Transcript: Nightly Business Report – February 24, 2017

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

Funded in part by —


are happening on Wall Street that haven`t happened in decades.  What that
might mean for the stock market`s next move.

market monitor tonight has a list of stocks he says will bring big returns
if you have the patience.

BREWER:  And the winner is — the small upstate business behind the
entertainment industry`s iconic statuette.

Those stories and more on NIGHTLY BUSINESS REPORT for Friday, February

And good evening, everyone.  I`m Contessa Brewer, in tonight for Sue

MATHISEN:  And welcome from me as well.  I`m Tyler Mathisen.

Well, I wouldn`t have believed it at 10:00 this morning, but indeed the
streak extends to 11.  A rush of buyers in the final minutes of trading
today sent the Dow Jones Industrial Average higher, keeping not only its
win streak alive but also its consecutive number of record closes.  And it
is the longest such streak in 30 years.

Today, the blue chip Dow index eked out an 11-point gain to 20,821, not far
from 21 grand.  The NASDAQ added nine, the S&P 500 rose 3.  For the week,
the indexes were higher across the board with the NASDAQ and the S&P 500
turning in five straight weeks of gains.

And the month is shaping up to be something few have seen before.  So far,
there have only been three down days for stocks with just two trading days
left in February.

Dominic Chu has more now on the streaks that don`t come around all that


kind of market you typically see.  In fact, it wouldn`t be all that
dramatic to say it`s been decades that we`ve seen the kind of things we`ve
seen this week.

And here`s what we mean — today`s positive close for the Dow means a
winning streak of 11 straight days, a winning streak that hasn`t happened
since 1992.  But this winning streak isn`t just about gains.  Each of those
gains has been a new record close for the Dow.  The last time we`ve had 11
straight record closes, well, according to Howard Silverblatt over at S&P
and Dow indices, it was a 13-day win streak that ended in 1987 of record

We`ve also seen one of the calmest periods for the stock market in years as
well.  The last time the Dow moved by a percent or more in either
direction, December 7 of last year when it gained over 1 1/2 percent.

Now, given today`s fractional gains, the Dow`s streak has now extended to
53 trading days without a 1 percent or greater move.  That`s the longest
streak for the Dow since 2007.

And, by the way, just for good measure, the NASDAQ streak of low volatility
also stands at 53 days, the longest streak for it since 1989.

For NIGHTLY BUSINESS REPORT, I`m Dominic Chu here at the New York Stock


BREWER:  OK.  Let`s get right to Art Hogan for more on this streak of
milestones we`re seeing in the market, and what it means going forward for
the market.  He`s the chief market strategist at Wunderlich Securities.

Art, great to see you.

What does it mean?  Are we heading for more record closes?


We probably are.  I don`t know if we`ll have the streak continue, you know,
in perpetuity.  But I`ll certainly tell you that the backdrop looks good.

I think one of the things that`s really driving the market here is we ended
an earnings recession in third quarter.  The fourth quarter earnings
certainly came in better than expected and certainly better than the third
quarter.  And the economic data continues to improve.

So , the fundamental backdrop is keeping investors patient while they wait
for some promised policy agenda items that would be very pro-business like
tax reform.  So, I think we`ve got a market that`s pricing in something in
the future and I think that`s tax cuts, and things like deregulation and
infrastructure spend.

But I think in the near term, you know, you get paid to wait because the
fundamentals have been very good.  So, I think the markets certainly found
a path of least resistant to the up side and certainly can continue to do
that unless and until we think some of these policy agenda items get pushed
out to `18.

MATHISEN:  You know, who can tell you what might trip the market, but one
thing that I would say what`s on your horizon would be the elections in
Europe later this spring, particularly France, Germany later this year,
others, too.

HOGAN:  Tyler, I think that`s — that`s a great point.  It`s funny that we
don`t talk about this a lot.  And, you know, if, in fact, we didn`t have a
new administration, if we didn`t have the promise of tax cuts and repeal
and replace and deregulation and infrastructure spend, we`d probably be
spending a whole lot more talk about Netherlands and then France and then
perhaps Germany, all elections that are too close to call.

You know, we know elections are too close to call in general.  And all of
these look to be very close.  And, you know, questioning whether or not the
eurozone exists two years from now because of some of these election
results would certainly give investors a pause.

