Transcript: Nightly Business Report – February 2, 2017

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

stop shopping on Amazon (NASDAQ:AMZN). Sales are up and so are earnings. But why did the stocks                                                                           fall on its results?

era. How investment advisors keep a long-term focus amid the fast-paced,
the uncertainties and the tumult of the Trump administration.

HERERA: Next flash points. From trade to foreign policy, are there areas
of the world that investors need to watch extra closely?

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
February 2nd.

MATHISEN: Good evening, everyone, and welcome.

Well, they were on just about everybody`s doorsteps during the holidays,
Amazon (NASDAQ:AMZN) packages of course. The retailer captured, believe it
or not, 40 percent of total online holiday sales and tonight, all of that
shopping showed up in the company`s quarterly results.

Here`s the numbers: Amazon (NASDAQ:AMZN) earned a $1.54 a share. That was
19 cents better than expectations and translates into a 55 percent rise in
profit, making for its seventh straight profitable quarter. Sales rose
too. They were up 22 percent from a year ago to $43 billion but that
figure was below estimates, as was the revenue outlook for the current
quarter and that pressured the stock initially in after-hours trading as
you see there.

Deidre Bosa has the one key takeaway from Amazon`s quarter.


been extra disappointed that Amazon`s revenue in the last quarter fell
below expectations because Q4 has traditionally been the strongest quarter,
thanks to holiday sales. The company even saying that it saw its best
holiday season ever. However, EPS beat the streets estimates and that
makes it seventh straight quarters that Amazon (NASDAQ:AMZN) has been in
the black.

Deidre Bosa, CNBC Business News, San Francisco.


HERERA: Despite Amazon`s pull back in late day trading today the stock is
up more than 7 percent this year, similar to other tech stocks. In fact,
the tech focus NASDAQ 100 has risen more than 5.5 percent since the 2015,
easily outperforming both the Dow and S&P 500.

MATHISEN: But there are some headwinds and additionally some tailwinds but
those headwinds could derail the rally that has been going on in the tech
sector since the beginning of the year.

Scott Kessler is head of technology sector equity research at CFRA Research
and he joins us now to discuss.

Scott, bottom line me here — technologies off to a good start. Can it
keep it up?

SCOTT KESSLER, CFRA RESEARCH: To some extent, we think so, Tyler. You
know, it`s basically tied for first as the best performing S&P 500 sector,
at least through January up 4.2 percent, and we think that really reflects
a couple of realities.

One is these stocks were not, let`s say, loved post-election. A lot of
people were gravitating too sectors and names that people thought would
benefit disproportionately as a result of the election of now President
Trump and a Republican Congress. But what we seen at least in 2017, thus
far, is people are realizing that there could be benefits as a result of
the political changes, as well as some other catalyst for the sector going

HERERA: All right. There are some negatives, though, that you`ve given us
for the tech sector and one is the strong dollar.

KESSLER: Yes, Sue. So, when we think about the technology sector, we
think about a group of large companies that has a very international focus
and so if you think about for 2015, the sector generated a large
percentage, actually the second highest percentage of any sectors revenues
outside the U.S. So, we think a stronger or even increasing dollar against
major currencies like the euro, British pounds, Japanese yen, that`s a
negative for a lot of these companies.

MATHISEN: Two other areas that could be headwinds that you enumerate are
trade restrictions. Obviously, a lot of tech companies import a lot of
product, they could be caught by that border adjustment tax and the other
one is H1B visa concerns, about the ability to attract the tech workers,
the tech company say they need.

KESSLER: Yes. So, I think the first item of the two you mentioned, Tyler,
I think it`s pretty self-explanatory, but it`s probably most significant
for a lot of the companies that are responsible for producing goods that
are under say a U.S. brand umbrella like an Apple (NASDAQ:AAPL), for

But a lot of the sourcing and manufacturing actually occurs outside the
U.S. and HB1 visa situation, look, I mean, the president a year or so ago
was talking about the need to reform the HB1 visa program because, frankly,
a lot of entry level workers were making use of that program and I think a
lot of people now want to see that reformed.


KESSLER: And we saw legislation introduced just last week to make some
significant changes — interestingly from a Democratic representative from
Silicon Valley.

MATHISEN: Right. All right. Scott, thank you very much for that summary
of the pluses and minuses on tech. Scott Kessler, CFRA Research.

