Transcript: Nightly Business Report – February 15, 2017

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

Funded in part by —

(COMMERCIAL AD)

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Unchartered territory. The
stock market is having its best win streak in a quarter century, but it has
some investors scratching their heads.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Around the table. Retail
CEOs sit with President Trump with one very big concern on their minds.

HERERA: Distracted driving. Can a startup keep drivers from picking up
their phone?

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
February 15th.

MATHISEN: Good evening, everyone, and welcome.

The stock market did something it has not done in 25 years, all three major
indexes closed at records now for five consecutive days. According to Dow
Jones, that`s the longest streak since 1992. Investors today encourage by
new reports that show the economy is picked up a little momentum. They
also continue to be optimistic about the prospects for tax cuts, which the
president reiterated today and about regulatory rollbacks.

That helped lift financial stocks which in turn push the broader market
higher.

The Dow Jones Industrial Average added 107 points to 20,611. The NASDAQ
gained 36, and the S&P 500 advanced 11.

HERERA: As we`ve been reporting, those tax cuts hinge on a key proposal, a
border tax that would generate a lot of revenue but large retail CEOs are
worried. The industry has warned that form of border tax could hurt their
business and raise prices for consumers. Well, this morning, a group of
retail executive went to the White House where they met with President
Trump, who said only that tax rates would be lowered and simplified in a
plan that will be outlined soon.

When the retail CEOs left the White House, they made their way to Capitol
Hill, where negotiations on the border adjustment tax are taking place.

Ylan Mui picks up the story.

(BEGIN VIDEOTAPE)

YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Retailers spent a long
day here in Washington meeting with lawmakers to fight against the border
adjustment tax this tax would waive the cost of imports and retailers say
it could force them to raise their prices as well. They`ve met with many
lawmakers here in Capitol Hill, including Representative Kevin Brady
(NYSE:BRC) who is chairman of the House Ways and Means Committee and one of
the biggest supporters of the border adjustment tax. They also met with
Senator Orrin Hatch of the Senate Finance Committee.

We caught up with some of the CEOs as they were leaving that meeting. Here
is AutoZone (NYSE:AZO) CEO Bill Rhodes speaking to reporters.

BILL RHODES, AUTOZONE CEO: Our key message today is we really appreciate
the openness of everyone from the White House, to the House, to the Senate.
We represent over 42 million American jobs and we`re here to make sure that
we`re all looking for a pro-growth agenda to move this economy forward.

MUI: Now, this issue is something that has divided the business community.
The American-made coalition, which is made up of manufacturers like GE and
Boeing (NYSE:BA) are actually in support of the border adjustment tax.
Here`s the statement that they put out today. They said that opponents of
tax reform are defending an outdated and broken system that subsidizes
cheap foreign import at the expense of American manufacturers and workers.

There`s so much debate on this issue here on Capitol Hill as well.
Representative Mark Meadows who is kind of the conservative House Freedom
Caucus is very skeptical of the border adjustment tax. Meanwhile, Senator
Hatch has said he still has questions about how this tax would work in
reality, how it would impact consumers and how would impact businesses.
So, the Republican Party it`s still not sure how it will move this issue
forward both in the House and on the Senate and retailers are hoping to
take advantage of that indecision to shift the ball in their favor.

For the NIGHTLY BUSINESS REPORT, I`m Ylan Mui here in Washington.

(END VIDEOTAPE)

MATHISEN: On the eve of his confirmation hearing, the president`s pick to
head the Labor Department is withdrawing his name from consideration.
Andrew Puzder, the CEO of CKE Restaurants, which owns Hardees and Carl`s
Jr., has faced criticism from senators about his business record and his
failure to pay taxes for an undocumented housekeeper.

HERERA: The president now has to look for a new labor secretary, as well
as a new national security adviser who resigned over his communications
with Russia. With so many questions, including some about the president`s
tax agenda, why doesn`t the market appear concerned?

Marks Zinder is a principle of Mark Zinder and Associates and former
Franklin Templeton spokesperson. He`s here to tell us what the market does
not seem all that concerned.

Good to see, Mark. Welcome.

MARK ZINDER, ZINDER ASSOCIATES PRINCIPAL: Good to see you all as well.
Thank you very much.

HERERA: You know, we just mentioned that the market has done something
that it hasn`t done in a quarter century, this winning streak. Yet when
you look at the aggressive agenda in Washington and some of the
difficulties that have come up in the last couple of days, one would think
that the market might have a less positive reaction to that. What`s going
on?

