Transcript: Nightly Business Report – February 9, 2017

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

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SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Major ruling. A U.S. appeals court upholds the suspension of the president`s travel ban and the business world is paying close attention.

Triple play. The three major indexes surged to record as talks of tax reform moves the market higher.

The big fix. What the president wants to do to make flying in America better.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thursday, February 9th.

Good evening, everyone. I`m Sue Herera. Tyler Mathisen is off tonight.

A record day on Wall Street with the Dow, NASDAQ, and S&P 500 all hitting records. We`ll have more on that in a moment.

But we begin tonight with a major legal ruling. A U.S. appeals court unanimously upheld a temporary suspension of President Trump`s immigration order which ban travelers from seven predominantly Muslim nations. It`s something the tech industry and businesses across the country have been watching very closely.

John Harwood comes to us tonight from Washington.

Good evening, John.

And this was a unanimous decision against the government. What is likely to happen next?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, there are two choices facing the Trump administration. One is that they can go to the Supreme Court and try to fight this and win this battle there. The other is they can pull back the executive order and make changes in it to try to make it conform with what the courts have ruled so far.

The fact that we have four judges so far, two Republicans, the initial Washington state judge appointed by Republican president and then on this three judge panel, two appointed by Democratic president, one by President George W. Bush, indicates that the road ahead for this executive order may be difficult.

So, we`ve got to see what the legal team at the White House decides, also have to wait and see how the president decides to respond because the way that he has talked about the judiciary has raised concerns on Capitol Hill in both parties and will see whether or not he goes off on this judge ruling or withholds comment and let`s his legal team speak for him.

HERERA: As far as the Supreme Court goes, Sean Spicer, the press secretary has said in the past that that something that they would consider. There is a vacancy on the court. We know that the president has a nominee out there. Would there be any chance if his nominee if confirmed would be sitting on the court if indeed this case came to the court?

HARWOOD: I don`t think so, Sue. I think this is ripening on a much faster timetable than Judge Gorsuch nomination is likely to proceed. And I think given the contours of the court and the fact that the Republican appointed judges have ruled against the president so far, the prospects for him winning at the court, I think aren`t especially promising at this moment.
If you had a split between the four on the left of the court and the four on the right, that would leave the Ninth Circuit ruling to stand.

But it`s also possible that some of the conservative wing of the court might side with the liberals because that`s what happened with those two Republican appointed judges on the West Coast.

HERERA: Indeed. John Harwood, thank you as always, John.

HARWOOD: You bet.

HERERA: John came to us tonight from Washington.

A bit later in our program, we`ll take a look at which sectors might be impacted by this ruling.

Well, Wall Street may have been covered by snow today, but stocks were hot.
It was a record close for the three major indexes, upbeat earnings help lift stocks immediately out of the gate, but the rally picked up steam after President Trump uttered one word — taxes.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We`re going to be announcing something I would say over the next two or three weeks that will be phenomenal in terms of tax.

(END VIDEO CLIP)

HERERA: Stocks have generally risen over the past three months as investors bet that the new administration will cut taxes and will roll back regulations. And that was all investors needed to hear. The Dow Jones Industrial Average rose 118 points to 20,172, the NASDAQ added 32 and the S&P 500 gained 13.

Bob Pisani has more on Wall Street`s record day.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: We`ve got the Trump trade versus the Trump tantrum. If anyone had any doubt that tax reform talk is what moves the markets, those doubts should be laid to rest today.
The S&P 500 moved almost eight points in the hour after President Trump said he would have more on tax reform in a couple of weeks. Bank stocks particularly moved because bond yield rose. Small caps rose because small companies would be among the biggest beneficiaries of a tax cut.

Now, never mind that Congressman Paul Ryan indicated that Obamacare would be the priority and that tax reform wouldn`t come until the spring at the earliest. Never mind all that. The president said we will have more on tax reform and we`ll have it very soon and the markets believed him and the markets moved.

So what does this tell you? It confirms that tax reform is what moves the market. It also confirms that the path of least resistance for the stock market right now is higher.

Why is that? Because the markets move up whenever the president talks about tax reform or infrastructure spending. But when the stuff the market doesn`t like is in the spotlight, like Obamacare or immigration or trade wars, the market either moves sideways are drifts slightly lower and lighter moderate volume.

