Transcript: Nightly Business Report – March 21, 2017

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Trump slump? Stocks fall hard, posting their biggest drop of the year. Hot sectors plunged as

investors worry that the GOP`s healthcare revision hangs by a suture,
imperiling other key parts of the business-friendly Trump agenda.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Running into rivals. Nike`s
revenue dropped as competitors stepped up their game in the very lucrative
sports apparel industry.

MATHISEN: Second acts. Why the new retirement maybe to not retire at all.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Tuesday,
March 21st.

HERERA: Good evening, everyone. Welcome.

It was the worst day of the year for stocks the Dow dropped more than 200
points as investors grew skeptical about how quickly things can get done in
Washington. President Trump was on Capitol Hill today to help sell the
Republican plan to overhaul the health care system. Concerns that the GOP
will not get the votes needed is adding to doubt that the pro-growth
policies like tax reform will get pushed through anytime soon. Mix in, a
down day for financials and questions about interest rate policy and you
have a recipe for a sell-off, and the month-long streak without a one-
percent move, well, it was broken today.

The Dow Jones Industrial Average tumbled 237 points to 20,668, the NASDAQ
was off 107, the S&P dropped 29.

Bob Pisani has more on today`s big decline.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was a sea of red
here on Wall Street today and we saw something that we haven`t seen in a
long time, a one percent move to the downside in the S&P, that hasn`t
happened since January 30th.

All right. So, what`s behind all this selling? It`s clear that a lot of
this is continued weakness in bond yields and the dollar from last week`s
Federal Reserve meeting. Now, that`s putting pressure on banks. So, for
example, the bank ETF, the symbol is KBE, was down four percent. Goldman
Sachs (NYSE:GS) alone shaved points off of the Dow.

The second big issue is anxiety, which is building over President Trump`s
ability to pass his agenda of tax cuts and infrastructure spending and
lower regulation. That`s the whole Trump agenda right there. Right now,
the repeal of Obamacare is standing squarely in the way. There`s a lot
riding on Thursday`s House votes to repeal Obamacare as these battles are
threatening to push out tax reform and more stimulus well into the end of
2017 or even into 2018.

Finally, there is some concern on fundamentals. Auto stocks, for example,
like Ford and General Motors (NYSE:GM) and Hertz and Avis, they were all
down sharply today over concerns about an uptick in loan delinquencies and
weaker used car prices. And also, energy stocks remain weak as oil
approaches a new low for the year.

You put it all together and it`s a stew of worries for the markets to
digest.

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

(END VIDEOTAPE)

HERERA: And he sell-off spilled over into construction related stocks as
investors question as Bob mentioned how soon the White House would be able
to push through its pledge to increase infrastructure spending. So, names
like AK Steel Caterpillar (NYSE:CAT) and Granite Construction (NYSE:GVA)
are lower.

MATHISEN: A.B. Mendez joins us now to talk more about today`s selloff on
Wall Street. He`s a portfolio manager at Frost Investment Advisors.

Mr. Mendez, welcome. Good to have you with us.

You know, a lot of what happened today was that the so-called crowded
trades that have been fueling the market up, whether they were financials,
the infrastructure stocks and others sold off a lot. Should we be
surprised at this?

A.B. MENDEZ, FORST INVESTMENT ADVISORS PORTFOLIO MANAGER: Not at all and,
Tyler and Sue, to thank you for having me today. I don`t think it`s
surprising at all. If anything is surprising, it`s with each successive
sell-off in the market as we go through time, the viciousness and rapidity
with which they happen it seems to be breaking, maybe it`s because a lot of
that is driven by algorithmic strategies, I don`t know for sure.

But the fact that we would selloff the momentum trades, the crowded trades,
the Trump trades, deep cyclicals and financials that have really done
fantastically since the election, that we get a little bit of a pullback
here I don`t think it`s surprising at all.

HERERA: As a matter of fact, you kind of separate out the president`s
agenda from the market and you`re looking at the economy, and it looks
pretty good to you.

MENDEZ: Absolutely, and people talk about you know, oh, it looks like the
Trump administration might not be able to accomplish 100 percent of their
stated goals. I mean, that should not be news to anyone this happens in
every election cycle.

So, it seems to me the administration remains committed to policies that
will be business-friendly, deregulation which will be critically important
to the financial sector which arguably has been over regulated for some
time now, and that notwithstanding even before we get some of these
stimulative policies, macroeconomic data have continued to be supportive.

MATHISEN: Will you a buyer today or a seller a today, or neither? Or if
you were neither, what would your bias be over the next few weeks?