ZINDER: You would think, but history has shown us that economics you know
matters more than politics. And so, what you see going on in Washington,
it matters in the short term, but in the long term, the economics trump
all.

MATHISEN: You work with and for Sir John Templeton, one of the most sort
of storied investors of all. What would he say about two things — one is
the level of stock prices today? And, two, in a broad sense, how an
investor can assess the political risks and opportunities that are out
there?

ZINDER: Well, with regards to the stock market, he used to follow
something called price-to-book. Let me explain. He was a value investor
of Benjamin Graham, a value investor.

Benjamin Graham wanted to know what is the value of the company, what`s its
breakup value. And historically, stock sold about twice the break-up
value. And right now, they`re not that high.

There about three times book values and historically two points by this is
the norm. So, I don`t think were overvalued.

HERERA: What about the economics of the country right now? We have the
Fed probably on the on the verge of raising interest rates, at least one
more time this year. We have a little bit of inflation coming in which is
good.

ZINDER: Sure.

HERERA: Does that continue to underpin this market? I mean, do you
longer-term see this market continuing to move higher?

ZINDER: Oh, absolutely, these are all good things. You know, the one
thing we have to look at as far as a stock market is people say, well, it`s
running along the tooth or the economy, the economy is long in the tooth.
And what you have to look at is not how many years, but your average GDP
growth expansion. It`s about 23 percent. We`re only up a 10.6 percent
trough to peak right now. So, I think we still have a lot of room to go.

And as far as a bear market, they see it`s a 20-percent correction. We had
a 19.9-point correction in August of 2011. Why don`t that count, right?
That should count.

So, I think we have a lot more room to go.

MATHISEN: You know, a lot of people inside the Beltway, in the media, in
New York and Washington, are wringing their hands over what`s been going on
in the administration. Already this week, he`s lost his national security
advisor to a resignation. Now, the labor secretary. There are ongoing
investigations into contacts between campaign workers and potentially
Russian intelligence.

But the market is playing past it and I sense most of the rest of the
country is focused on something that they see is far more important, and
that is a better business climate.

ZINDER: Absolutely. If you look at what is potentially coming down the
pipe, right, what — stocks go up because earnings improve. When you start
cutting taxes, tax reform, maybe reform Dodd-Frank, that will improve
corporate balance sheets and, of course, that makes things just look so
much better going forward.

HERERA: All right. We`ll leave it there, Mark. Thank you so much for
spending time with us.

ZINDER: Thank you all. I really appreciate.

MATHISEN: You`re very welcome.

All right. Now, to those encouraging economic reports we just referenced.
Americans went shopping in January. Retail sales picked up sharply last
month, despite a decline in car sales. A steady combination of hiring and
modest wage growth discounting, these are keeping consumers spending.

HERERA: Also helping increase confidence in the U.S. growth scenario was
the latest read on inflation, which showed the strongest monthly gain in
almost four years. The Labor Department`s consumer price index rose 0.6
percent last month and that was more than expected. In the 12 months,
though, through January, that index is up two and a half percent, the
biggest year-over-year gain since March of 2012.

MATHISEN: Fed Chair Janet Yellen return to Capitol Hill today and
reiterated her upbeat assessment of the economy she also talked about the
prospect for fiscal stimulus.

(BEGIN VIDEO CLIP)

JANET YELLEN, FEDERAL RESERVE CHAIR: I think market participants of —
likely you`re on anticipating shifts and fiscal policies that will
stimulate growth and raise — perhaps raise earnings, maybe tax cuts that
will boost earnings. We have seen longer-term interest rates go up in the
dollar strengthened and that`s consistent with expectations of an
expansionary fiscal policy.

(END VIDEO CLIP)

MATHISEN: Her testimony, along with strong economic data, nudged higher
the odds of an interest rate hike in March.

HERERA: President Trump and Israeli Prime Minister Benjamin Netanyahu held
a joint news conference at the White House today. The two heads of state
sought to bolster their countries ties, both diplomatic and business
relations.

Seema Mody tell us why investors were paying close attention.

(BEGIN VIDEOTAPE)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: The partnership between our
two countries built on our shared values has advanced the cause of human
freedom, dignity and peace. These are the building blocks of democracy.

SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Since the signing of
the U.S.-Israel free trade agreement over years ago, according to the U.S.
Chamber of Commerce, trade between the two nations has grown tenfold. And
both leaders showcasing a strong desire to us even closer together there
could be more opportunity ahead for business.