But right now, we seem to be whistling past that right now and focusing on
the near-term fundamentals here.  Now, who knows how that plays out?  But I
would tell you, with the Netherlands elections coming up in March, I would
guess that`s going to become part of the narrative very soon.

BREWER:  And how much patience do investors here have to wait for tax
reform and regulation repeal?

HOGAN:  That`s a great question.  I think if we don`t get a clear roadmap,
we don`t have enough details, right?  But I think that — you know, next
Tuesday, we don`t get a road map for what this looks like, you know, here`s
where we stand.  The House Republicans have a plan.  The White House does
have a plan.  The Senate has a plan.  We`re going to work and we`re going
to get this done, and the roadmap is to get this accomplished by August.

If we hear that next week, I think investors will be fine.  Something that
pushes that out, whether it`s — hey, we have to tackle repeal and replace
before we get this accomplished, we`ll have investors say, wait a minute,
that pushes tax reform off until `18, that`s not what we`re betting on
here, that`s not what we`re investing in.  So, I think it`s next week`s
business to get a clearer roadmap on that.

BREWER:  Thanks for sharing your expertise with us, Art.  We appreciate

Art Hogan with Wunderlich Securities.

MATHISEN:  Well, consumer confidence fell for the first time since the
election in November.  The University of Michigan`s final index sentiment
for February dropped from its highest level since 2004.  The results of the
survey split along partisan lines.  The director of the survey said the
divide is the sharpest on record, with Republicans, as you might expect,
more upbeat than Democrats.  The index measures consumer attitudes toward
inflation, unemployment and personal finances.

BREWER:  Housing remains hot.  New home sales rebounded last month, despite
rising less than expected.  Today`s report follows a release earlier in the
week that existing home sales are at a ten-year high.  Together, it appears
as if the housing market is off to a strong start for 2017.

Diana Olick takes a closer look.


homes inched up in January month to month, but not even close to
expectations and December`s already big drop was revised down.  So, we got
an increase 3.7 percent month to month to 555,000 annualized units,
seasonally adjusted.  That followed a very low pace in December even with
warmer than average temperatures.

Now, this may have a lot to do with the jump in mortgage rates in December.
Newly built homes come to a price premium to existing.  And on top of that,
prices from homes were up 7 1/2 percent from a year ago in January, which
is really not a sustainable jump given those higher rates.

The supply of new homes for sale is now at the highest in eight years.  So,
maybe that`s a sign that prices will cool a bit.  Builders still focus on
that move up and higher end buyer which is not where we need the supply.
We need entry level.

Sales of newly built homes represented about 12 percent of all sales.
That`s less than half of the prerecession average.  Clearly, there is a lot
more runway ahead for the builders if they could just step up and put up
more homes.

What`s holding them back?  Labor.  Not even close to enough.  And what is
available is about twice as expensive as before the recession.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.


MATHISEN:  President Trump is keeping a pledge he made to roll back
regulations.  Today, he signed an executive order that requires federal
agencies to appoint a regulatory reform officer.  That person would be
responsible for enforcing already existing executive orders that aim to
simplify complicated federal regs.


to pass a simple test, does it make life better or safer for American
workers or consumers?  If the answer is no, we`ll be getting rid of it and
getting rid of it quickly.  We`ll stop punishing companies for doing
business in the United States.  It`s going to be absolutely just the
opposite.  They`re going to be incentivized tore doing business in the
United States.


MATHISEN:  The president signed the order in front of executives
representing industries from steel to agriculture to pharmaceuticals.

BREWER:  President Trump is calling China the grand champion of currency
manipulation.  His comments in the “Reuters” interview are a departure from
Treasury Secretary Steve Mnuchin`s pledge in a CNBC interview to a more
methodical approach to analyzing Beijing`s practice.  Nonetheless, the
world`s second largest economy is reacting strongly.

Eunice Yoon reports tonight from Beijing.


Treasury Secretary Steven Mnuchin appeared noncommittal about President
Trump`s longstanding pledge to label China a currency manipulator.

While today at the foreign ministry in Beijing, the spokesperson said that
Beijing welcomed Mnuchin`s response.

Secretary Mnuchin is new into office.  We look forward to cooperation with
him to push forward China/U.S. economic cooperation and trade.

YOON:  Despite Mnuchin`s moderate stance, President Trump a few hours later
told “Reuters” that the Chinese were the grand champions of currency

The foreign ministry spokesperson said that China is a champion just maybe
not the way the president meant it.