Well, simply put, good news moves the markets up, but bad news only makes the markets kind of drift around. That tells me the path of least resistance for now is certainly higher.

Now, we have the Trump trade on good days for the market and we have the Trump tantrum on bad days.

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

(END VIDEOTAPE)

HERERA: Infrastructure spending was also one of the topics the president discussed today with airline and shipping companies at the White House.
President Trump told the executives that it`s time to fix America`s airports and upgrade how America`s fly. That helped airline stocks take off.

Phil reports tonight from the White House.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: President Trump sat down with more than a dozen of the top executives who run airlines and airports to hammer a familiar theme, flying in America needs to get better.

TRUMP: Our airports used to be the best. Now, they`re at the bottom of the rung.

LEBEAU: Most travelers likely agree with the president. Many of America`s airports are too crowded and too outdated and need to be fixed. President Trump wants to ease regulations to help airlines while increasing spending to improve the industry`s infrastructure. Among the top priorities:
upgrading the air traffic control system so there`s less congestion and fewer delays at the busiest airports.

After the White House meeting, the CEO of Southwest Airlines (NYSE:LUV) said the president was told why the current system needs to be fixed.

GARY KELLY, SOUTHWEST AIRLINES CHMN AND CEO: There`s about $25 billion of waste annually with the system that`s currently being used. So, that`s where our focus is, that`s where the airlines for America focus is.

LEBEAU: Just as important, an improved air traffic control system could possibly lead to lower fares.

DAVID VERNON, BERNSTEIN GLOBAL WEALTH MANAGEMENT: So, that inefficiency in air traffic system really creates bottlenecks that they turn into operating costs and consumer fares. So, that would be the biggest thing to move the needle as far as regulatory change.

LEBEAU: With the number of people flying in the U.S. at an all time high, the need to handle for travelers is growing. Still, America may be a long ways from seeing all new terminals and airports being built.

That`s because the biggest airport construction projects often take years to get going let alone completed. But today, President Trump told the industry, he wants to get them the billions of dollars that will be need.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Washington, D.C.

(END VIDEOTAPE)

HERERA: Some states are vying to be part of what could be a very large infrastructure spending spree.

Ylan Mui is following the story for us from Washington.

Ylan, what does states want to see now from the White House?

YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, 49 states have sent a wish list of their top priorities for infrastructure spending to the White House and to the White House`s National Trade Council. Now, this list includes more than 400 projects and some of them include — some of the states are asking for things like new energy plants, they`re asking for things like earthquake emergency response and warning systems.

They`re also asking for money for new roads and new bridges. Some of the states total more than $100 billion — California most notably has a list that`s longer than 50 projects.

HERERA: Oh, wow. OK, now, what about Congress? Where does Congress stand on infrastructure plan?

MUI: Well, House Speaker Paul Ryan had initially been lukewarm to this idea. He felt that Congress had already addressed infrastructure spending in a previous highway spending bill. He seems to be coming around to the idea, but it could take Congress a while to actually get to infrastructure spending. He said it`s going to be spring at the earliest before lawmakers can take this up in addition to taking up tax reform.

So, Capitol Hill really has a lot on its plate going forward.

HERERA: It certainly does.

Generally speaking, what tends to be the economic impact of infrastructure spending?

MUI: Well, there was an interesting report by the Economic Policy Institute that found that $250 billion worth of infrastructure spending could create 3 million jobs in just one year alone. So, there could be a really big impact in terms of the number of people who could go back to work.

However, there`s a big cost involved in that as well. Right now, President Trump is taking office with the debt to GDP ratio at its highest level since President Truman took office in 1945. So, there`s a lot of Republicans and a lot of budget hawks who are starting to warn that the debt level is simply getting out of control.

HERERA: Which begs the question how does Washington plan to pay for it all if it indeed it does go through?

MUI: That`s right. President Trump`s challenge is going to make all of these numbers add up. You know, he`s touted as much as a trillion dollars in infrastructure spending, but at the same time he`s also saying that he`s going to do phenomenal things when it comes to tax reform.

So, all of those things are going to cost a lot of money and you`ve got Republicans such as Mick Mulvaney, his nominee to head the budget department saying that`s a lot of money and I don`t know if the Congress can really afford to continue to approve those types of projects.

