Transcript: Nightly Business Report – March 15, 2017

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

Funded in part by —

(COMMERCIAL AD)

(BEGIN VIDEO CLIP)

JANET YELLEN, FEDERAL RESERVE CHAIR: The simple message is the economy is
doing well.

(END VIDEO CLIP)

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Well, the Fed makes its
move. The central bank likes interest rates, signaling there are more
raises to come. And the market likes what it heard.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Shifting gears. President
Trump tells the auto industry he wants to make changes and hands them a
fuel economy victory.

MATHISEN: Tax scams. Why the bad guys want to get their hands on your W-
2s.

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

HERERA: Good evening, everyone, and welcome.

Interest rates are on the rise. Federal Reserve policy makers today
increased the key short term rate for just the third time since the
financial crisis. The move is a sign that the Central Bank is confident
about the outlook for the economy but it`s actually much more than that.
The move will likely impact borrowers who are looking to take out a
mortgage or finance a car. It could potentially help savers who have
earned little interest for years.

As for investors, many say a strong economy is good for stocks and that
helped lift the market today. The Dow Jones Industrial Average is 112
points to 20,950, the NASDAQ added 43 and the S&P 500 gained 19.

Hampton Pearson takes a closer look at the Fed`s interest rate decision.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Inarguably, one of
the most transparent moves in the recent memory, the Federal Reserve Open
Market Committee increased key short term interest rate points by a quarter
point. The new range, 0.75 percent to 1 percent.

It`s the second rate hike in three months. Monetary policymakers cited a
stronger labor market and improving overall economy as the primary reasons
for the hike.

YELLEN: The simple message is the economy is doing well. We have
confidence in the robustness of the economy and its resilience to shocks.
It`s performed well over the last several years. We`ve created since the
trough of unemployment after the financial crisis around 16 million jobs.

PEARSON: The Central Bank`s outlook for growth changed little however.
Policymakers predicting 2.1 percent this year and next before slipping 1.9
percent in 2019.

Fed Chair Janet Yellen signaled the most likely scenario sees monetary
policymakers raising rates just three times this year. In recent weeks,
Fed speak and stronger economic data raised concerns among market watchers
there might be four rate likes this year.

YELLEN: Policy is not set in stone. It is data dependent and we`re not
locked into any particular policy path.

PEARSON: The markets rallied, with stock prices moving higher and bond
yields falling, as traders reacted to the Fed. In the hour after the
decision was announced, the Dow was up more than 100 points.

KARIN KIMBROUGH, MERRILL LYNCH WEALTH MANAGEMENT: The Fed is not going to
precipitate any kind of recession. They`re not going too fast but they`re
starting to get their groove. They`re going to start raising. They`ve
told us they`re going to do what the market was pretty much expecting.

BILL GROSS, JANUS CAPITAL: Today`s statement was a little legal hawkish
than some had feared. And so, we`re seeing rally in stocks and bonds.

PEARSON: Fed markets think policymakers may wait until June for the next
rate hike. By then, we should have a better idea of prospects in Congress
for President Trump`s plans for tax cuts, deregulation and increased
spending on infrastructure.

For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson in Washington.

(END VIDEOTAPE)

MATHISEN: Steven Wieting joins us now for more analysis on the Fed, the
economy and the market. He`s global chief investment strategist at Citi
Private Bank.

Steven, welcome. Good to have you with us.

STEVEN WIETING, CITI PRIVATE BANK GLOBAL CHIEF INVESTMENT STRATEGIST: Good
to be here.

MATHISEN: I`m curious. Usually when interest rates go up, stocks tend not
to like it. When interest rates go up, yields tend to go up.

WIETING: Right.

MATHISEN: But today, stocks went higher and bonds went higher as the
yields went lower. Why?

WIETING: Well, I think there was a great deal of worry that the pace of
tightening by the Fed would in fact ramp up even more. Janet Yellen in her
speech March 3rd suggested that the Fed was comfortable with the way the
economy is unfolding, the way inflation and growth is unfolding. And yes,
they have now tightened twice in three months as opposed to once in each of
the last two years.

