Transcript: Nightly Business Report – March 1, 2017

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

Funded in part by —


a bull. Stocks were supercharged following the president`s speech, even
though it lacked the specifics many investors had been looking for.

(NYSE:XOM) becomes the first major producer to increase spending on new
projects after years of suffering from low oil prices.

GRIFFETH: Sign on the dotted line. Confidence is up. Unemployment is
down. And that`s a recipe for continued strong auto sales.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday.
It`s already March the 1st.

Good evening, everybody. I`m Bill Griffeth, in tonight for Tyler Mathisen.

HERERA: And I`m Sue Herera.

Well, the bulls led the charge on Wall Street. The Dow soared past 21,000
for the first time ever. The S&P 500 broke through the 2,400 mark midday.
And the rally was sparked by two things. First, the optimistic tone struck
by President Trump in his speech last night to a joint session of Congress.
Second, Federal Reserve officials` upbeat take on the economy.

So, let`s get right to the numbers. The Dow Jones Industrial Average
climbed 303 points to a record 21,115. The NASDAQ gained 78. The S&P 500
added 32.

And get this — it only took the Dow 24 trading sessions to move from
20,000 to 21,000, tying it for the fastest 1,000-point jump ever of.

GRIFFETH: Amazing.

The one thing president did not give investors was specifics on his
proposed pro-growth policies. But, apparently, it didn`t matter because he
unexpectedly gave them something else instead.

And Bob Pisani explains tonight.


going through close as the Trump hope trade as I call it is very much
alive. The markets wanted more specifics on Trump`s proposals on tax
reform, on infrastructure spending, on reduction of regulations. Didn`t
get it. Didn`t happen.

No matter. Traders almost unanimously viewed the speech as a success. The
market got something that`s perhaps more important, it got a speech which
clearly implied that there was a good chance the president could accomplish
all the goals he was setting out. Now, that`s been enough so far and it
was more than good enough today, as you saw.

Now, he spoke about more money for defense. And many aerospace and defense
stocks like Boeing (NYSE:BA) hit new highs. A whole group hit new highs in
that group.

He talked about putting a deregulation task force inside every agency.
Now, the biggest beneficiary of that, of course, would be banks. The KBE
or the ETF as it`s called hit the highest level since 2008.

Then, the president reiterated his desire to spend $1 trillion on
infrastructure finance to a private-public partnership. No time frame on
that, but infrastructure stocks like Aecom and Jacobs Engineering that have
been languishing since mid-December all got a boost today.

Finally, the president talked about repealing and replacing Obamacare, but
he specifically talked about giving states flexibility on Medicaid.
Managed Medicaid companies like Centene (NYSE:CNC) and WellCare were also
up on the day.

Now, Trump didn`t offer more specifics but the forcefulness of the speech
implied he could accomplish his goals of lower tax and infrastructure and
regulatory reform, and that`s why the markets were rallying.

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


HERERA: So, let`s turn now to David Lebovitz for more on today`s stock
market rally. He is the global market strategist at J.P. Morgan Asset

Good to see you again, David. Welcome back.

Thanks for having me.

HERERA: Let me just get your reaction. I think you heard some of the
things that Bob Pisani laid out. Do you in general agree with what Bob
said? And what`s your impression of the move in the market today?

LEBOVITZ: You know, I would agree with most of what Bob said. I think
that there are really three things going on here. One, Trump`s speech was
very well-received by the markets. Two, you have the Federal Reserve
signaling that they do — that they may, in fact, feel comfortable hiking
rates here in a couple of weeks. And, three, you continue to see the
economic data look fairly solid.

So, I believe it`s the combination of those three factors which led to the
market`s performance today. But, you know, I think there are still some
risks out there that we need to be cognizant of. As Bob alluded to, we
don`t have a ton of details as to what the new administration`s policies
might look like or when they may be implemented. So, you know, they always
say the devil is in the details. This time I think the devil is in the
timing and we need to get more clarity on when these policies are actually
going to come to fruition.

GRIFFETH: And plenty of respected market watchers out there who are
watching this rally unfold are worried about the implications for of
earnings and the impact that will have. You know, earnings are still be
the mother of — a mother`s milk of the stock market out there. Is the
stock market getting ahead of itself relative to earnings in corporate
America is what I`m trying to ask.