HERERA: Ylan, thank you so much. Ylan Mui in Washington.

Well, just one day after making a big job announcement from the Oval Office, Intel (NASDAQ:INTC) is warning of lower profit margins in one of its businesses. At an investor meeting, a company executive said its data center profit margins will be lower than usual. That unit has been a key contributor to Intel`s growth. That push shares lower by about 2.5 percent.

Coke`s earnings fizzled. The world`s largest beverage company saw profits fall 55 percent. Revenues also dropped from a year ago, making it the seventh straight quarter of declining sales. Coke is a widely held stocks and today`s news sent it lower by 2 percent.

Sara Eisen digs into Coke`s quarter.

(BEGIN VIDEOTAPE)

SARA EISEN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The world`s biggest beverage company is in transition mode. Results today painted a picture of better growth in North America but weakness around the world. Add in a stronger U.S. dollar that chipped away at Coke`s overseas sales, a complicated refranchising where Coke is spinning off most of its bottlers to become a leaner company, and a new CEO, James Quincey, who takes over from Mukhtar Kent in May.

JAMES QUINCEY, COCA-COLA INCOMING CEO: We focused the portfolio on more categories, we upped the marketing investment, we improves the execution, we transformed the bottling system, refranchising it, and I think the whole team has pulled that together and now, they`ve had two really strong years capped off with a great fourth quarter. The North American business is humming.

Lots to do in 2017, with the biggest year of refranchising, but we`re confident. The team is confident.

EISEN: The big picture, soda consumption is slowing, as people opt for healthier choices like bottled water and juices and teas. This will be Quincey`s main challenge, along with adjusting to a new administration.
Already, Coke has opposed President Trump`s recent immigration order.

QUINCEY: Coca-Cola (NYSE:KO) stood for exclusivity. We`re in 200 countries around the world. We have always stood for that. We are always going to stand for that.

So, we think that that`s part of our core values and that what our statement that Mukhtar put out was all about. It doesn`t affect a lot of our employees, but we wanted to be clear about what our brand stands for and what our company stands for.

EISEN: Another big question will be global trade. Coke`s international exposure means if we do see more protectionist policies like border taxes or tariffs, it could be a headwind for business. For now, though, management is focused on building a smaller more focused company, selling smaller cans of Coke which are doing better to keep up with changing consumer tastes.

For NIGHTLY BUSINESS REPORT, I`m Sara Eisen.

(END VIDEOTAPE)

HERERA: Anthem`s bid to buy rival Cigna has been blocked. A federal judge sided with regulators who argued that the takeover would reduce competition and harm consumers. Following the decision, shares of both companies were higher.

Bertha Coombs takes a look at what might happen next.

(BEGIN VIDEOTAPE)

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: A federal judge ruled against Anthem`s $54 billion merger with Cigna, saying in her decision that the deal would leave large national employers with less choice. Judge Amy Berman Jackson rejected Anthem`s argument that the combined firm could reduce cost and pass on $2 billion in savings because she says Cigna`s testimony in court contradicted Anthem`s claim. The hostility between the two firms was so pronounced the judge called it, quote, “the elephant in the courtroom.”

ANA GUPTE, LEERINK ANALYST: Cigna and Anthem and their conflict and she I think rightly so challenges the ability for the two companies to realize those efficiencies.

COOMBS: Anthem says it will move quickly to appeal the ruling. CEO Joseph Swedish saying in a statement that “if not overturned, the consequences of the decision will hurt American consumers.”

Antitrust attorneys give Anthem low odds of winning the appeal. Analyst Ann Gupte says the move will help Anthem in its next legal battle with Cigna over their hefty breakup fee.

GUPTE: They do have merger agreement through April that buys them time to think about the strategy, to challenge this breakup fee of $1.85 billion.
And I think that they will challenge it legally.

COOMBS: So what happens next for the health insurers? Analysts think that even with the uncertainty over health reform in Washington, we could see a whole new round of deals. Cigna has hinted to investors that it has the cash to make a sizable acquisition even without a breakup fee.

