached a settlement with the Federal Communications Commission regarding an investigation into possible fraud at that company. The wireless spectrum owner said it would pay the FCC $15 million and give the Treasury Department a percentage of any future license sales. Shares rose nearly 31 percent, that`s a relief rally for you, to $41.13.

In a regulatory filing, activist hedge fund Elliott Management disclosed more than 8 percent stake in health care consulting firm the Advisory Board Company. The hedge fund said it believes the advisory board stock is significantly undervalued and would like to speak with the company about maximizing shareholder values. Advisory Board shares surged 16 percent to $44.

And home improvement company Lowe`s is reported planning some job cuts according to CNBC, which cited a source familiar with the matter, the company will be changing its store staffing model and that will result in less than 1 percent of the workforce being laid off. Lowe`s employs about
285,000 employees. Shares were up 32 cents to $71.58.

MATHISEN: The automotive supplier Takata could plead guilty as soon as tomorrow to criminal misconduct. The company is at the center of those defective air bags, the scandal that was linked to a number of deaths and injuries. According to “The Wall Street Journal”, the company is expected to pay a billion dollars to resolve the criminal probe.

HERERA: Coming up, what`s being done to make a life saving medicine accessible to those who need it most? Find out in the final part of our series “Drug Price Crisis”, that`s next.


MATHISEN: This week, we`ve reported from the front lines of this country`s opioid epidemic. We told you how the soaring price of Naloxone, the drug that reverses overdoses from heroin or prescription painkillers, may keep it out of the hands of first responders and others who need it the most.
And we looked at some of the reasons companies say prices have risen.

Tonight, Meg Tirrell looks at what can be done in the final part of our “Drug Price Crisis” series.


MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: For Dan Bigg, it was the death of a friend that prompted his work around a life saving drug.

DAN BIGG, CHICAGO RECOVERY ALLIANCE, EXECUTIVE DIRECTOR: We had talked about this as an agent to use, but we had — John`s death was the reason we started using it.

TIRRELL: Bigg`s friend, John`s Szyler, died two years ago of a heroin overdose. Since then, Bigg has worked with the organization they founded together, the Chicago Recovery Alliance.

BIGG: We have reached over 72,000 people with O.D. prevention and Naloxone, and we now have over 8,000 reports of pure reversal using it.

TIRRELL: He and his team funded from private donations and the city of Chicago can be found each day of the week in a different neighborhood of the city.

People see this drug and they know they can come here for help, getting anything for clean syringes to a test for hepatitis C or HIV, to a flu shot and this, which contains three syringes and three vials of Naloxone, which could save three lives.

As deaths from heroin overdose have overtaken those from gun homicides in this country, federal and state governments have worked to increase Naloxone distribution.

DR. ERIC KETCHAM, SAN JUAN REGIONAL MEDICAL CENTER EMERGENCY PHYSICIAN: I think this is more manipulation by the pharmaceutical industry really to profit from the epidemic as it exists.

TIRRELL: The drug makers say they price the drug responsibly and the increases are due to the manufacturing and patient assistance. Still, researchers say solutions are needed. Some include bulk purchasing of Naloxone, similar to how governments buy vaccines, contracting with companies to produce less costly version and importing Naloxone from other countries where it`s cheaper. Others like Dan Bigg saying Naloxone shouldn`t require a prescription at all.

BIGG: You know, you go into a Walgreens or something, you can see a dozen different saline sprays for your nose, and they`re all under ten bucks.
That`s what the Naloxone market should look like in my opinion.

TIRRELL: Some major pharmacies already make Naloxone available without a prescription through special programs. And over-the-county version the same way we buy Advil would require a different regulatory pathway. The FDA says it`s supportive of the idea of over-the-counter Naloxone, but that would require manufacturer to pursue regulatory approval.

Public health experts say making Naloxone more available is only a small part of the solution to this country`s opioid epidemic.

DR LEANA WEN, BALTIMORE HEALTH COMMISSIONER: We have to save someone`s life right now because if we don`t save their life today, there`s no chance for a better tomorrow. That said, Naloxone isn`t the answer, because once a person is saved, they still have a disease.

TIRRELL: A new bill providing billion dollars in funding was just signed into law, primarily focused on increasing access to substance abuse disorder treatment.

WEN: Addiction is a chronic brain disease, and yet, the surgeon general`s recent report found that only one in ten patients with a disease of addiction can get the help that they need. And what other disease would we find that to be acceptable? Imagine if I said only one in ten patients who have cancer can get chemo therapy.

TIRRELL: It`s an urgent problem with much more work to be done.



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

MATHISEN: I`m Tyler Mathisen. Have a great evening, everybody, and 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) 2017 CNBC, Inc.


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