Transcript: Nightly Business Report – March 13, 2017

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

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TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Health care prognosis. Official estimates are out. The Republican-backed bill would lower the federal deficit but boost the ranks of the uninsured and the cost of premium.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Steering a new course. Intel makes a multi-billion dollar purchase to become a major player in the self-driving car industry.

MATHISEN: Gas glut. Gasoline hasn’t been in such plentiful supply in the U.S. in nearly 30 years, and that could be good news for drivers.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Monday, March 13th.

HERERA: Good evening, everyone, and welcome.

Well, the numbers are in, the House health care bill, a key part of the new administration’s agenda, has been analyzed. And here is what the nonpartisan Congressional Budget Office says: the bill would reduce the federal deficit more than $330 billion over ten years, 14 million more Americans would be uninsured under the new bill than under Obamacare by the year 2018, 24 million by the year 2026. Premiums would increase for individual insurance holders by 15 to 20 percent.

John Harwood is in Washington tonight for more — with more for us.

John, those are the rough numbers but what else did the CBO report say?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, they say that insurance premiums will go up in the next two years, go down after that, but only for some people. Younger people’s premiums go down because they’ll be able to buy smaller policies. Older people’s premiums will go up and the CBO also projected that deductibles on average will rise under this plan, not fall, which is what President Trump said he would — they would do.

MATHISEN: Within just the past few minutes, Secretary Price and OMB Director Mulvaney have been out and been very critical of this OMB — of this CBO report. What was the reaction?

HARWOOD: Well, they’re saying that the coverage can’t fall that much. They disagree strenuously. CBO did not consider all of the relevant factors. But keep in mind, Tyler, Tom Price himself as the House budget chair appointed the current director of the Congressional Budget Office. That serves to undercut the idea that the CBO was biased against the Trump administration. These numbers going to be very damaging to the Republican effort to pass an Obamacare repeal and replacement.

HERERA: I think I know what happens next, but you handicap it for me.

HARWOOD: Well, I think Republicans — first of all, this bill, Sue, who was in trouble to begin with, because there are many conservatives who think it is Obamacare light, that it creates a new entitlement and then those on the left and more moderate Republicans think it takes away coverage from too many people. They’ve got to figure out what which way they want to move which group they want to try to placate, it’s not going to be very easy to decide pick one direction and try to figure out a path to a majority in the House and Senate from there.

HERERA: All right. John Harwood in Washington — John, thank you.

HARWOOD: You bet.

MATHISEN: Well, that CBO report on health care was just one big event that investors will watch this week and they’ll get a chance to react come tomorrow, and it comes as a new dynamic enters the market. Today, the Dow Jones Industrial Average lost 21 points to finish at 20,881. The NASDAQ however was up by 14, and the S&P 500 rose fractionally.

Bob Pisani takes a look at the big events ahead and the changing tone on the trading floor.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The uptrend and stocks is still intact, but the market is split between winners and losers as opposed to February, when there were almost all winners. So, tech and bank stocks to continue to do well, those are the largest sectors in the S&P. So, that’s a big reason the overall market is still up this month.

Now, a little bit more worrisome has been the trend in small-cap stock they got off to a strong start for the year but they’ve stayed it a bit. Yet, small-cap Russell is about five percent off its historic high of just a few weeks ago. That’s a modest decline but much more than the 2 percent decline for the S&P or the one percent decline for the NASDAQ, which holds many of the big tech stocks.

Now, this waffling is unlikely to continue. There’s plenty of market moving events later this week, including the Fed’s decision on interest rates that will be Wednesday. There’s also the Dutch election on Wednesday as well. There’s the release of the president’s budget on Thursday and more decisions on raising weights from the central banks in England and Japan the same day.

There’s one other small wild card for stocks. President Trump meets with German Chancellor Angela Merkel on Friday in Washington. Now, Trump’s chief trade advisor has called Germany a currency manipulator for keeping the euro low, even though it’s the central bank, the European central bank that sets monetary policy.

Immigration, NATO and Russia will all be on the agenda. I would love to be a fly on the wall for that one.