But they`re quite comfortable with where they are. And they don`t feel
that they`ve fallen behind the curve. And so, the expectations that we
would face a real interest rate shock faded today.

HERERA: In other words, they would do the three that they`ve kind of
projected but not the fourth, perhaps that many people in the market are
now saying the economy may be strong enough by that point to withstand.

WIETING: That`s right. And the general uncertainty about the path of
tightening came down today. Now, nine FOMC members expect three tightening
steps this year. So, two more tightening steps this is year is more
probable. But not some wild range, including perhaps even more than four
tightening steps.

In past cycles, the Federal Reserve has tightened much more and much faster
and the Federal Reserve is signaling their comfort with their policy of
continuing to raise rates very moderately and keeping the expansion intact.

MATHISEN: And so, we end up at the end of the cycle, two or three years
from now, 2020, with a federal funds rate of what? About 3 percent? And
what does that then imply for what will happen or the mortgage rates and/or
savings rates?

WIETING: Well, it means somewhat higher mortgage rates, but savings rates
should ultimately move up a bit more. It does mean that the yield curve is
likely to flatten some.

The real questions are answered by the Fed policy. There have been
business cycles, booms and busts despite the Fed. You have to recall that
in most of these economic downturns, the Federal Reserve has been cutting
rates into them. It`s usually because of some unrecognized problem.

The Federal Reserve is not going to cause that problem if they continue to
go at this pace.

HERERA: What about fiscal stimulus and stimulus from the Trump
administration`s proposed agenda? How might that factor in? Assuming the
administration gets most what it is asking for? How does that or does that
factor into the Fed`s actions?

WIETING: It can and will factor in, as Chair Yellen mentioned. However,
the position that they are in right now with complete uncertainty be about
what exact policy proposals would go before the Congress and the likelihood
of passage. The uncertainty about that just the isn`t there now, whether
there are offsets, whether this is a tax reform or a large tax cut. Those
pieces of information are missing at the moment.

MATHISEN: Steven thanks so much for your help tonight. We appreciate it.

WIETING: My pleasure.

MATHISEN: Steven Wieting with Citi Private Bank.

HERERA: After today`s rally, stocks are once again sitting near record
levels. But no matter how high stocks go, investors are always on the
lookout for a potential correction. And at these levels, a typical
pullback could look pretty steep.

Bob Pisani explains.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Are you ready for a
2,000-point drop in the Dow Jones Industrial Average? That`s what a normal
correction would look like right now. Normal corrections look kind of
scary when the markets are these highs.

So think about this. The Dow hit an all time high on March 1st. It was
21,115. That means a 10 percent drop would be considered a normal
correction. It would be a decline of 2,111 points. That sounds pretty
steep, doesn`t it?

Here`s an even bigger drop — 3,000 points. Over the past 30 years, the
stock market has declined an average of 14 percent from high to low on an
intra year basis. That`s according to adviser investors. That translates
to a roughly 3,000-point decline from the Dow`s March 1st pop.

Finally, March 9th was the eighth anniversary of the bottom of the market.
It was widely noted that the S&P 500 was up almost 250 percent since then.
But it`s up even more than that. Over 300 percent if reinvested dividends
are accounted for.

That`s the power of compounded interest and staying in the market. That`s
about a 19 percent annual compounded gain every year, for eight years.
Now, think about that — your money would be up an average of almost 20
percent a year when dividends are included and the money is reinvested over
the last eight years. That is a remarkable run.

Can stocks gain 20 percent a year for the next eight years? Well, maybe
but I wouldn`t necessarily count on that kind of run.

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

(END VIDEOTAPE)

MATHISEN: And neither would I.

To the housing market we go. Ahead of the spring selling season,
homebuilders are feeling much more optimistic about their prospects. The
National Association of Homebuilders says sentiment surge to a 12-year high
this month, exceeding expectations. Builders views of sales prospects now
and over the next six months increased, as did a gauge of traffic by
prospective buyers.

HERERA: Consumer prices saw their biggest annual increase since 2012. The
consumer price index for the month of February was tempered. But over the
past year, prices have risen by more than 2.5 percent. The increase is
being driven by housing costs and the price of medical treatments.