MENDEZ: I was neither and I`d tell you, we have traded at relatively high
valuations relative to history for some time now. That said, again,
supported by strong macroeconomic data and the potential for more business-
friendly policy, I would be neither unless and until, you know, a few days
from now the dust settles.

And, you know, if a week or two from now, we were 5 percent, 10 percent
down on the broad indices, we continue to see a lot of opportunity out
there in secular growth names, in names that are, you know, strong balance
sheets, strong profitability and cash flows, and where we`ve been waiting
for an opportunity to add to positions that we know we like, where we get a
better valuation entry point. So, would be buying, you know, once the dust
settles.

HERERA: What — very quickly in the time that we have left, does the Fed
and a possible two more interest rate hikes factor into your forecast at
all?

MENDEZ: It makes me a bit more cautious on names that carry higher
leverage, you know, companies that have more debt on their balance sheet
and are going to have to refinance that debt potentially at a higher
interest rate down the road. But more broadly, that`s the only way it
factors in. More — companies that carry higher debt, companies that seem
higher risk that are less profitable more speculative, you know, I`m a bit
more cautious because those discounted cash flow evaluations use that
interest rate as an input.

HERERA: Right.

MENDEZ: Beyond those couple of examples, you know, it doesn`t have much
impact on the secular growers that we look at.

MATHISEN: Mr. Mendez, thank you very much for your thoughts tonight.

MENDEZ: Thanks so much.

MATHISEN: A.B. Mendez is with Frost Investment Advisors.

HERERA: Nike`s competition is intensifying and that pressured the Dow
components quarterly revenue, which just missed Wall Street estimates. The
world`s largest footwear maker earned sixty-eight cents a share, easily
passing expectations of cents a share. Revenue of nearly eight and a half
billion was up from a year ago, but analysts wanted a little bit more, and
with that shares fell initially in after-hours trading.

Sara Eisen has more on Nike`s quarter.

(BEGIN VIDEOTAPE)

SARA EISEN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Nike (NYSE:NKE) showed
just what a profit machine it could be, but when it comes to the stock,
investors want to know if the sales growth is going to be enough. That big
bottom line beat driven by lower costs and a lower effective tax rate. But
sales growth at 5 percent match estimates pretty much across the world.

Nike`s getting dinged lately by the stronger U.S. dollar and big
competition from Under Armour (NYSE:UA) and especially Adidas. Adidas has
had a bit of a business resurgence in North America, nailing the retro chic
fashion trend with athleisure. That`s why everyone is going to be
listening for signs of what Nike (NYSE:NKE) has up its sleeve on innovation
to get that sales rate back to around 15 percent where it was just over two
years ago.

For NIGHTLY BUSINESS REPORT, I`m Sara Eisen.

(END VIDEOTAPE)

MATHISEN: FedEx (NYSE:FDX) long considered a barometer for the economy
globally saw higher fuel costs and its e-commerce expansion dent profit.
The package delivery company earned $2.35 a share, missing estimates by a
big 27 cents. Revenue grew more than 18 percent from a year ago, though,
to $15 billion.

Investors, well, what do they want? They want more. More, more, more,
that`s what they want. Shares dropped in initial after-hours trading.

Morgan Brennan gives us the one key takeaway from FedEx`s numbers.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: FedEx`s big earning
miss was driven by three big factors, one fewer operating day in the
quarter a big expansion of the shipping giants ground network, which is an
investment that`s been crucial to keeping up with the e-commerce surge and
rising fuel prices which marked the first time energy costs cut into
FedEx`s profits rather than add to them, in two and a half years or really
since the oil downturn.

Even so, FedEx (NYSE:FDX) saying it expects, quote, “significant” earnings
growth over the next three years as those network investments the
integration of its recent purchase, TNT Express (NYSE:EXPR), and the growth
of e-commerce all begin to finally deliver.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.

(END VIDEOTAPE)

HERERA: Great Britain has followed the U.S. in restricting the electronics
that passengers can carry on to flights from certain airports in the Middle
East. The Department of Homeland Security added the restrictions for a
select number of flights after reviewing the latest intelligence on the
threat of terrorism.

Phil LeBeau has more on the changes and what they mean for people flying to
and from the Middle East.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Department of
Homeland Security believes there`s a growing threat of terrorist targeting
airplanes flying directly to the U.S. In fact, the agency says
intelligence indicates terrorists are aggressively pursuing innovative
methods to undertake their attacks, including smuggling explosives in
consumer items like laptops, tablets and e-readers.