SHUANG:  If you want to label China as a grand champion, indeed China is a
grand champion, but we are a grand champion in economic development.

YOON:  The ministry spokesman repeated several times during the briefing
that it wasn`t Beijing`s intention to devalue the currency and get a trade
advantage.  Instead he said the focus is to stabilize the yuan and press
ahead with currency reforms.

For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.


MATHISEN:  Still ahead, devouring start-ups.  Why big food companies are
looking to smaller ones to find growth.


BREWER:  JCPenney plans to close as many as 140 stores.  That`s more than
10 percent of its locations.  The retailer is struggling to increase sales
and customer foot traffic.

JCPenney also said it would offer new goods and services to keep pace with
shifting consumer preferences.  The stock fell more than 5.5 percent today
in trading.  Those store closures also pressured mid-tier mall operators
like Pennsylvania Real Estate Trust, CBL and Associates and Washington
Prime Group.

MATHISEN:  Well, it`s not just retailers that are facing mounting
challenges but food companies as well.  A persistent drop in prices has
eaten into grocery margins.  In fact, the organic grocers Sprouts Farmers
market told investors this deflation is the worst it`s experienced since
the recession and the longest such stretch in decades.  It`s also being hit
by those torrential rains out in California which are delaying plantings.
Despite the challenges, the company reported healthy sales growth and the
stock was up by a little bit today.

BREWER:  Well, earlier in the week, we told you the big food industry has a
big growth problem.  Well known names like Kellogg`s and General Mills
(NYSE:GIS) are having a hard time meeting changing consumer tastes.  To
solve that problem, they`re starting their own venture capital fund hoping
to find a favorite food start-up.

Aditi Roy has more on how the world of food and Silicon Valley are


Soups and Tyson Chicken are just a few iconic American food brands that
have dominated market share and mind share for decades, but now that`s
changing.  Food industry watchers say consumer preferences driven by
millennials are shifting towards fresher, more healthful and organic

To stay competitive, big brands have acquired or invested in emerging
brands.  For instance, in 2014, General Mills (NYSE:GIS) bought Annie`s
which makes organic snacks for kids, but now some consumer packaged goods
or CPG companies are going a step further, by starting their own venture

Some industry analysts say it`s the right move for legacy companies.

ROHAN OZA, CAVU VENTURE PARTNERS:  They don`t have the ability internally
to push the innovation thinking, the risk-taking, the culture, the equity
model, the desire to work, you know, 19 hours a day to build something cool
because you own a piece of the action.  It`s a very different philosophy.

ROY:  Rohan Oza of Cavu Venture Partners co-invested with General Mills
(NYSE:GIS) V.C. 301 Inc. in Kite Hill, a dairy alternative start-up.

Other funds include Campbell`s Soups V.C. Acre which launched a $125
million fund a year ago.  Its vestments include Juicero, a cold-press
juicing system.

Kellogg`s venture fund 1894 Capital launched just last year with $100
million and just invested in Kuli Kuli, a plant-based organic snack bar.

Industry analysts say between 2011 and 2015, big CPG companies have lost
market share to emerging brands.  The founder of Kite Hill says in-house
V.C.s are a way for CPG giants to regain their competitive advantage.

MATTHEW SADE, KITE HILL CEO:  What we`re seeing with 301 and other venture
arms of large CPG firms is that they`re migrating downstream and beginning
to partner with some of the smaller promising young companies because they
can`t wait for them to mature.  They`re losing too much revenue, they`re
losing too much market share and they, frankly, want to get involved
earlier and help accelerate the growth of those companies so that they can
participate in the upside.

ROY:  Some wonder why the legacy companies don`t spend more money in
developing their own new products instead of starting V.C. funds.  Experts
I talked to say it`s because it would take too long and require too much of
an investment and the risks of failure are simply too high.

As one V.C. partner told me, big CPG companies are built for efficiency
while V.C.s are built for innovation.

For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, San Francisco.


MATHISEN:  Foot Locker sprints past Wall Street speculations and that`s
where we begin tonight`s “Market Focus”.

The shoe and athletic apparel retailer said it saw increases in both profit
and revenue.  Same-store sales grew at a faster clip than analysts
expected.  And on that, shares were off and running.  Up 9 percent to

Restoration Hardware saw its shares is surge today following the home
furnishing retailers better than expected preliminary results that came out
after the bell yesterday.  RH or Restoration Hardware also said it would
launch a $300 million share buyback program.  Shares up 24 percent to

Hilton Worldwide said it would buy back up to a billion of its shares and
plans to change the company`s name.  As of March 6th, the hotel operator
will simply go by Hilton Inc.  Shares were up 1 percent to $57.78.