Today, the Federal Reserve Chair Janet Yellen said inflation is rising
towards the central bank`s target.

MATHISEN: The Justice Department has charged four men, including two
Russian spies with hacking Yahoo (NASDAQ:YHOO). Federal prosecutors
alleged that the suspects hacked into Yahoo`s system to steal information
from roughly a half billion customer accounts in 2014.

(BEGIN VIDEO CLIP)

MARY MCCORD, NATIONAL SECURITY ACTING ASST. ATTORNEY GENERAL: With these
charges, the Department of Justice is continuing to send a powerful message
that we will not allow individuals, groups, nation states or a combination
of them to compromise the privacy of our citizens, the economic interests
of our companies, or the security of our country.

(END VIDEO CLIP)

MATHISEN: This marks the first time the U.S. government has issued
criminal charges against Russian officials for cyber attacks. Yahoo
(NASDAQ:YHOO) says it appreciates the FBI investigative work and that it is
committed to keeping its users secure.

HERERA: Still ahead, a big win for the automakers.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Is it time to change
regulations when it comes to mileage vehicles get? I`m Phil LeBeau outside
of Detroit, where President Trump is calling for a review of the fuel
economy standards. That story coming up on NIGHTLY BUSINESS REPORT.

(END VIDEO CLIP)

MATHISEN: General Motors (NYSE:GM) plans to rehire some Michigan assembly
plant workers who were to be laid off in May. The automaker will add 220
new jobs to one plant in the state and it will eventually hire back or
redeploy 680 of the 1,100 laid off workers at another factory in Michigan.

HERERA: President Trump is reversing rules pushed by the Obama
administration to have cars and trucks get substantially higher mileage by
the year 2025. It is a change the automakers have been calling for. They
say the higher fuel economy requirements drive up their costs and force
them to build the times of vehicles that Americans are not buying.

Phil LeBeau has more from Ypsilanti, Michigan.

(BEGIN VIDEOTAPE)

LEBEAU: In front of several thousand autoworkers, President Trump said it
is time to review mileage requirements driving up the cost of cars and
trucks.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We`re setting up a task
force in every federal agency to identify and remove any regulation that
undermines American auto production and any other kind of production.

LEBEAU: What President Trump wants to review are the Obama
administration`s rules requiring vehicles built by 2025 to average 54 1/2
miles per gallon. Automakers say those rules were written assuming gas
prices in 2017 would average $4 a gallon and keep rising.

But with prices at the pump well under $3 a gallon, Americans are buying
more trucks, SUVs and crossovers which will struggle to meet substantially
higher fuel standards over the next decade.

MARY BARRA, GENERAL MOTORS CEO: Remember, we were in 2012 making decisions
and looking at how we could make improvements through 2025. To take, you
know, a pause in 2017 and `18, and say, OK, what has happened, what does
the customer want, what`s happened to fuel prices, what has happened from a
technology perspective? It makes a lot of sense.

LEBEAU: Ultimately, auto makers should see their costs come down if fuel
economy targets are lower, which is what many on Wall Street have been
expecting.

ADAM JONAS, MORGAN STANLEY: We felt that it was so ambitious that
irrespective of who was in the White House, which administration, that they
were likely going to be graded out, delayed, softened a bit, at least in
the intermediate years.

LEBEAU: For President Trump, this stop in Michigan allows him to push two
messages. For voters here in Michigan, he can say that he`s helping
automakers lower costs. And for others around the country, he can say he`s
keeping a campaign promise to lower regulations.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Ypsilanti, Michigan.

(END VIDEOTAPE)

MATHISEN: Oracle (NASDAQ:ORCL) continues its strength in the cloud
business, and that is where we begin tonight`s “Market Focus”.

The computer technology company, a software firm really, saw profits rise
and beat estimates, while its sales rose, thanks to an increase in the
company`s cloud products. But overall, revenue was just shy of estimates.
The company also raised its quarterly dividend from 15 cents to 19 cents a
share, and shares initially popped in afterhours trading. They finished
the regular session up a fraction at $43.05.