HERERA: On Wall Street, stocks finished the day mostly flat as investors
analyze the day`s earnings. Look ahead to tomorrow`s job report and kept
watch on the growing tensions around the globe. The Dow Jones Industrial
Average dropped six points to 19,884. The NASDAQ was also off six, and the
S&P 500 rose one.

MATHISEN: We`re more than half way through earnings seasons and it is
clear now that the new administration is having an impact on business.
According to “The Wall Street Journal” of the more than 240 S&P 500
companies that hosted conference calls in January, one half mentioned new
President Trump either directly or indirectly, and most of the companies
urged patients and optimism despite some of the policy uncertainty issuing
from Washington.

HERERA: And that uncertainty is also been felt by investors who are trying
to figure out what they should do with their money in this fast-changing

So, Mike Santoli went to San Diego to see what investors are doing in this
new Trump era.


after Election Day, investment advisors are convinced the investment
landscape has shifted dramatically under President Trump. But as 2,000
registered investment advisers gather in San Diego this week for TD
Ameritrade`s annual adviser conference, they were still sorting out exactly
how these shifts will play out. The surveys of these advisors found 83
percent Trump policies will be a major factor affecting the client

clients are probably feeling a lot more optimistic right now. But more
business-friendly and market-friendly policies that seem to be on the
table. We`re seeing advisors excited about, you know, maybe a little bit
more of a pro-business environment reduced regulation or reduced complexity
in the regulatory environment I would say.

SANTOLI: At least initially, they`re betting the net impact will be
positive. Almost 70 percent came into the year optimistic about U.S.
economic growth, the most upbeat result in eight years. And 53 percent or
bullish on stocks while 70 percent bonds will lose value as rates climb.

They`re steering clients out of the conservative dividend rich sectors that
benefit from slow growth and low rates, such as utilities and consumer
staple stocks. They like financials and industrials, embracing a consensus
that has been become known as the Trump trade. Yet, some advisors are
concerned about the way the president`s erratic messages on trade,
corporate behavior and foreign relations could spook markets.

LOUIS BARAJAS, WEALTH MANAGEMENT LAB: When President Trump goes out and
tweet something, again, I go back to the very kneejerk reactions, very
reactive, instead of really thinking things through. I think that he needs
to have that when we sometimes put a child who`s not behaving, we kind of
put them in a timeout. I think what Mr. Trump, I think what he needs is a
he needed a timeout.

SANTOLI: For now, markets have remained quite calm amid President Trump`s
often provocative tweets and public remarks, the stocks hovering near all
time highs. Perhaps this means investors are willing to look through the
daily noise toward the prospect of business-friendly tax cuts and
deregulation. Yet as the markets adjust with to a new president with a
test investment advisors might have to work extra hard at a key part of
their job, keeping clients focused on the long-term.

For NIGHTLY BUSINESS REPORT, I`m Santoli in San Diego.


MATHISEN: President Trump`s comments on Iran got the attention of
investors today. The president said that, quote, “nothing is off the
table” following that country`s test launch of a ballistic missile. House
Speaker Paul Ryan said the U.S. should stop appeasing Iran and many
Republicans would be in favor of additional sanctions on the country.
Other presidents, by the way, have echoed Mr. Trump`s statement. Former
President Obama also said that military options were not off the table to
prevent the country from getting a nuclear weapon.

HERERA: So with growing tensions between Iran and the U.S., where are some
other places around the world that you should be watching more closely?

Jeff Kleintop joins us. He`s the chief global investment strategy at
Charles Schwab and he`s here to fill us in on that.

Good to see you as always, Jeff. Welcome.


HERERA: What are you watching? Obviously, Iran was front and center in
today`s trading session and probably will be for some time now. But it`s a
big world and there are a lot of different events that are scheduled to
happen such as Brexit and that.

What are you watching most closely?

KLEINTOP: Well, there are a number of those political events. Like you
talk about Brexit. There`s certainly elections in Europe, but those are on
the calendar. It`s the unscheduled surprise events that could really have
a big chance of moving the market.

Iran and sanctions there, but looking overseas, the leader of North Korea
announced this year that he`s planning on testing and intercontinental
ballistic missile capable of reaching the U.S. Anything that could involve
a military conflict with the U.S. is going to get the markets attention
right away. So, if they do test that missile, will there be a response
from the Trump administration?