So, it`s requiring passengers on select sites to put almost all their
electronics in checked bags, only their phones and medical devices can
still be carried on board. The rule change covers 10 airports in the
Middle East and Africa, which nine airlines use to fly directly into the
U.S. Averaging about flights a day.

REP. ERIC SWALWELL (D), CALIFORNIA: I have received a number of briefings
on an aviation threat and I`ll have to leave it at that for now. But I can
say that we have long known that many of our enemies across the world and
in the United States see as their biggest target bringing down a U.S.
airliner.

LEBEAU: The Department of Homeland Security won`t say what specifically
prompted the change in electronics rules, but events like last year`s
terror attack in a Brussels airport have convinced the agency and its new
chief, General John Kelly, to tighten security.

JAMES JEFFREY, FORMER DEPUTY NATIONAL SECURITY ADVISOR: Having experienced
a lot of terror coming out of the Middle East and in the Middle East, that
you have to give the administration, cut them a little bit of slack on
something like this. They would not have done this for no reason.

LEBEAU: That means nine airlines, including the popular Persian Gulf
carriers like Emirates and Etihad will have to make changes on flights to
the U.S. Meanwhile, U.S. airlines are not impacted by this electronic
band. That`s because none of them have direct flights from the airports in
question.

It`s unclear how long this electronics ban for certain flights from the
Middle East will last, but as one senior administration official put it,
we`re constantly evaluating the intelligence data. And for now, this is
the right thing to do.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

HERERA: Still ahead, forced to downsize. Why the future looks a lot
smaller for some big box retailers.

(MUSIC)

MATHISEN: Perhaps no industry is changing as quickly as retail, the
upheaval apparent at one of the most heavily attended industry conferences
where digital startups are just as influential as old guard retailers,
something was not the case just a couple of years ago. And it`s those
large traditional stores like Target (NYSE:TGT) and Kohl`s that are
shifting their strategies.

Courtney Reagan reports from Las Vegas.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: More than 5,000
retailers, ecommerce brands and investors are at the Shoptalk Conference,
trying to solve the same problems. Give shoppers what they want make it as
easy as possible, all while growing business. But there`s still much
debate about the role physical stores will play in the future and how
digital players will benefit from this massive shift.

DEVIN WENIG, EBAY PRESIDENT AND CEO: The fourth quarter, the last holiday
season, was a really important moment. I think it was an inflection point
where that was the end of retail as we know it.

REAGAN: Big-box retailers like Target (NYSE:TGT) are dealing with the
transition in a number of ways, both online and in physical stores. While
targets investing in its smaller than industry average digital business,
the retailer`s 1,800 stores remain the key focus, including 100 new smaller
stores, one will open across from Macy`s (NYSE:M) New York flagship in
Herald Square.

BRIAN CORNELL, TARGET CHAIRMAN AND CEO: We`re going after market share
right now, and when I talk to the financial community a couple of weeks
ago, we said we are going to invest $7 billion of capital and really make
sure that we revitalize our stores, revitalize our brand, move into new
neighborhoods, elevate our digital capabilities but Herald Square I expect
will be one of our best small format stores.

REAGAN: And Kohl`s (NYSE:KSS) isn`t closing stores either. The all small
department store has more 400 locations than Macy`s (NYSE:M), which is
closing stores. But like Target (NYSE:TGT), Kohl`s thinks smaller stores
are a better solution.

KEVIN MANSELL, KOHL`S CHAM. PRESIDENT AND CEO: Sales in stores at Kohl`s
(NYSE:KSS) and other retailers have come down, so to some extent, we have
to acknowledge that fact and resize you should set in some case open
smaller stores and lean on technology a lot to make the experience better.

JAN KNIFFEN, J. ROGERS KNIFFEN, WWE CEO: We`ll have brick and mortar.
There will be survivors dealt adopt all this technology. They`ll get
smarter. They`ll have a little better return on investments and the
otherwise would have had, but they won`t have what they used to have.

REAGAN: Well, no one knows what retail will look like in the future.

Everyone here at Shoptalk is convinced it won`t look the way it does today.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan in Las Vegas, Nevada.

(END VIDEOTAPE)

HERERA: Walmart wants technology to be a bigger part of its strategy. The
world`s largest retailer is launching a tech incubator in Silicon Valley so
it can identify changes that will reshape the industry in the years to
come. The company says the current focus will be on virtual reality and
automated delivery. Walmart has been overhauling its digital business to
better challenge Amazon (NASDAQ:AMZN).

MATHISEN: Marriott International has big plans the large hotel chain wants
to expand and buy a lot and sell you more than just a hotel room. And many
rivals, they`re only doing the same.