LEBOVITZ: I think what you`re seeing is you`re seeing the stock market not
only pricing and improvement in earnings, but you see the stock market now
price in a change in policy. You know, as this rally began, as multiples
began to expand, what we were seeing with a little bit more optimism price
then with respect to economic growth and how stronger nominal growth would
translate into corporate profits. But the major backup we`ve seen in
multiple so far I think is increasing expectations around what could happen
politically which obviously create some room for disappointment.

So, we still think the fundamentals are there. You know, we`re looking for
mid to high-single-digit earnings growth in 2017 for the year as a whole.
There`s some upside risk for that forecast if we get things like tax reform
and deregulation of it sooner than we were expecting, but I think that you
know the earnings are going to be the key because in the long run, stock
prices following so we need to see that trend of improving bottom lines

HERERA: In talking to one market analyst today, he said the Fed matters
much less right now than it did previously because of the aggressive agenda
that the Trump administration has laid out and if they are able to achieve
some of what they have laid out, it makes the Fed not irrelevant certainly
but much less important then it was, say, six months ago. Do you agree
with that or not?

LEBOVITZ: No, I think that`s completely accurate. When I think about
2016, you know, the first nine months of the year, equity market
performance was really driven by interest rates. You had low volatility
bond proxies outperforming. You had everybody hanging on the Feds each and
every word.

You know, now with President Trump in the new administration in office, we
have seen the focus turns to what could happen on the fiscal front of the
way that I`ve been explaining it to investors is, you know, the end
destination of mid to high-single-digit returns from U.S. equities is
probably the same, but the journey they`re taking to get there is quite

Last year, their journey took them past the Federal Reserve.

HERERA: Right.

LEBOVITZ: This year, they`re going to be driving past the White House.

HERERA: All right. David, thank you very much. Good to see you again as

LEBOVITZ: Thanks for having me.

HERERA: David Lebovitz with J.P. Morgan Asset Management.

GRIFFETH: Well, speaking of the Fed, stocks also got a lift from a couple
of Federal Reserve officials and their upbeat assessments of the economy.
For one, the president of New York Fed, Bill Dudley, said that the case for
tightening monetary policy had become in his words a lot more compelling.

And then there`s San Francisco Fed President John Williams who said he saw
no need to delay raising rates. That help lift the financial stocks since
bank stocks (INAUDIBLE) their profits tend to get a boost from higher
interest rates. The next Fed meeting, in case you`re wondering, is in two

HERERA: And businesses are generally optimistic but not as much as they
have been. The Federal Reserve`s Beige Book, which is an anecdotal look at
the economy across the country said the economy expanded at a modest to
moderate pace from early January through mid-February. The report also
indicated that the job market remains tight with some districts pointing to
widening labor shortages.

GRIFFETH: Also, growth in consumer spending slowed in January despite an
increase in incomes. That`s because rising prices hurt Americans
purchasing power. Commerce Department reported this morning that annual
inflation rose to 1.9 percent, its highest level since 2012, and close to
that Fed target.

HERERA: The manufacturing sector continues to gain steam. Activity
expanded at its fastest pace in more than two years. The Institute for
Supply Management said new orders are increasing, along with output.

GRIFFETH: The automotive sector certainly is a key pillar of the economy
and the latest read on auto sales shows the American consumer is not
slowing down. In fact, February turned out to be another month where the
annual pace of sales top 17.5 million vehicles, and once again, trucks,
SUVs and incentives lured buyers into showrooms.

Phil LeBeau has our story tonight.


confidence close to a record high, Americans are deciding it`s time to buy
a new car or truck. On the surface, February sales for some automakers may
look unimpressive compared to the same time a year ago, especially for
Toyota (NYSE:TM) and Fiat Chrysler which saw business fall almost ten
percent last month.

But make no mistake, the number of people signing a deal for a new vehicle
remain strong and they pick trucks and SUVs over cars. Ford F-series sales
jumped almost 9 percent. With gas prices holding steady, Americans are
looking to buy bigger models.