BREWER:  Boy, that`s a big change.

MATHISEN:  That`s a big, big change.  No one will be confused.

BREWER:  Satellite imagery from Digital Globe will be taken over by
Canadian space technology company MacDonald Dettwiler & Associates for
nearly $2.5 billion.  The deal will increase MDA`s presence in the U.S.
government space market.  Digital Globe shares fell 8 percent on the news
to $31.25.

Shares of Applied Opto Electronics continue to rise following the company`s
strong quarterly results after the bell yesterday.  In its latest quarter,
the suppler of fiber optic networks reported increases in profit and
revenue that topped estimates.  Shares popped to more than 22 percent to

And more fallout from a story we spotlighted for you more than a year ago.
Shares continue of Insys Therapeutics continued to fall after two doctors
were found guilty yesterday of receiving illegal kickbacks from a specialty
pharmaceutical company and overprescribing the company`s potentially pain
killer.  The company is currently seeking a settlement with the Justice
Department regarding its sale and business practices.  Shares were off 6
percent to $12.03.

MATHISEN:  Time now for our market monitor who is finding opportunity in
some consumer related stocks he says should be in your portfolio for the
long term.  This is his first time joining us on the program.

Trip Miller is managing partner at Gullane.

Trip, welcome.  Good to have you.

You say these stocks, the three you`re going to mention can double over the
next three to five years.

Let`s start with Wynn Resorts (NASDAQ:WYNN), the big gambling company.  Not
concerned about Macau?  That`s been a problem, hasn`t it?

for them over the last few years.  They were very slow to open their Wynn
Palace Resort which they spent over $4 billion on.  But we think the data
shows that things are improving in Macau.

Most importantly for us, we see the stability that`s been present for the
last year or so in their U.S. operations.  And there`s multiple catalysts
that are present in the U.S. that will upset some of that weakness in Macau
in the short run.  But we are bullish on Macau over the long run.

BREWER:  And you like the fact that Steve Wynn has his name on that brand.

How do you feel about Penske then?

MILLER:  Sure.  We like Penske, we like Wynn.  Both brands — the CEO and
the chairman of the board are the brands.  So, if they do something to harm
the brand, they`re harming their own family name.  They have a lot of skin
in the game.  And so, their interests are aligned with ours.

Penske like Wynn we believe benefits from a stronger consumer with more
dollars in their pockets.  They`re both very strong global brands.  We
think that Penske has the opportunity to benefit from continued
consolidation in the automotive industry across the globe.

MATHISEN:  Let`s move on to number three, which is Sonic (NASDAQ:SONC).
You call it an undervalued fast food operator, 3,600 locations.  My sense
was that Sonic (NASDAQ:SONC) sort of peaked.  We sort of hit peak Sonic
(NASDAQ:SONC) a few years ago.

MILLER:  Well, Tyler, the thing we like about Sonic (NASDAQ:SONC) is
they`re aggressively repurchasing their shares as they go from 89 percent
to 98 percent franchised.  With that, they`re loosening up capex.  They`re
having additional free cash flow to fund those buybacks.  We expect then
the company`s led us to believe they`ll return about 10 percent in buy
backs to the shareholders over the rest of this year.  And they have
continued opportunity to open more stores both domestically and potentially
internationally where they haven`t gone yet.

They`re moving into the northern states with experienced operators in their
franchise networks.  So, we feel like they could add up to a thousand
stores over the next decade.

BREWER:  Wow.  But, Trip, at the same time, we`re talking — we just got
finish talking about how these big grocery brands are focusing on organic
and healthier foods because that`s where the American consumers going.  We
know that that the big restaurant chains have had to strategize about how
to include those on their menu offerings.

How do you sort of coincide that with what Sonic (NASDAQ:SONC) offers,
which is just good old fashioned junk food?

MILLER:  We agree with you.  There`s a big push into organic and healthier
food.  But Sonic (NASDAQ:SONC) traditionally, most of their markets have
been smaller markets where we feel there`s less of a focus on healthy.

And let`s face it, people like a good treat once in a while.