Susan Li takes a look at why the industry wants to branch out.

(BEGIN VIDEOTAPE)

SUSAN LI, NIGHTLY BUSINESS REPORT CORRESPONDENT: One hotel every 14 hours,
a stunning pace of development for Marriott over the next three years. Its
closest competitor Hilton also has similar plans.

ARNE SORENSON, MARRIOTT CEO: I`ll confess I have equal parts enthusiasm
and exhaustion when I use that statistic, because that`s a lot of hotels to
open over the course of the next three years. It is supply growth to be
sure, but think about it, it`s about 300,000 rooms. We think the industry
globally is about 15 million rooms.

LI: To entice more people to stay, big hotel companies are offering a lot
more than just rooms, everything from urban wellness retreats to dorm-like
accommodation for the millennial traveler.

RACHAEL ROTHMAN, SUSQUEHANNA SENIOR ANALYST: Not everybody is the same,
right? It gives them choice. It gives them choice of type of experience
of price points of number of guests or need state or whatever sort of
business school word you would use, right? It`s not for every occasion.
It allows you to trade up and trade down and have different experiences.

LI: One big disruptor for the sector, the rise of Airbnb. Morgan Stanley
(NYSE:MS) predicts the expected growth in hotel revenues will flow eighty
percent more than initially thought, owing to the competition from the home
sharing service.

But with over 70 percent of revenue coming from business and travel groups,
the world`s largest hotel chain doesn`t seem worried.

SORENSON: We`re absolutely convinced that offering more choice to our
loyalty members, to our group customers, to individual travelers, is a way
of getting them to stay with us more often.

LI: Over one billion trips were made worldwide last year and that`s why
hotel companies are working harder to build and to revive the experiences
they`ll get the traveler to check in.

For NIGHTLY BUSINESS REPORT, I`m Susan Li, in Times Square.

(END VIDEOTAPE)

HERERA: The homebuilder Lennar (NYSE:LEN) says renewed optimism leads to
more orders and that`s where we begin tonight`s “Market Focus”.

The company said a pickup and job growth has buyers more confident and that
led to a better than expected profit. Higher home prices and deliveries
also helped out but Lennar (NYSE:LEN) did post revenue that missed
estimates and said a rise in land and construction costs caused gross
margins to decline. Shares fell more than 2 percent to $51.27.

Sales fell for the seventh straight quarter at General Mills (NYSE:GIS).
The food giant said results were hurt by fewer promotions and sluggish
demand for yogurt and baking products. But profit did top expectations and
the company repeated its earnings outlook for the year. Shares fell just
slightly to $59.76.

MATHISEN: Lockheed Martin (NYSE:LMT) said it is more optimistic than ever
regarding its growth prospects under a Trump administration. The defense
contractor pointed to the president`s call for increased defense spending
by members of NATO. This could potentially result in Lockheed Martin
(NYSE:LMT) receiving more international orders. But shares, well, it still
fell by one percent on this down day to $269 even.

A U.S. representative has called for the Department of Defense to launch an
investigation into the aerospace components maker TransDigm. California
Congressman Ro Khanna expressed concerns that company was operating as a
monopolist and may be engaging in fraud and abuse in the defense industrial
base. TransDigm down more than five percent following this report to
$224.79.

HERERA: A controversial provision of the Republicans tax reform blueprint
is unlikely to go away. That`s according to the Republicans chief tax
writer in the House of Representatives.

(BEGIN VIDEO CLIP)

REP. KEVIN BRADY (R), TEXAS: My sense is that border adjustability has
become a given, that it will be part of the final tax reform plan and
really now the discussions are how can it be designed and transition in a
very positive way for importers, because for the rest of businesses and I
would say for importers as well, looking this strong economy, taxing
everyone equally in the U.S., eliminating any tax incentives to move
overseas and making sure made-in-America products can compete around the
world, everyone wants that in the final tax reform plan.

(END VIDEO CLIP)

HERERA: The border adjustment tax would levy fees on import, which is why
a number of industries have come out against it. But it`s not just big
business that`s concerned but small business as well.

Kate Rogers (NYSE:ROG) has our story.

(BEGIN VIDEOTAPE)

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: As the battle over tax
reform continues in Washington, some small retailers like Richmond
Virginia-based Ledbury are focused on a key proposal in the House
Republican tax plan, the border adjustment tax or BAT. The proposal favors
American manufacturing by levying a 20 percent tax on items imported into
the U.S. Meanwhile, exported goods are not taxed.