For NIGHTLY BUSINESS REPORT, I’m Bob Pisani at the NYSE.

(END VIDEOTAPE)

HERERA: So, Bob laid out some of the things that are ahead for stocks. Here to discuss how this week’s events could shape the markets is Michael Farr. He is the president of money management firm Farr, Miller and Washington.

Good to see you, Michael.

MICHAEL FARR, PRESIDENT, FARR, MILLER AND WASHINGTON: Thank you, Sue. Nice to be here.

HERERA: Let me start first of all with this report that we got about the health care initiatives that the Trump administration is putting forward. Obviously, there is going to be much debate but you point out in your notes that the market seems to be pricing in almost perfection that the entire Trump agenda will go through.

So, given what we’ve just heard, what do you think the market reaction will be?

FARR: You know, Sue, this has kind of been my worry since November right after the election. Markets started to move a lot higher based on a lot of optimism and hope for this agenda, which — and a lot of it is very stimulative but Washington doesn’t work that way. Washington’s kind of slow and messy. The CBO has to step in and score a bill which we’ve seen just happen.

Republicans have to get a bill through here, any kind of a bill to get it to kind of a House/Senate conference where the next step of sausage making gets made. But this looks like something that could get well into 2017 or even 2018, and this is kind of what’s going to happen with a political agenda working its way through Washington. We’re going to see this again with the tax cuts. We’re going to see this again with other immigration things.

So, we just hope that the markets can be patient while Congress does what it does.

MATHISEN: So, is it your surmise then based on that that the up, up and away rise in stock prices that we’ve seen for the last three months is going to level off a bit, maybe correct a little bit, and that now is not a particularly optimal time to be putting fresh money in big ways into the equity markets?

FARR: You know, I wrote in my market commentary that we could be on the beginning of a next 3,000-point move, whether it’s to the upside or the downside, I just can’t possibly tell you.

We haven’t had a correction in a long time. We’ve made a bunch of all time highs. It would — market, you know, experienced people say market could correct and the market should give some back.

Why? What’s going to be the — what’s going to be the cause, what will be the spark? We really don’t know. We might not even know it when we see it. But it should give some back.

HERERA: Michael, Bob Pisani and his piece laid out some of the other events globally, elections in various other countries in Europe, how much influence do you think that will have on the market versus the domestic agenda?

FARR: I think that it could have a big influence depending on what happens. This is this Dutch candidate and we’re going to find out about Wednesday is a nationalist candidate. There — they want to close the Netherlands’ borders. They are anti-Islam. They want to close mosques. They want to leave the euro and the E.U. That, it would open the door I think then to what happens in France and will Marine Le Pen be elected.

And if these sort of series of events occur, then you see a breakup I think of the E.U. and that does affect what happens here.

HERERA: OK.

FARR: And a trend towards nationalism and protectionism that begins to take place on a global basis. Markets aren’t expecting that.

HERERA: All right. On that note, Michael, thank you very much.

FARR: Thanks so much.

HERERA: Michael Farr with Farr, Miller, and Washington.

MATHISEN: And as central bank policymakers prepare to meet tomorrow and Wednesday in Washington, the Federal Reserve Bank of Atlanta will soon have a new president.

University of Southern California economics professor Raphael Bostic was approved by the Atlanta Fed’s board and by the Fed’s board of governors in Washington. When he takes over in June, he will be the first black regional bank president in the central bank’s under 100 history.

Professor Bostic has done work on home ownership and housing finance. He succeeds Dennis Lockhart who retired at the end of last month.

HERERA: Stocks have been also eyeing the oil market and today, prices extended their losing streak to a sixth straight session. Domestic crude settled just above $48 a barrel as growth in the U.S. production threatens to offset the cuts from OPEC.

Now, it’s not just excess oil that has investors concerned, but also a gasoline glut.

Jackie DeAngelis reports tonight from a gasoline storage facility in Sewaren, New Jersey.

(BEGIN VIDEOTAPE)

JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: crude oil and gasoline storage like the tanks that you see behind me are at record levels according to the Energy Information Administration. This could be good news for consumers.