All of this is good news for automakers who are not only selling more of
their higher profit vehicles, but they`ve also managed to bring down their
inventory. So, they`re in better shape heading into the busy spring sales

Right now, most expect March, April and May to be busy for dealerships.
Unemployment is low, consumer confidence is high, a recipe for strong auto
sales to continue.



HERERA: After years of an oil price downturn, ExxonMobil (NYSE:XOM) is
doing something it hasn`t done quite a while, it is increasing its spending
and its investment. It`s the first major oil company to do so, marking a
potential turning point for that industry.

But as Jackie DeAngelis reports, the move isn`t without risk.


(NYSE:XOM) speaks, Wall Street listens. And Exxon is talking with his
wallet confirming it will spend billion dollars on capital expenditures
this year. That number up a bit from its projection. Now that crude
prices seem stable, over $50 a barrel after a low of nearly $26 last year,
Exxon seems to feel more confident about investing even in short cycle
projects, like the Permian Basin and the Bakken.

DARREN WOODS, EXXONMOBIL CEO: In 2017, we expect to spend $22 billion.
This allows us to advance investments and adjust either up or down
commodity prices, price conditions and cash flow. More than one-third of
the capex will be invested in advancing our large inventory of short cycle
opportunities. They are primarily Permian and Bakken unconventional place
in short cycle conventional work programs. This component of our
investment plan is expected to generate positive cash flow less than three
years after initial investment.

DEANGELIS: But risks continue to plague the industry. While OPEC members
have trimmed production and their cooperation is impressed market, concerns
about increases in U.S., Russian and Nigerian production worry the market.
That means that the delicate dance between supply and demand will continue
and if big oil acts over-aggressively, the danger is it could flood the
market with oil once again.

WOODS: We`ll use a proven development plan, planning process to enhance
commercial potential and competitiveness over a range of economic

DEANGELIS: Today, the Department of Energy released its weekly crude
inventory data. In that report, U.S. production is holding over million
barrels a day, increasing steadily over the course of the last year.

Consider that OPEC cut is a max of nearly two million barrels per day, it`s
the reduction that could easily be eclipsed by non-OPEC producers. What
this tells us is that players like Exxon, Chevron (NYSE:CVX), Hess
(NYSE:HES) and others are shouldering a big responsibility. Their actions
could swing a market that has struggled to find its footing.



HERERA: ExxonMobil (NYSE:XOM) CEO also told investors that the new short
and long-term projects should continue to help fund Exxon`s 106-year-old

GRIFFETH: Still ahead, the president calls for a fundamental change to
legal immigration. We`ll talk about the potential impact that has on
business and the economy.


HERERA: Eight Wells Fargo (NYSE:WFC) executives will see no cash bonus for
2016. This as the bank looks to increase accountability following the fake
accounts scandal. Compensation received in 2014 will also be partially
clawed back. Those affected include CEO Tim Sloan, the bank CFO, and six
other top lieutenants.

GRIFFETH: Snap, the parent company of the popular messaging app Snapchat,
priced its initial public offering above its target range tonight. The
company also raised more than $3 billion, giving Snap an approximate
valuation overall of $24 billion.

But a lot of questions still remain about this high-profile IPO, including
how it`s going to make money.

Julia Boorstin takes a look tonight.


reaches more than 40 percent of 18 to 34 year olds in the U.S., and it
earns revenue in four ways — Snap ads, lenses, geofilters and spectacles.
Its biggest business, Snap ads, which run between stories from friends or
brand, to begin with a full screen video ad of up to 10 seconds, with the
ability to swipe up for more options.

Snap says more than 60 percent of these ads are watch with the sound on,
reporting an ad watched as soon as it loads.

Snapchat sponsored lenses like this one for the NBA all-star game using
augmented reality to put a brand on top of the users face.

Snapchat charges a daily flat fee for these reporting how many users played
with the filters and sent them to friends.

Sponsored geofilters target people within a specific location, like a
concert or a mall, layering an image on top of photos and the self-
described camera company now sells these $130 spectacles, which capture
video. With only a limited number available, they haven`t yet generated
significant revenue.



HERERA: Mylan (NASDAQ:MYL) forecasts a strong 2017, and that`s where we
begin tonight`s “Market Focus”.