Other areas maybe in the South China Sea. There`s been some interaction
between China`s navy and the U.S.`s navy. An escalation there would
certainly get the market`s attention as well, because remember, we`re
trying to figure out what the Trump doctrine is on foreign policy and so,
the market`s going to extrapolate even small interactions into much bigger

MATHISEN: What about the Middle East? Obviously, Syria is a sort of
nonfunctioning state some would say and Iraq may be the same and then,
there is the announced intention of the Trump administration to move the
U.S. embassy from Tel Aviv to Jerusalem. That could destabilize the
situation in the Middle East, couldn`t it?

KLEINTOP: It certainly could. You know, Jerusalem, the Palestinians would
like Jerusalem to be the head of their state. So, that would certainly
inflame conflict there. Also, if the Trump administration were to pull
back as he`s mentioned on support for rebels in Syria, that might mean
Turkey and Saudi Arabia may step up in support for Sunnis and you`ve got a
proxy war there between them and Iran. All of that could certainly inflame

But I`ll also mention the fact that Russia has renewal of their sanctions
coming up this summer and they could look to stir up trouble. Maybe in
Romania, we`re seeing protests right now in Romania over some changes to
policy on anticorruption reforms that sought to limit Russian interactions
in Romanian politics. Look, there are a lot of areas in the Middle East
and in eastern Europe where we could see some of these things show up and
have some effects on the markets.

HERERA: Jeff, thank you very much. Appreciate it.

KLEINTOP: My pleasure, thanks.

HERERA: Jeff Kleintop with Charles Schwab.

MATHISEN: And still ahead, why Harley-Davidson (NYSE:HOG) the all American
brand is once again getting a lot of buzz.


MATHISEN: More earnings news. Merck`s profits came in as expected in the
most recent quarter, but revenues dipped just a bit. The Dow component was
hurt mostly by generic competition. On the other hand, bright spots
included growth in its oncology, diabetes and hepatitis C drugs. Drug
maker also said profits for 2017 be roughly in line with Wall Street
expectations. Investors found that outlook reassuring, considering the
increase in drug development cost and shares moved about 3 percent higher.

HERERA: Fellow Dow component Visa (NYSE:V) reported better than expected
quarterly profit and revenue, thanks to higher payment volume growth. The
world`s largest payment`s network operator earned 86 cents a share, 8 cents
better than estimates. Revenues were up 25 percent to more than $4
billion. And that sent shares initially higher in after-hours trading.

Kayla Tausche has the one key takeaway on Visa`s results.


global company that facilitates transactions and payments all across the
world in the trillions of dollars. So, what investors were looking for was
the sense of how the global volatility in the market was potentially
affecting the company and its volume. Well, the short answer is not that
much. Payment volume grew 47 percent in the company`s first quarter. That
was exactly what Wall Street was expecting and the company CEO says we`re
seeing good momentum in the business driven by domestic and cross border

That being said, the company did reaffirm its guidance for the year but
said that currency volatility or the impact of foreign exchange rate
fluctuation will take a little bit of a bigger bite out of its bottom line.



MATHISEN: Well, Macy`s (NYSE:M) may be open to selling itself and that is
where we begin tonight`s “Market Focus”.

“The New York Post” says the retailer is willing to hear buyout offers so
it can avoid a potential board shake up that could dent departing CEO Terry
Lundgren`s reputation among other things. The record added one of the
shareholders, activist hedge fund Starboard Value is unhappy with the
company`s financial results and may look to advocate for management
changes. Shares of Macy`s (NYSE:M) up 5 percent on the session at $30.72.

Ralph Lauren said its CEO Stefan Larsson is going to step down from the
clothing retailer on May 1, following a disagreement with founder Ralph
Lauren regarding creative strategy. Never a good career move to disagree
with the founder, I suppose. The company said the departure was mutually
agreed upon by the two gentlemen. Ralph Lauren also reported earnings
above expectations and reaffirmed its 2017 guidance. Shares down 12
percent though, $76.61.

And the media company CBS (NYSE:CBS) said it has reached an agreement to
sell its radio business to the broadcasting company Entercom. The merger
will result in an outfit that operates more than 200 stations around the
world. CBS (NYSE:CBS) shares fractionally to $64.14. Entercom surged
nearly 11 percent to $15.70.

And the infant formula maker Mead Johnson may soon be taken over by the
British consumer goods company, Reckitt Benckiser. The owner of the Lysol
and Wool Light brands said yesterday it was in advanced talks to my Mead
Johnson for nearly $17 billion. Don`t mix the wool light with the baby


MATHISEN: Mead Johnson shares soared 21 percent to $84.38.