The clothing retailer Guess reported higher revenue, saying strength in the
company`s Europe and Asia markets helped offset weakness ongoing weakness
at its locations in the Americas. But those results still missed
estimates, as did the company`s profits. Guess also gave some
disappointing guidance for the current quarter and that sent shares
initially tumbling after-hours. They did end the regular session up 1
percent to $12.23. Watch them tomorrow.

The camera maker GoPro said it would cut its workforce by 270 employees in
an effort to lower operating costs by $200 million this year. The company
also said it expects earnings for the current quarter to come in at the
high end of its outlook. GoPro up 11 cents to $7.35.

HERERA: Home furnishings retailer William-Sonoma reported revenue and same
store sales that missed estimates. But the company`s profit came in ahead
of expectations. The owner of Pottery Barn also gave guidance for the
current quarter and full year that was a little light but still the company
raised its quarterly dividend 5 percent to 39 cents a share. Shares
initially rose after hours and also ended the regular session up 1 percent
to $48.12.

Arcos Dorados, which is McDonald`s (NYSE:MCD) largest franchisee, said
marketing initiatives and lower costs helped the company post stronger
profit and revenue. The largest restaurant chain in Latin America also
recorded a rise in same store sales and said it plans to open 180 more
McDonald`s (NYSE:MCD) over the next three years. And that news sent the
shares up by 19 percent to $7.60.

MATHISEN: No executives have their finger on the pulse of American
business quite the way chief financial officers do. And tonight, CNBC is
out with a new survey of CFOs.

Jackie Angelis tells us what they`re seeing and worrying about.

(BEGIN VIDEOTAPE)

JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: And the survey
says global CFOs are concerned about some of President Trump`s key agenda
items as well as the Fed. CNBC`s global CFO council survey reached out to
CFOs of some of the largest companies in the world. Together, their
companies are worth more than $4 trillion.

Now, most of the leaders say that they`re less than 50 percent confident
that we`re going to see corporate tax reform, repatriation and
infrastructure changes this year. Nearly all that were surveyed said that
they were worried about a trade war with China. A handful see U.S. trade
policy as the biggest external risks to their business.

In terms of Fed expectations, the majority still see two rate hikes this
year, but there wasn`t a little bit of a shift in the thinking. More were
open to the idea of additional hikes. Actually about a quarter now believe
Janet Yellen may hike three times, that number more than double from the
last survey.

Despite the expectation for rising rates, the majority though still bullish
on stocks and the global economy. They note that we could see more record
highs ahead.

For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis.

(END VIDEOTAPE)

HERERA: As Jackie just reported, the nation`s chief financial officers are
indeed concerned about a trade war with China. China is concerned about
the same thing. That country`s premier said so himself today at the end of
the annual meeting of China`s parliament.

Eunice Yoon tonight in Beijing.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Chinese premier
sent a clear message to Donald Trump that a trade war cuts two ways. The
premier warned that if the U.S. were to follow through with protectionist
measures, then foreign companies, and especially American ones, can bear
the brunt of those actions. American companies have long seen China as an
important market to them, and he said that yes, it`s true, American
companies have outsourced manufacturing to China, but that the bulk of the
profits go back to American firms.

He also commented on globalization. He said he is back to Xi Jinping`s
view that China would become a defender of freer global trade. However, he
was a bit cautious about Beijing`s commitment to that international role.

LI KEQIANG, CHINESE PREMIER (through translator): The regional
arrangements that concern China and were conditions are in place, we would
have an open minded approach to it and we would be ready to walk together
with others to push them forward. But China has no intention to overreach
itself into areas where it feels it`s not in place.

YOON: The premier also weighed in the on the heightened tensions on the
Korean Peninsula after the missile tests by North Korea.

LI KEQIANG: So, what we hope is that all the parties concerned will work
together to de-escalate the situation, get issues back on the track of
dialogue and work together to find proper solutions. It`s just common
sense that no one wants to see chaos on his doorstep.

YOON: The threat of North Korea is likely at the top of the agenda when
Secretary of State Rex Tillerson comes to this part of world for meetings
with Asian leaders. He`s going to be touching down in Beijing on Saturday.