The maker of the allergy medication EpiPen is predicting that profit and
revenue for the year will come in above analysts` expectations. The
company citing strong demand for its generics business as well. It also
reported better-than-expected fourth-quarter results. The shares rose 7
percent to $44.87.

Technology is the centerpiece of McDonald`s new growth plan. That company
will invest in digital ordering and delivery options in an effort to drive
customer growth. The company also said its continuing to trim overall
administrative cost. The shares rose 1 percent to $129.05.

Best Buy (NYSE:BBY) said weak demand for video games cause the electronics
retailer to miss revenue estimates and post an unexpected decline in same-
store sales. The company also warned of another drop this quarter, but
still, it hiked its quarterly dividend by 21 percent to 34 cents a share.
Shares were off four-and-a-half percent to $42.14.

GRIFFETH: Home improvement retailer Lowe`s said more customers spend a lot
more money at its stores in the most recent quarter. As a result, profit
and sales topped expectations and the company said the year ahead looks
strong as well. Lowe`s shares popped more than 9 percent in today`s strong
trading. It`s at $81.45.

And American Eagle Outfitters (NYSE:AEO) issued a downbeat outlook for its
same-store sales and said that it`s facing a challenging retail environment
right now. The company added that it expects store sales for the current
quarter to be flat to down in the low single digits. But there was some
positive news, it`s Aerie brand saw a double-digit rise in sales. It
wasn`t enough though, shares slumped by nine and a half percent on
otherwise big update to $14.34.

HERERA: President Trump in his address last night calls for a change to
the U.S. immigration system. He wants it to be merit-based. That means
immigrants are selected based on their merit and skills, similar to the
process used in Canada and Australia.


current system of lower-skilled immigration, and instead adopting a merit-
based system, we will have so many more benefits. It will save countless
dollars, raise workers` wages, and help struggling families, including
immigrant families, enter the middle class. And they will do it quickly,
and they will be very, very happy, indeed.


HERERA: Supporters of a merit-based approach argue that the current system
increases the supply of low-skilled workers and pushes down wages of those
at the bottom. Critics say the current system has successfully allowed
immigrants to take advantage of U.S. opportunities.

GRIFFETH: So, what impact would a merit-based immigration policy have on
the U.S. economy and businesses?

Josh Feinman is global chief economist at Deutsche Asset Management. He
joins us tonight to talk about this.

As we mentioned, this is already in use in various forms in Canada and
Australia. Would we use the same blueprint and it wouldn`t be enough to
move the dial for industries like technology, which keeps saying they don`t
have enough skilled workers out there?

economic perspective, a merit-based system has much to recommend it. Now,
of course, the devil will be in the details. We`ll have to see, you know,
how big of a system they`re talking about, you know, how aggressive they`re
going to be.

But the basic idea of tilting your immigration towards higher skilled folks
I think makes a good deal of sense. You`re talking about people who would
have a greater inclination and ability to work, people for whom many firms,
you know, would be very, you know, aggressively looking to hire them.
These people tend to be younger, more entrepreneurial, you know, higher

So I think it would be a creative to grow so for the economy as the whole.

HERERA: What about those critics of that merit-based system to say it
discounts the immigrant who may be less skilled that comes into the united
states with a greater desire to change their life and therefore, they start
more small businesses and they tend to maybe work a little bit harder at
the bottom run? Do buy that? Or maybe it`s a combination of both.

FEINMAN: I think it is a bit of combination of both and, look, I think
there`s a case to be made for having you know are both types, for sure.
But I think, so far, the dials been tilted more towards the lower skilled
and we`ve seen in, you know, recent decades, a greater share of the
immigration has been, you know, in that category.

So, you know, that has benefits, some of which you mentioned. But also
have some downsides, and one of them is it does tend to pressure some of
the wages of lower-skilled Americans. And that is one, only one, small
component of the contribution towards widening inequality so if you tilt
things towards the higher skilled you actually have the potential to your
mitigate that a little bit and increase the supply of higher skilled

GRIFFETH: Josh, let me ask Sue`s question from a slightly different angle.
There are those who say that the lower skilled workers are willing to take
the jobs that many Americans don`t want, whether it`s an agriculture or
fast food — you know, you name the industry that are for low paying jobs
to begin with. What about that part of this equation right now?