JOHN KILDUFF, AGAIN CAPITAL FOUNDING PARTNER: It’s why consumers in the U.S. have been able to enjoy relatively low gasoline prices for the better part of two years now.

DEANGELIS: But oil companies are nervous. They’ve seen this pattern before. Too much supply, not enough demand to meet it. In fact, February of last year when prices were near $26, it was the same kind of situation. Analysts say it’s possible again but this time could be different.

ANDY LIPOW, LIPOW OIL ASSOCIATES PRES.: Given the extraordinarily high and record inventories on the East Coast, we’ve actually seen two things happen. In December, the U.S. exported record amounts of gasoline and, on the other hand, last week, we saw gasoline imports into the U.S. We see lowest level since November of.

And the combination of the two is going to help us reduce all that winter grade gasoline inventory that’s been laying around.

DEANGELIS: This all could have an impact on stocks as well.

Lower oil prices could pressure big oil and the stock market. Chevron and Exxon are Dow components.

But there are other segments of the sector that could get hit.

LIPOW: Given that they’re a very high gasoline inventories we’re seeing gasoline prices of course come under pressure, which is good news for the consumer but it’s bad news for refining margins and as a result, those independent refiners are seeing their stock prices come under pressure.

DEANGELIS: Majority of people did not see this falling prices coming. So, what happens next could surprise everyone again.

For NIGHTLY BUSINESS REPORT, I’m Jackie DeAngelis in Sewaren, New Jersey.

(END VIDEOTAPE)

MATHISEN: A surprise acquisition by Intel, the world’s largest computer chip maker, will pay $15 billion to acquire Mobileye, a firm focused on developing technology for self-driving cars. Mobileye soared 28 percent today. The Dow component Intel dropped 2 percent.

Jon Fortt has more on the deal that puts Intel right in the middle of one of tech’s hottest segments.

(BEGIN VIDEOTAPE)

JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Fifteen billion dollars is a lot even for a company the size of Intel. There’s only one time it’s paid more for a company and that was Altera just two years ago. The second big purchase is the latest sign of a strategy shift under Intel CEO Brian Krzanich. He took the job nearly four years ago after the company had missed the smartphone revolution. He also faced the middle age PC market and few clear paths to growth.

His answer: pull back from the traditional PC market and invest instead in cutting-edge areas like virtual reality, drone sensors and cars. And that’s where Mobileye comes in.

BRIAN KRZANICH, INTEL CEO: There in more than just cars. They’ll be in high-end devices like the spotting cameras on helicopters. They’ll be in high-end drones. They’ll be in high-end robotics as well.

And so, it’s really about computer vision and how computer vision is going to change the world. It’s — in order to have true artificial intelligence of a mobile device, you have to have computer vision. That system has to be able to see the world in order to be able to interpret the world and navigate or work within the world.

FORTT: Intel is not the only company betting big on the car and computer vision. Five months ago, fellow chip giant Qualcomm said it will pay about $40 billion dollars for NXP semiconductors, which specializes in automotive and wireless technologies.

Of course, Facebook bought virtual reality company Oculus years ago.

And don’t forget Snap. It just went public earlier this month calling itself a camera company. That’s a nod to its own version of computer vision.

For NIGHTLY BUSINESS REPORT, I’m Jon Fortt in New York.

(END VIDEOTAPE)

HERERA: Still ahead, why the plug has been pulled on a billion dollar deal.

(MUSIC)

MATHISEN: A veteran of the Food and Drug Administration has been tapped by President Trump to lead that agency. If approved, Scott Gottlieb would be charged with cutting red tape and examining the drug approval process.

Meg Tirrell looks at who he is and his potential impact.

(BEGIN VIDEOTAPE)

MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: The pharmaceutical industry’s response to President Donald Trump’s nominee for FDA commissioner, thank, God, it’s Gottlieb. The news that Dr. Scott Gottlieb is Trump’s pick to regulate the country’s food and medicines came after months of speculation and rumored names included candidates with no formal medical training.

So, the choice of Gottlieb, an M.D., is leading to something of a sigh of relief for the industry.