Netanyahu joined Trumpet emphasizing the important relationship between the
two countries and not only combating terrorism but in business as well.

BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: I look forward to working with
you, to dramatically upgrade our lines in every field, in security and
technology and cyber and trade and so many others.

MODY: The rekindled relationship between the two nations could on earth
opportunity with some asset managers saying now is the time to invest in
Israeli stock. Northern Trust (NASDAQ:NTRS), which oversees more than $300
billion, says cyber security and defense companies are poised to benefit
from Trump`s vote of confidence. Israel has already made the USA a key
market for its businesses with 94 companies currently trading on the
NASDAQ, more than any other form listing.

Some of the standouts companies like wix.com and SodaStream each soaring
well over two hundred percent in the past year. And it`s a two-way street,
Silicon Valley also dependent on Israel. Amazon (NASDAQ:AMZN) and
Microsoft (NASDAQ:MSFT) have been busy acquiring Israeli startups in recent
years.

And this could just be the beginning as Tel Aviv continues to emerge as a
tech hub of the East.

I`m Seema Mody for NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

HERERA: Still ahead, fixing America`s crumbling infrastructure.

(BEGIN VIDEO CLIP)

ADITI ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT: I`m Aditi Roy in
Oroville, California, where the choppers are buzzing in the air carrying
bags of rocks the shore up that emergency spillway. I`ll have that story
coming up on NIGHTLY BUSINESS REPORT.

(END VIDEO CLIP)

HERERA: The Trump administration started making changes to the Affordable
Care Act. The proposed rule would tighten the provisions to apply for
coverage outside of open enrollment. It would also require consumers to
pay back premiums due before signing up again.

And it also cuts the open enrollment period for 2018 in half. Those
changes would give insurers more time to have their plan reviewed and
finalized by state and federal regulators. Now, separately, a government
report said the pace of growth of health care spending is expected to
increase nearly five and a half percent in 2017 from a year ago.

MATHISEN: Well, healthcare and infrastructure are both top priorities for
the White House and investors. Today, a new report shows that almost
56,000 U.S. bridges are structurally deficient, a classification that means
those bridges are in need of attention.

But current attention is on the Oroville Dam in California, that we
reported on earlier this week. Crews have been working to shore up the
emergency spillway in an effort to fortify the structure.

And as Aditi Roy reports, even though the mandatory evacuation has been
lifted, the concerns have not gone away.

(BEGIN VIDEOTAPE)

ROY: It`s a race against time in Oroville, California, as choppers buzz in
the air, carrying bag filled with gravel to shore up the eroding emergency
spillway of the Oroville Dam, trying to beat the next round of storms. The
homeowners braced for them, ready to evacuate a second time if the threat
becomes real.

UNIDENTIFIED MALE: They said to be ready to put the stuff back in. So, if
you want to get fresh clothes and if something doesn`t happen, to throw it
back in your vehicle and get back on the road.

The spillway`s crumbling condition after several back-to-back winter storms
prompted fears of a 30-foot wall of water gushing downstream and spark the
evacuation of 200,000 residents living downstream. Now, officials say
they`ve lowered the water level to ease the threat and have downgraded the
evacuation order to an evacuation warning.

The situation even got the White House`s attention.

SEAN SPICER, WHITE HOUSE PRESS SECRETARY: The situation is a textbook
example of why we need to pursue a major infrastructure package in
Congress. Dams, bridges, roads and all ports around the country have
fallen into disrepair.

ROY: The American Society of Civil Engineers which comes out with an
infrastructure report card every four years gave America`s dams a D in its
most recent report in 2013.

The report says by 2020, 70 percent of the total dams in the U.S. will be
50-plus years old. The Association of State Dam Safety says the number of
high hazard dams or ones whose failure could cost loss of life is
increasing dramatically. The organization also says it will cost $21
billion to repair the country`s aging dams.

Experts say dam owners are responsible for those repairs and since most of
the country`s dams are privately owned, analysts say funding repairs is a
challenge.

MARK OGDEN, ASSOCIATION OF STATE DAM SAFETY: A lot of privately-owned dams
don`t have that type of revenue stream, and it can be difficult for a damn
owner to find the financing necessary to make upgrades to their dam.

ROY: As policymakers debate the state of the nation`s infrastructure,
residents in Oroville watch and wait.

UNIDENTIFIED MALE: I mean, I can see it from here and if I`ve seen the
break, well then, adios, I`m out of here.

ROY: As residents monitor those lake levels closely, the Trump
administration has approved federal funds to help pay for some of those
repair costs here at the Oroville Dam.