FEINMAN: Oh, I think there`s an element of that for sure, and that`s why I
don`t think that a wise policy would be shut the door to lower skilled
immigration. I think you need some of both. But, you know, maybe the
balance has been more tilted towards the lower skilled you know
predominantly and now, maybe you know sort of balancing out a little bit
more towards the higher skilled makes a little sense.


FEINMAN: But I agree, you don`t want to shut the door completely onto the
lower skill.

GRIFFETH: Josh Feinman of Deutsche Asset Management — thanks for joining
us tonight.

FEINMAN: Thanks for having me.

HERERA: Coming up, sinkholes, eroding dams, why California`s crumbling
infrastructure is in need of a big fix?


GRIFFETH: Last night, President Trump also reiterated his pledge to ask
Congress for $1 trillion infrastructure package and that sent shares of
stocks like Dow component Caterpillar (NYSE:CAT), U.S. Steel and Alcoa
(NYSE:AA) higher. If legislation is passed on that, many states would be
pushing to have their projects funded.

And as Aditi Roy reports for us tonight, after a winter of brutal storms,
California`s infrastructure for one maybe in desperate need.


middle of an interstate and eroding spillway of the Oroville Dam nearly
causing a catastrophic dam failure and prompting a mass evacuation, and
highways ravaged by rain and mud slides. Those examples from California`s
brutal storms this winter caused an estimated half billion dollars worth of
damage. They`re also the most recent cases of what Governor Jerry Brown
calls the state`s crumbling infrastructure.

GOV. JERRY BROWN (D), CALIFORNIA: We`ve got dam spillway eroding. We`ve
got roads crumbling. We have our aging infrastructure and it`s maxed out.
What`s required is to take some immediate action, which we`re doing, and
then over the longer term, we have to invest billions of dollars in
California infrastructure.

ROY: He`s asking the federal government for help. Brown, a vocal critic
of President Trump, recently sent a letter to the president, requesting
expedited environmental review of ten high priority infrastructure projects
for California, which makes up the world`s six largest economy, according
to the state`s finance department.

Part of the problem, some say the state hasn`t been spending enough to
maintain roads. The governor estimates California highways need $59
billion worth of deferred maintenance.

The American Society of Civil Engineers which comes out with a report card
on the country`s infrastructure every four years gave failing grade to the
Golden State in its most recent report from 2013. California got a C-minus
in transportation and a “D” for levees and flood control.

Among the projects making the governor`s list for the White House,
emergency repairs to the eroding Oroville Dam spillway, and California`s
high speed rail project which itself has faced numerous roadblocks in
funding and political opposition.

The governor`s office also estimates California`s local streets and roads
need $78 billion in repairs and its flood control system needs $50 billion
worth of improvements. Governor Brown hoping infrastructure is one area he
and the president can agree upon.

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


HERERA: Some sad news to pass along tonight from our NIGHTLY BUSINESS
REPORT family. Longtime anchor of this program, Paul Kangas, passed away
yesterday at the age of 79. He was a pioneer in broadcast business news
and is unmistakable style help make NBR the most-watched daily business
program on television.



HERERA: Kangas joined NIGHTLY BUSINESS REPORT in 1979, beginning a 30-year
run. His deliberate, measured style helped NBR become the first business
program to build a mass audience.

PAUL KANGAS, NBR ANCHOR: As panic selling erupted on those foreign of
stock exchanges as you deferred, prices on New York Exchange continue to
plunge early today.

HERERA: In a phrase, Kangas was business news before business news was
cool on TV.

In 2009, the year he stepped away, Kangas was presented with a Lifetime
Achievement Award in Business and Financial Reporting by the National
Academy of Television Arts and Sciences. A Michigan native, Kangas
graduated from the University of Michigan and served in the U.S. Coast
Guard during the early 1960s.

After studying at NYU`s Stern School of Business, he earned a stock brokers
license and later began his career as a broadcaster at a CBS (NYSE:CBS)
radio affiliate in Miami. One of the first to share a passion and his
expertise in the stock market as a broadcaster, Kangas was known for many
things but perhaps for nothing so much alive his signature sign-off.

KANGAS: I extend to all of you my wishes for the very best of good buys.



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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