BRIAN SKORNEY, ROBERT W. BAIRD BIOTECH ANALYST: Some of the names that have been floated out there in the rumor mill are very extreme on the deregulation side. He’s a very well-rounded individual.

TIRRELL: Gottlieb, a fellow with the American Enterprise Institute, and a venture capitalist served in the FDA under President George W. Bush. If confirmed, he’d take the helm of the drug regulator at a time of intense scrutiny of the industry’s prices.

The FDA isn’t authorized to address pricing directly but Gottlieb has a long track record of advocating for increased competition to help lower prices, particularly in areas like complex generics such as the EpiPen, a device and a drug in one.

SCOTT GOTTLIEB, FDA COMMISSIONER-DESIGNATE: Complex drugs have become very hard to go into the market. It’s not just with the EpiPen, but also things like metered-dose inhalers or liposomal agents or topical agents. Anytime it’s hard for the agency to demonstrate sameness between one drug in another, the agency has a very hard time. We were literally talking about this very issue years ago in ours at FDA.

TIRRELL: Many industry watchers expect Gottlieb to focus on flexibility within the agency, to speed drugs, both generics and new medicines, to market.

But it’s Gottlieb’s familiarity with the drug industry that’s drawing criticism. The consumer advocacy group Public Citizen says, quote, “Gottlieb is entangled in an unprecedented web of big pharma ties,” citing more than $400,000 Gottlieb was paid in fees from drug and medical device companies between 2013 and 2015. Gottlieb declined to comment.

And some see his involvement with the industry as an attribute.

SKORNEY: It’s very hard to find qualified people who don’t have some conflict because, frankly, if you’re going to get things done, you have to have perspective on every angle, and you have to be willing to work with industry, you have to be willing to work with physicians, insurers. You know, you have to keep all stakeholders interests on the table.

TIRRELL: And, in an unfamiliar display of bipartisan support, Andy Slavitt who ran Medicare and Medicaid for President Obama said of Gottlieb on Twitter, quote, “A very good choice.”

Gottlieb still needs to be confirmed by the Senate.

For NIGHTLY BUSINESS REPORT, I’m Meg Tirrell.

(END VIDEOTAPE)

HERERA: Citrix Systems may be exploring a sale and that’s where we begin tonight’s “Market Focus”.

A report from Bloomberg says the $13 billion business software company is working with Goldman Sachs to find a potential buyer, and that sent shares of Citrix up more than 6 percent to $84.93.

Shares of Valeant Pharmaceuticals fell after hours following a CNBC report that activist investor Bill Ackman sold his entire position in the embattled drugmaker. Ackman is said to have sold more than $27 million shares at $11 each. He is also expected to step down from Valeant’s board of directors. Valeant shares initially fell about 10 percent in extended-hours trading and that was on top of a one percent drop during the regular day session where they closed at $12.11.

MATHISEN: According to a regulatory filing out Friday, billionaire investor Carl Icahn up to his stake in the truck maker Navistar to more than 17 percent. Icahn had owned about a $16 percent stake in the company. Navistar up more than 1 percent in price action today. It finished at $26.46.

The Chinese biotech company Hutchison China MediTech better known as Chi-Med said strong commercial sales help drive its latest quarterly numbers. The cancer drug maker said revenue up 21 percent, while profit also rose. Chi-Med shares jumped nearly 13 percent to $15.97.

HERERA: A billion dollar cross-border deal falls apart. China’s richest man who is also the head of Wanda Group, will no longer buy Dick Clark Productions, the company behind the Golden Globes and the American Music Awards. The agreement would have marked the Chinese company’s first move in Hollywood, but as Eunice Yoon explains, that deal is now dead.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: China’s Wanda isn’t commenting on the decision but Dick Clark productions representatives say that Wanda couldn’t meet its contractual obligation. Since Wanda traditionally hasn’t had trouble raising financing in this country, people are reading this to mean that Wanda couldn’t make a payment because it doesn’t have the same level of government support as it did before to get its money out of the country.