For NIGHTLY BUSINESS REPORT, Aditi Roy, Oroville, California.

(END VIDEOTAPE)

HERERA: Rebuilding America will not be cheap.

The president has talked about investing as much as one trillion dollars,
well, today on Capitol Hill, a number of transportation executives told
lawmakers which types of projects they think are needed most.

Morgan Brennan has more.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Executives of the
BNSF and Amtrak Railroad, trucker Schneider, and industrial shipper Dow
Chemical (NYSE:DOW) all testified, as senators lamented that the sorry
state of roads bridges tracks and port, signaling just how willing this new
Congress potentially is to finally find a way to update America.

SEN. CORY BOOKER (D), NEW JERSEY: Remember, we got an inheritance from our
grandparents the best infrastructure on the globe. We`ve now trashed
inheritance it`s time for our generation to step up and do the right thing,
make the investment so that our children and grandchildren can again be the
number one on the Planet Earth, not just for the quality of our
infrastructure, but that infrastructure ensures that we will continue to be
the dominant economy.

BRENNAN: Ahead of the hearing, Amtrak chief, Wick Moorman, said it will
take $28 billion over years to make the investments needed to modernize,
much of it along the passenger railroads` most profitable routes, the
northeast corridor.

WICK MOORMAN, AMTRAK PRES. & CEO: We have hundred-year-old major
infrastructure up there and it suffers from reliability issues today,
they`re only going to get worse and something has to be done. And in fact,
you`ve seen recently, the state of New York and New Jersey come together,
and we`re going to start replacing a bridge up there is the first step in
the long process that`s well over a hundred years old.

So, I think — I think the impetus is there.

BRENNAN: At the top of Amtrak`s list, the $12 billion gateway program,
which includes new rail tunnels between New York City and New Jersey.

On the freight side, Matt Rose, executive chairman of Berkshire Hathaway
(NYSE:BRK.A) owned BNSF, focused on regulatory and tax reform, as well as
ways of infrastructure improvements that could be carried out to ensure
freight railroads which fund their own networks remain competitive against
truckers using public roadways.

MATTHEW ROSE, BNSF EXEC. CHAIRMAN: Congress must find a new way to release
increase the commercial users` contribution to the infrastructure that they
use to increase fuel taxes, wait distance fee, or similar proxy. This
isn`t something that must happen eventually. It`s time to look at it now.
The trucking industry to its credit also recognizes this.

BRENNAN: Christopher Lofgren, CEO of privately-held Schneider, focused on
new technology, from federally mandated electronic logging devices, to
trunk automation, to even cybersecurity, as a connected network becomes the
trucking business model of the future.

The hearing was the latest fact-finding mission as lawmakers try to
determine what it will take to modernize America`s infrastructure and do so
without breaking the bank.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.

(END VIDEOTAPE)

MATHISEN: Verizon (NYSE:VZ) reportedly get a better price for Yahoo
(NASDAQ:YHOO) and that is where we begin tonight`s “Market Focus”.

Multiple reports say the wireless carrier is nearing a new agreement with
Yahoo (NASDAQ:YHOO) to acquire the tech company`s core assets for up to
$300 million less than its initial offer. Last July, Verizon (NYSE:VZ)
planned to buy the company for nearly $5 billion, but that was cast on the
closing of the merger following Yahoo`s disclosure that it suffered too big
hackings. Verizon (NYSE:VZ) shares were off a fraction at $48.08. Yahoo
(NASDAQ:YHOO) rose nearly one-and-a-half percent to $45.65.

Pepsi said strong sales for the company`s healthier snack options help lift
revenue above expectations. The maker of Gatorade and Sabra Hummus, who
knew, also reported better-than-expected profit, but gave full-year
guidance that was shy of estimates. Shares down 19 cents at $106.73.

Meantime, SodaStream saw its profit more than triple and top estimates in
its latest quarter. The maker of home beverage carbonation systems said
strong demand for sparkling water products help results. The company also
posted higher revenue. Shares rose a better than 4.5 percent to $49.54.

HERERA: Late yesterday, asset manager Fortress Investment Group said it
would be bought by Japanese technology company Softbank for more than
billion dollars that merger is set to transform Softbank into one of the
world`s largest asset managers. Fortress gained nearly 29 percent to
$7.99.