MILLER:  Children love it.  We like the fact that they`ve got a diversified
model that they get a lot of revenue at off-peak hours that other
restaurants don`t because of their sales of desserts and slushes and other

MATHISEN:  Let`s talk about the market generally.  Give me, about 20
seconds, your thoughts about where we are right now.

MILLER:  The thing that concerns us a little bit is obviously the low level
on the VIX and the fact that there seems to be a lot of complacency in the
markets.  Obviously, we set 11 new highs on the Dow.  And so, as value
investors, we want to be fearful when others are greedy.  And so, that
gives us pause as we look at businesses not only domestically but around
the globe.

MATHISEN:  All right.  Thanks very much, Trip.  Good luck.  We appreciate

MILLER:  Thanks for having us.  Thank you.

MATHISEN:  Trip Miller with Gullane Capital Partners:

BREWER:  Coming up, the small business behind Hollywood`s biggest night.


MATHISEN:  Here`s a look at what to watch next week, busy week coming up.

On Monday, the world`s largest mobile industry conference gets under way as
it does every year, over in Barcelona, just as the industry readies itself
for some major shifts.

On Tuesday, big night.  President Trump will address a joint session of
Congress.  His first time doing that.  On — as president.

On Thursday, Snap Inc., the parent company of Snapchat, is expected to
start trading on the New York Stock Exchange.  It could be the largest tech
IPO in years.

And that`s what to watch next week.

BREWER:  Well, from Upstate New York to Hollywood, California, the story of
one small business could be the makings of a movie plot.  But it`s not a
movie.  It`s the real life of one businessman who finds himself at the
center of Hollywood`s most celebrated night.

Kate Rogers (NYSE:ROG) reports from Rock Tavern, New York.


foot warehouse in Rock Tavern, New York, couldn`t be farther than the
bright lights of Hollywood.

Plus, for the past 3 1/2 mounts, Polich Tallix Inc. has been working on a
project for Hollywood`s biggest night.  Manufacturing the Academy`s Motion
Picture Arts and Sciences prize Oscar statuettes for Sunday`s 89th annual

The small business may be best known these days for making the Oscars, but
has been around for 47 years working with famed sculptors like Jeff Koons.

In fact, the Oscar`s only account for 1 percent of its annual business.

ADAM DEMCHAK, POLICH TALLIX INC. EVP:  It`s a big project for us.  It`s
fun, exciting, it gets us a lot of press and attention.  I mean, typically,
our role in projects where we`re working for sculptors, we`re sort of
behind the scenes.

ROGERS:  The Oscars are made in 12 steps including being shipped to
Brooklyn to be plated in gold before being sent back to Polich Tallix for

DEMCHAK:  Each one of these bronze castings has to be mirror polished.  So,
we start with very contemporary technology, move into modern processes and
ultimately a very sort of old world handcraft.  There`s not a lot of places
that you can go, even in the art community, where you can get all of that
in one roof.

ROGERS:  And no matter who comes through the foundry`s doors, from famed
sculptors to bankers, Demchak said the Oscar statuettes managed to impress
just about everyone.

DEMCHAK:  I think the best part about doing it is seeing people when they
come in who don`t know that we do the Oscars and we say, hey, do you want
to see an Oscar, do you want to hold an Oscar?  And just the change in —
the obvious visible excitement that pops on their face when they understand
we`re making the actual Oscars, and they get to see one and know where it`s
been made.  It changes the mood.

ROGERS:  And admittedly, it does.

All right.  I`m ready to receive my Oscar.

DEMCHAK:  There you.

ROGERS:  It`s actually heavier than you think it is.  And everybody
probably says that.

For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG), Rock Tavern, New


MATHISEN:  Big night on Sunday for the Oscar.

Before we go, another look at the day on Wall Street, which saw the Dow
close at its 11th straight record close.  That is the longest such streak
in 30 years.  Here are some numbers.  The blue chip index up 11 points at
20,821, NASDAQ added 9 and the S&P 500 rose 3.  Another up week for all
three markets.

BREWER:  And that wraps up this week for us and NIGHTLY BUSINESS REPORT for
tonight.  I`m Contessa Brewer.  Thank you so much for being with us.

MATHISEN:  Been nice having you here.

BREWER:  It`s been great to be here.

MATHISEN:  And I`m Tyler Mathisen.  Thanks for watching.  Have a great
week, everybody.  We`ll see you Monday.


Nightly Business Report transcripts and video are available on-line post
broadcast at The program is transcribed by CQRC
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