CEO David Cordani lost out to Aetna (NYSE:AET) two years ago when a bid to acquire Medicare powerhouse Humana (NYSE:HUM). Now that the court has also blocked Aetna (NYSE:AET) and Humana`s $34 billion deal, analysts say Cordani may try again.

Humana (NYSE:HUM) and Aetna`s merger agreement expires next week and they will update investors on whether they`ll be breaking up or staying together just after Valentine`s Day.

Bertha Coombs, NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

HERERA: Still ahead, the president likes to tweet, a lot, but it`s not enough to make the social media company great again.

(MUSIC)

HERERA: No retweets for Twitter. Monthly user growth in the company`s latest quarter was disappointing and revenue growth was the slowest since going public that along with a weak outlook pressure the shares.

Julia Boorstin takes a look at why Twitter is tumbling.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Not only did Twitter`s revenue in the fourth quarter fall short of expectations, the company`s earnings forecast for the first quarter of this year was about half of what analysts projected and Twitter added only 2 million monthly active users, just half of the monthly user additions of the prior quarter.

MARK MAHANEY, RBC CAPITAL MARKETS: The real negative to point out and what they were very upfront about is they`re seeing much more competitive pressure for video ad dollars. And they listed all the other social media networks. That problem is probably going to intensify.

BOORSTIN: But CEO Jack Dorsey said all the changes to Twitter`s products are working, with the third consecutive quarter of double digits percentage growth and daily users and their engagement. And he says he`s confident the company will be able to keep up that user growth.

Dorsey says this year, the company will focus on turning around its revenue and while President Trump makes headlines for his use of Twitter, that`s not having an impact on usage or revenue yet.

But Dorsey says he`s more confident than ever that Twitter is growing in its influence.

JACK DORSEY, TWITTER CEO: The whole world is watching Twitter. While we may not be meeting everyone`s growth expectations, there`s one thing that continues to grow and outpace our peers, Twitter`s influence and impact.

BOORSTIN: But Dorsey dual CEO roles at Twitter and at Square drew criticism from former Microsoft (NASDAQ:MSFT) CEO and Twitter shareholder Steve Ballmer.

STEVE BALLMER, FORMER MICROSOFT CEO: He started two amazing companies.
Who can do that? That`s very tough, both Twitter and Square, and I give him credit for that. And I think now`s the time for him to focus down, at least from my perspective, on the stock I own.

BOORSTIN: When asked on the earnings call if he can continue running Twitter and Square, Dorsey said he has the management team in place to continue running both companies.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.

(END VIDEOTAPE)

HERERA: Beazer Homes swings to a loss and that`s where we begin tonight`s “Market Focus”.

The homebuilder said it saw higher selling prices, but an overall drop in new home deliveries and nearly $3 billion pretax charge led to the poor results. Revenue for the quarter was flat. Beazer shares were off nearly five and a half percent to $13.26.

Viacom (NYSE:VIA) posted revenue above expectations, thanks in part to higher theatrical sales and strengthen the media giant`s international market. Profit fell but it was still above estimates.

As part of a long awaited restructuring plan, Viacom (NYSE:VIA) will focus on what it calls flagship brands, including Paramount Pictures and MTV.
Investors seem to like the news, sending Viacom (NYSE:VIA) up 4 percent to $43.89.

Dunkin` Brands returned to profitability in its latest quarter, benefiting from higher franchise fees and royalty income. The company also reported better than expected revenue and hiked its dividend by more than 7 percent to 32 cents a share.

But Dunkin` CEO says there`s still more work to be done.

(BEGIN VIDEO CLIP)

NIGEL TRAVIS, DUNKIN` BRANDS CEO: We`ve looked at our menu and we feel it`s too complex. We need to simplify it. So, we`re doing a fairly extensive test. Certain things will happen. We`ll change them back again.

So, it`s a test to find out the way forward, but we want to streamline our menu, the results of that should be that employees have an easier job which is obviously speed up transactions.

(END VIDEO CLIP)

HERERA: Dunkin` rose 4 percent to $54.13.

Yum Brands (NYSE:YUM) profit topped estimates, thanks to strong performance at its KFC and Taco Bell fast food chain. Revenue also rose but that was shy of forecast. The company did note that its Pizza Hut brand didn`t perform as well and said improvement needed to be made.