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

(END VIDEOTAPE)

MATHISEN: Coming up, is your tax information for sale on the dark web?
What you need to be aware of this tax filing season.

(MUSIC)

MATHISEN: The White House tomorrow will release its budget blue print.
“The New York Times (NYSE:NYT)” reports that the president will propose
steep cuts for the EPA and the State Department. He will also propose to
eliminate the Transportation Department program that subsidizes flights to
rural airports.

HERERA: Early exit polls give the Dutch prime minister a big lead over his
far right rival. The election which is the first of many across Europe was
viewed as a test of the European Union and of the rise of populism. In
response to the exit polls, the euro touched its highest level in more than
a month.

MATHISEN: Well, it`s tax season if you didn`t know that already. If you
haven`t filed your taxes just yet, you`re not alone. And there are a few
things filers need to be aware of, including fraudsters, cyber criminals
who cash in the on nearly $2 billion worth of fraudulent refunds last year.
They`re becoming increasingly sophisticated and brazen.

Andrea Day has our story.

(BEGIN VIDEOTAPE)

ANDREA DAY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Your W-2 could be for
sale on the Dark Web.

IBM`s Etay Maor took us into the secret stores criminals used to buy and
sell private information.

ETAY MAOR, IBM SENIOR FRAUD PREVENTION STRATEGIST: You name it, they`ll
sell it.

DAY: The stores look line legitimate websites and even include ratings for
sellers.

MAOR: They created a model that you can trust in an un-trusted
environment.

DAY: And he says, this season, a rush on W-2s, like these for sale right
now.

MAOR: It`s people with high wages. So, you should have higher tax
returns.

DAY: So, how did the bad guys get their hands on your W-2? In one scheme,
according to Maor, they send an e-mail that looks line it is from the IRS
or a tax provider. If you click on the link, you`re just giving data away.

MAOR: We`ve actually seen 400 percent increase in the number of emails
going out that have tax scams.

DAY: In another plot, they pretend to be a top exec at your company.

IRS commissioner John Koskinen.

JOHN KOSKINEN, IRS COMMISSIONER: Someone in the HR department or the
finance department gets what looks like an e-mail from the CEO saying, you
know, I need all the W-2s from our employers. Just send them along to me.

DAY: Armed with the info, cyber criminals can submit W-2s to the IRS and
claim the refund, even before you file. And there`s more. Maor says the
undercover crooks are also sending e-mails that look exactly like the tax
return you`ve been expecting. But —

MAOR: If you click on that, you get infected, and infect yourself with a
form of malware that can do anything from harvesting your banking
credentials, to stealing personal information, to locking down a computer,
run somewhere style.

DAY: According to the IRS, these types of frauds are growing. But there
are some good news, the IRS is getting better at figuring out what claims
are legit before money is handed over to the swindlers.

KOSKINEN: We can tell, if a computer is being used to file 30 returns,
that`s probably false set of returns that`s by a criminal.

DAY: And the best advice: never click on any link even if the e-mail looks
legit. Go straight to the website instead. If you get an e-mail from the
IRS, delete it. They`ll never send out an e-mail or ever contact you by
phone to collect a debt. The agency relies on good old-fashioned snail
mail.

I`m Andrea Day for NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

MATHISEN: That`s interesting. The IRS never sends an e-mail.

HERERA: I know. That`s good to know, right?

MATHISEN: That`s good to know.

HERERA: All right. On that note, news you can use. That`s NIGHTLY
BUSINESS REPORT. I`m Sue Herera.

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

MATHISEN: I`m Tyler Mathisen. We thank you for your support. We`ll see
you back here tomorrow.

END

Nightly Business Report transcripts and video are available on-line post
broadcast at http://nbr.com. The program is transcribed by CQRC
Transcriptions, LLC. Updates may be posted at a later date. The views of
our guests and commentators are their own and do not necessarily represent
the views of Nightly Business Report, or CNBC, Inc. Information presented
on Nightly Business Report is not and should not be considered as
investment advice. (c) 2017 CNBC, Inc.

 

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