HERERA: Despite posting lower profit and revenue in its latest quarter,
“The New York Times (NYSE:NYT)” beat street expectations, thanks to a surge
in digital subscriptions. CEO Mark Thompson said the decline in earnings
doesn`t tell the entire story.


MARK THOMPSON, NEW YORK TIMES CEO: Our print circulation, on deliveries,
they`re also growing at the moment. For the first time in many quarters,
actually, we`ve got more people coming to get the physical print newspaper.
Our digital business is going very well. You`ll see, we got very strong
growth in digital advertising and spectacular growth in digital consumer.


HERERA: “The New York Times (NYSE:NYT)” shares were unchanged on the day
at $13.55.

Chipotle said an increase in wages and higher prices for avocados caused
profit to fall and missed estimates. The burrito chain posted revenue in
line with forecast but saw it`s same store sales fall by nearly 5 percent.
But the company did say it expects those sales to improve and rise by high
single digits this year. Shares initially rose in after-hours and finished
the regular session up a fraction to $423.30.

And GoPro saw it`s loss widen, but the results still beat analysts`
expectations. The wearable camera makers said slower demand during the
holiday season caused sales to fall and miss estimates. The company also
gave guidance for the current quarter that was below street forecast.
GoPro shares initially plunged more than 10 percent in extended hours,
giving back nearly 4 percent gain in the regular session, where they closed
at $10.97.

MATHISEN: President Trump met with executives today from a company that`s
really apart from the fabric of America, Harley-Davidson (NYSE:HOG). The
executives drove up to the White House on what else, Harleys, putting this
iconic brand back in the spotlight.

Landon Dowdy has more.


years of manufacturing experience, Harley-Davidson (NYSE:HOG) is known for
riding high on its “Made in America” strategy. The motorcycles makers
allowed a dominant position in the U.S. motorcycle market.

JAMIE KATZ, MORNINGSTAR: I think the reason that it`s so iconic because it
remains an American manufacturing powerhouse. They`ve never used outside
of the country. They`ve never tried to manufacturer in places like Mexico,
unless there`s been a country with real tariff consequences maybe like
Brazil or India, they`ve stayed really loyal to remaining an American

DOWDY: But lately, Harley-Davidson (NYSE:HOG) is all revved up with
nowhere to go, which begs the question is the American iconic slipping.
Earlier this week, Harley reported disappointing fourth quarter results as
motorcycle shipments fell 12 percent year over year and are not forecast to
grow in 2017.

Harley`s problem, the 2016 models aren`t selling as we will as they hoped.
And there`s a limited supply of the 2017 models. Economic uncertainty,
unfavorable foreign exchange rates and heavy discounts by competitors are
further complicating the picture. The result? Flat sales in the U.S.
mirroring an industry-wide trend seen for the past three quarters. Today,
Harley executives rolled up to the White House where the president focused
on American production.

allegiance will be to the American workers and American businesses like
Harley-Davidson (NYSE:HOG).

DOWDY: This isn`t the first president to meet with the American iconic,
three of the last five presidents including Ronald Reagan, George W. Bush
and Bill Clinton have met with Harley-Davidson (NYSE:HOG) at their
Milwaukee headquarters.

While today`s meeting put the focus on manufacturing and jobs in the U.S.,
Harley`s challenge remains finding consumers to hop on those American-made



HERERA: While Harley-Davidson (NYSE:HOG) has long manufactured its
motorcycles in American factories, as Landon just mentioned, it reportedly
outsourced part of its information technology unit, a report on
said in 2012 signed an agreement with Infosys, an Indian tech staffing
company, to take over a portion of its IT department.

MATHISEN: While the president and Harley-Davidson (NYSE:HOG) execs met
about jobs, the Labor Department reported a greater than expected decline
in Americans filing for unemployment benefits. It`s the latest positive
piece of data that show a tightening job market, ahead of tomorrow`s
monthly employment report.

Hampton Pearson takes a look at what investors can expect tomorrow.


jobs report from the Labor Department, we learned that fewer Americans
applied for unemployment benefits last week, continuing a dramatic decline
over the last year. Just over two million Americans are receiving
unemployment benefits, down 8 percent from a year ago.

Experts say low claims are a proxy for layoffs with employers reluctant to
let workers go in a tight labor market and earlier this week, in a closely
watched survey of private sector job growth, employers hired some 246,000
new workers last month far above the overall consensus forecast of 174,000
jobs with the unemployment rate holding steady at 4.7 percent.