Despite a rising enrollment, Molina Healthcare (NYSE:MOH) posted an
unexpected loss and revenue that was worse than expected. The health
insurer cited challenges in the Affordable Care Act marketplace. The
company also gave weak earnings guidance for the year. Shares initially
fell more than 10 percent after hours, but ended the regular session of
just a fraction to $52.89.

And time Warner shareholders voted in favor of its planned merger with AT&T
(NYSE:T). The companies are now one step closer to finalizing their more
than $85 billion deal which still needs approval from U.S. officials.
Shares of AT&T (NYSE:T) were up about a percent to $42.12. Time Warner
(NYSE:TWX) was off seven cents to $96.32.

MATHISEN: Demand for Cisco`s security products help offset sluggish
results in its true national switcher business. The Dow component earned
$57 cents a share. That was a penny better than estimates.

Revenue, though, fell nearly 3 percent fifth straight quarterly decline, at
roughly eleven and a half billion dollars. Shares volatile after-hours
initially falling then popping.

Josh Lipton has more on Cisco`s quarter.

(BEGIN VIDEOTAPE)

JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT: $3.3 billion, that was
one big number in Cisco`s results. First, the company`s core switching
business that was down from 5 percent year-over-year. But RBC`s Mitch
Steve says that was a bit better than his forecast. He says Cisco`s
performance and guidance demonstrates the company is moving away from its
traditional market into the right parts of the business.

Cisco (NASDAQ:CSCO), of course, became a tech titan with its switching and
routing businesses, but its companies now moved the cloud, they buy less
hardware. Of course, Cisco (NASDAQ:CSCO) understand those trends, which is
why Cisco (NASDAQ:CSCO) CEO Chuck Robbins is focused on owning, developing
and distributing more software. To that end, Cisco (NASDAQ:CSCO) recent
agreed to buy software developer App Dynamics for $3.7 billion.

For NIGHTLY BUSINESS REPORT, I`m Josh Lipton, San Francisco.

(END VIDEOTAPE)

HERERA: Coming up, can new technologies keep us safe when we get behind
the wheel?

(MUSIC)

MATHISEN: Here is a jolting statistic — the number of people who died in
a car accident in the U.S. has hit its highest level since 2007. Blame it
on a number of factors, including higher speed limits, drunk driving as
well as texting, and driving.

Phil LeBeau takes a look at the numbers and whether some new technologies
may keep us safer behind the wheel.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Driving in America has
become deadlier. The National Safety Council estimates more than 40,000
people died in car accidents last year, the most since 2007. It caps the
steepest two-year rise in auto fatalities since 1964. Some of it is
because drivers are going faster as states race speed limits, while
distracted driving remains a huge problem. Ironically, highway deaths are
rising even as new technologies like lane departure warning systems are
becoming more common.

But the National Safety Council says some of these new systems are being
ignored by drivers.

DEBORAH HERSMAN, NATIONAL SAFETY COUNCIL CEO: There are haptic warnings,
oral warning, visual warnings. Some of these warnings are confusing to
drivers and some of them are the functionality is really not there. And
so, drivers are turning them off.

LEBEAU: Doug Simpson, the founder and CEO of Navdy, thinks he has a way to
keep drivers from picking up their phone. Since late last year, Navdy had
sold a device that project text messages emails and navigation unto a small
green in front of the driver. Navdy believes drivers will not stop texting
or calling, so a head-up display is a safer approach to handling the issue.

DOUG SIMPSON, NAVDY FOUNDER & CEO: People are going to make phone calls.
You know, they are going to use turn-by-turn navigation. They are going to
going to listen to music. This is a far safer way to do those things in the
car than the alternatives.

LEBEAU: Deborah Hersman disagrees.

HERSMAN: Doing these things don`t make drivers safer. They make them more
distracted and split attention between the roadway and these other tasks.

LEBEAU: In fact, many drivers remains their own worst enemies when they`re
behind the wheel.

That`s why automakers and tech firms are investing more than ever into
devices and systems designed to keep us from crashing into other cars or
people, but at the latest numbers show, we are a long ways from seeing a
big reduction in highway fatalities.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

MATHISEN: And to read more about new technologies and distracted driving,
head to our website NBR.com.

HERERA: Before we go, though, here`s another look at the record day on
Wall Street. The Dow added 107 points, the NASDAQ gained 36, and the S&P
advanced 11 points. We`ll see what happens tomorrow, right?

MATHISEN: Yes, we were.

HERERA: That does it for us tonight. I`m Sue Herera. Thanks for joining
us.

MATHISEN: And thanks for me as well. I`m Tyler Mathisen. Good night.

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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