Beijing has had an overarching national policy to encourage companies like Wanda to go overseas, spread their wings and become global champions. However, that strategy has been running into conflict with another important priority of Beijing, that is to stabilize the currency and clamp down on capital outflows.

Over the past couple of days, we’ve heard some sharp criticism from high-level government officials, the commerce minister called some of the investments blind and irrational and also the Chinese central bank governor said that investments in certain industries weren’t aligned with industrial policies, such as sports and entertainment.

Now, Wanda wants to become a major powerhouse in the entertainment industry. It’s already a known quantity in Hollywood after buying over AMC on cinema chain, as well as the film producing company Legendary Entertainment. And now, with this investment in takeover of Dick Clark Productions, the company had hoped to make a foray into the American TV market. However, those plans, as well as its global ambitions, are now on hold.

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

(END VIDEOTAPE)

MATHISEN: Coming up, we will take you on a trip over Austin, Texas.

(BEGIN VIDEO CLIP)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: I’m Julia Boorstin in Austin, Texas, going up in this helicopter to tell you why Lockheed Martin is bringing South by Southwest entrepreneurs a thousand feet in the air. That’s coming up on NIGHTLY BUSINESS REPORT.

(END VIDEO CLIP)

HERERA: Want to know what’s trending in technology, media and investing, look no further than the South by Southwest conference in Austin it started out as a music festival. But now, it’s a place where gadgets are put on display, among other things, and as Julia Boorstin reports, this year, companies are going big.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: South by Southwest gathers nearly 100,000 attendees, hundreds of companies, and dozens of big brands trying to get the attention of the early adopters who are here. And it’s become a key battleground for media giants new and old to market their originals and sell their subscriptions directly to consumers.

Amazon created this Resistance Radio headquarters to promote its original series “Man in the High Castle”, hosting a number of events such as a film festival oasis hosted by Amazon video Direct. Netflix is premiering five of its shows and offering an interactive experience around 13 reasons why, these lockers spread around often.

Meanwhile, HBO’s featuring the throne from “Game of Thrones”, plus an escape room experience around three of its hit shows.

And Turner is here promoting a range of its new content. Cartoon Network president Christina Miller telling us reaching this audience directly is more important than ever.

CHRISTINA MILLER, CARTOON NETWORK PRESIDENT: The control is in the consumers’ hands at this point, and we deal with the earliest audience in plurals or generation Z, as a lot of people are calling them. They’re the most mobile audience they’ve grown up with a ton of choice and they want control in that choice.

So, I think user experience is that kind of third leg on the stool with brands and distribution.

BOORSTIN: And it’s not just media brands that are trying to stand out here at South by Southwest. Lockheed Martin’s venture capital arm is fielding entrepreneur pitches up here in a helicopter a thousand feet above, often looking to make strategic investments in startups that will benefit the aerospace and defense company.

And there’s a range of tech startups here. Following Snap’s surprise description is a camera company, Pinterest considered next in line for an IPO, is here promoting how it’s putting cameras front and center for the first time, with a Pinterest lens which does visual search.

And some venture capitalists we talked to here tell us that after Snap’s huge IPO, they’re pushing companies to strike while the iron is hot.

JOSH ELMAN, GREYLOCK PARTNERS: The market seems like it’s at all-time highs. People are actually bullish on the jobs reports and everything else. So, I’m actually — we’re encouraging every company that feels like it’s ready to be a public company not to wait.

BOORSTIN: There hasn’t been one real breakout app like there was when Twitter and Snapchat were in the spotlight. But there has been a lot of buzz about virtual and augmented reality with many insiders saying this could be the year that those technologies go mainstream.

For NIGHTLY BUSINESS REPORT, I’m Julia Boorstin in Austin, Texas.

(END VIDEOTAPE)

HERERA: That was pretty cool.

That does it for us tonight on NIGHTLY BUSINESS REPORT. I’m Sue Herera.

We want to remind you, this is the time of year your public television stations seeks your support.

MATHISEN: And we’re grateful for it. I’m Tyler Mathisen. Thanks again for your support and we will see you right back here tomorrow night.

END

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