DIANE SWONK, DIANE SWONK ECONOMICS: We could see an upside surprise most
notably because in the retail sector we didn`t hire up a lot in the holiday
season, and even though we`re seeing that restructuring from bricks to
clicks and a lot of store closings, that`s not going to happen until the
February through April period.

PEARSON: At the first Federal Reserve meeting of the year, monetary policy
makers predicted further tightening of the labor market. Leading economist
will be looking for signs of more wage growth, and which sectors are
leading the way.

SWONK: We`re looking to see continued gains in the health care sector.
That`s one we`re going to have to watch going forward, because uncertainty
about the extension of the Affordable Care Act could cause some
consternation and some hesitancy to hire going forward.

PEARSON: In the coming months, the Trump administration policies on trade,
immigration, taxes and infrastructure are expected to impact the outlook
for jobs.

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


HERERA: Coming up calling the right plays. Is the NFL scoring a touchdown
with fans?


HERERA: Uber CEO is stepping down from the president`s Economic Advisory
Council. Travis Kalanick that his participation has been construed as an
endorsement of the new administration`s policies. The announcement follows
criticism of his decision to work with the White House. The president is
convening the first meeting of this advisory council tomorrow made up of
CEOs from some of the country`s biggest companies.

MATHISEN: The parent of the popular disappearing message service Snapchat
has officially filed for an initial public offering. Snap seeks to raise
up to $3 billion, even though in its filing the company may never achieve
or maintain profitability. The highly anticipated IPO is expected to be
one of the largest since Alibaba went public back in 2014.

HERERA: So, we know what we`ll be doing on Sunday. What will you be doing
on Sunday? Well, chances are that you`ll be one of the millions watching
the Super Bowl, but the business of football has seen better days, and it`s
hoping that Super Bowl 51 will deliver a touchdown.

Jane Wells is in Houston.


America has descended on its fourth largest city and Houston couldn`t be

UNIDENTIFIED MALE: It`s really fantastic for the city. It`s not just the
economy-wise, but I think overall, you know, for the country, it really
means something.

WELLS: But the Super Bowl is coming to Texas at a time when NFL ratings
have disappointed, something the commissioner is well aware of and the
league is looking at ways to speed up the game.

ROGER GOODELL, NFL COMMISSIONER: What we`re trying to do is to make our
product as exciting, our games as exciting and action-packed as possible.
So, it comes on various different levels for us and we have not dismissed
any theories about how we can continue to engage our fans more extensively
either on television or in the stadium.

WELLS: The matchup between the New England Patriots and Atlanta Falcons is
also seeing a drop in prices on the resale market for tickets. StubHub
says the average price of around $4,400 is down 12 percent from a year ago.

It still is the biggest game in town. Betting on the Super Bowl this year
could reach $4.7 billion. That`s a half billion dollars more than a year
ago and the companies are using the game to brand themselves in a new way.

For example, with the Trump`s administration emphasizes on American
manufacturing, publicly traded Party City is making Super Bowl napkins,
cups and other goods in the U.S. with plans to expand.

JIM HARRISON, PARTY CITY HOLDINGS CEO: Being in the United States being
close to manufacturing helps our supply chain.

WELLS: Then, there`s the company which has its name on the stadium,
Houston-based energy giant NRG.

UNIDENTIFIED FEMALE: We`re excited to have you introducing the NRG brand
to people.

TONY HALE, ACTOR: Me too. I have spent weeks researching NRG and it is
fascinating stuff.

WELLS: The company hired actor Tony Hale explaining exactly what NRG is.

HALE: That is a lot of people. That is a lot of people. Write this down,

WELLS: Finally, Sunday is a chance for Houston to reintroduce itself to
the world, as it starts to recover from the Boston oil prices. Security is
tight and expectations are high. The last time the Super Bowl was here was
2004 when Janet Jackson had her wardrobe malfunction.

This year, Lady Gaga will perform at halftime, but the odds favor a repeat
performance in one respect. Thirteen years ago in Houston, the Patriots
won and Tom Brady (NYSE:BRC) was MVP.

For NIGHTLY BUSINESS REPORT, Jane Wells, Houston, Texas.


HERERA: I just hope takes good game.

MATHISEN: Could be. Could be high scoring. These are two good offenses.

HERERA: They are. It`s going to be fun to watch.

On that note, 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, 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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