(BEGIN VIDEO CLIP)

GREG CREED, YUM! BRANDS CEO: We`re going to transform our assets. We`re going to transform our technology. We`ve got to get better at operations.
We`ve got to get better at communications. There`s a lot of things to do.

I think what we`re doing now is working with the franchisee. Obviously, our franchisees at Pizza Hut had the same success we`ve had with the KFC U.S. and the same success we`ve had with Taco Bell in the U.S.

(END VIDEO CLIP)

HERERA: Shares of Yum were up better than a percent to $67.39.

And camping gear maker Vista Outdoor reported a quarterly loss and posted sales below straight forecast. The company also cut its guidance for 2017 and investors pulled up stakes. Shares were off more than 18 percent to $20.95.

A legal challenge has been filed to stall the construction of the Dakota Access Pipeline. The Native American tribe which had been protesting its completion filed the lawsuit in an attempt to protect its water supply.
Meantime, the company behind the nearly $4 billion project says the pipeline should be completed and operational within about three months.

Up next, what tonight`s court ruling on the president`s travel ban means for some stocks.

(MUSIC)

HERERA: Economic storm clouds are forming once again over Greece. The country needs it creditors to release cash from a 2015 bailout so it can repay debt due later this month, and there`s disagreement over how to do that. Germany says austere budgets are needed for a decade. The IMF is calling for more debt relief. And Greece says austerity is not needed but more debt relief is.

So, what will the travel ban ruling now means for stocks?

Ross Gerber is CEO and president of Gerber Kawasaki and he joins us now.

Ross, nice to see you. Welcome.

ROSS GERBER, GERBER KAWASAKI CEO & PRESIDENT: Nice to see you too.

HERERA: What do you think the immediate reaction will be on Wall Street tomorrow to this court ruling?

GERBER: I mean, it`s super positive. I mean, for so many companies in America from the high end talent in the H-1B visa side, from tech companies like Google (NASDAQ:GOOG), Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), et cetera, to the low end workers in the agricultural fields of California, for example, Hormel Foods (NYSE:HRL), you know, what this does is it allows an increase in skilled and unskilled labor into the country and we need that. So, immigrants are the life blood of this country and any denial of its economic benefit is clearly somebody who missed econ. So, it`s a very, very good thing.

HERERA: What about the fact that the administration most likely will come out with a statement, we don`t know what they plan to do. There are several avenues that they have. One of which includes an appeal to the Supreme Court. Does that —

GERBER: Right, that`s what they`re going to do.

HERERA: You think that`s — OK.

GERBER: So Trump`s already — yes, he`s already tweeted just now, I`ll see you in court. So, we`re going to go to the Supreme Court. He`s going to lose. It`s an unconstitutional executive order. The judiciary does supersede the executive branch in this area and he`s going to lose.

And I think it`s a great thing for the American brand to prove that Trump can`t just do what he wants.

HERERA: But my question, which is more germane perhaps to our viewers, is does that, the discussion and the back and forth and the appeals to different courts — does that have the potential for volatility specifically as it relates to some of the tech stocks where the CEOs have been vocal?

GERBER: No. I think that we all — now, that we`ve got the Ninth Circuit decision — we all know that this will stand and this is going to be a benefit to stocks and the American brand, which is a benefit to stocks.
So, this is a very big positive. There`s no other spin.

HERERA: What about the fact that we have had the market run, now we had record highs in the market today in the indices. Are you still bullish on stocks? There are some who say that we`re looking a little extended.

GERBER: Yes. You know, that`s where we`re at too. We`ve made so much money in the last three or four months and that`s just uncharacteristic —

HERERA: All right. Well, we apologize. We had some technical difficulties with Ross, Ross Gerber is with Gerber Kawasaki.

As I mentioned just a moment ago, we had record highs in the indices today.
So, let`s take a look at how things shape up. We still have more earnings to go. The Dow Jones Industrial Average finishing up 118 points and change to 20172.40, the NASDAQ composite gained 32.73, about a half a percent to 5,715.18, and the S&P 500 finished up 13 points to 2,307.87.

And on that note, that does it for NIGHTLY BUSINESS REPORT for tonight.
I`m Sue Herera. Thanks for joining us. Have a great evening, everybody.
And we will see you right here tomorrow.

END

Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. 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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