But for Ledbury, the Bat could be detrimental. The startup sells high-end
men`s dress shirts ties and more online and in its store, but only two
percent of its products are manufactured in the U.S. The other ninety-
eight percent are made in Europe.

PAUL TRIBLE, LEDBURY CEO: For our business, that $145 shirt, they made
from Italian fabrics that we sew in Poland, that`s got an additional 20
percent tax on top of what we bring into the country. Now, I think some
people might say, hey, twenty percent, that`s not a huge deal. But what
not everybody realizes we`re already paying a huge amount of duties to
bring these shirts into the country.

ROGERS: Trible says shifting production to the U.S. would be too costly
and finding a cheaper manufacturer in Asia would cost them quality. So,
the startups options are to raise prices or cut hours for workers.

The National Retail Federation has warned this will become a norm for small
retailers if the BAT goes through, adding the tax will crush small
retailers, causing them to lay off workers are even close their doors.

While concerns over the BAT have cropped up on Main Street, some advocates
point out the benefits in the GOP plan, including a reduction in the
corporate tax rate would not be possible without it.

TODD MCCRACKEN, NSBA PRESIDENT: The blueprint from the House Republicans,
it contains a border adjustment. You know, it has lots of other really
good things for small companies in it. It has, you know, unlimited
immediate depreciation. So, I suppose you know depreciation, these
expensing of capital equipment. It has lower tax rates. It has an
elimination of the state tax.

So, that`s the other element of this. You can`t look at a board adjustment
all on its own. It`s not a proposal all by itself. It`s within the
context of larger tax reform.

ROGERS: At Ledbury, Trible is hopeful lawmakers will listen to the
concerns from retailers big and small before implementing such a major
change.

TRIBLE: This theory is relatively new. It`s untested and I think it
something that we really need to think about before dramatically changing
sort of the supply chains of the businesses in this country.

ROGERS: For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG).

(END VIDEOTAPE)

MATHISEN: Coming up, encore careers. Why retirement is starting to take
on a whole new meaning.

(MUSIC)

HERERA: A new study finds that most American workers feel confident
they`ll have enough to retire on, even as many of them don`t have much in
the way of savings at all. Among current retirees financial confidence is
even higher and many haven`t actually retired in the traditional sense.

As Jane Wells reports, the new retirement is not retiring.

(BEGIN VIDEOTAPE)

JASON ROBERTS, ASSISTANT DIRECTOR: I may bring in the camera close right
here.

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Veteran assistant
director Jason Roberts is giving a class to aspiring background actors at
Burbank`s legendary Central Casting. One of his students is 67-year-old
Abe Rogland.

ABE ROGLAND, SEEKING HIS SECOND ACT: It`s fascinating beyond set.

WELLS: Rogland used to own a logistics company but that went south in the
recession. Now, he`s pursuing his love of acting full-time, partly because
he needs the money and says he`s not the only one on the set who does.

ROGLAND: A lot of them is cash out, they are resurrecting. A lot of them
are working now because they have to pay the rent. Social Security is just
not making it.

WELLS: The Employment Benefit Research Institute found that forty-two
percent of people working for pay after retirement need the money to get
by, but at the same time, almost all of them also do it for fun.

WALTER KRAKOWIECKI, RETIRED AT 60: I get bored.

WELLS: Seventy-seven-year-old Walt Crackawiki retired at age 60 from a
career in food services management at Universal (NYSE:UVV) Studios. Now,
he picks up odd jobs at the background actor, not for money but to keep
busy. He even did a scene with Cameron Diaz for “Bad Teacher” where she
washed his Cadillac.

KRAKOWIECKI: Yes, she washed my car I didn`t wash my car for about two
months after that.

WELLS: The fact is, we`re living longer, healthier and more active lives.
That`s why the Mizell Senior Center here in Palm Springs is a hive of
activity. The EBRI Survey says at least half of Americans expect to live
to at least age 85, and more of us are retiring earlier than expected, but
we`re not sitting around.

People like Sherry Goodloe.

SHERRY GOODLOE, RETIRED AT 62: I had breast cancer six years ago, and I
looked at between 62 and 65, and I thought, do I really want to stay there
another few years or do I want to start really living?

WELLS: Goodloe run the numbers, realize that with a little downsizing, she
had enough retirement to, quote, “start living”. Now, through a website
called Trusted House Sitters, she house sits and pet sits around the world
for free.

GOODLOE: I plan to do this as long as I can. I love it.

WELLS: Retiring is a lot less retiring than it used to be.

For NIGHTLY BUSINESS REPORT, Jane Wells, Palm Springs.

(END VIDEOTAPE)

HERERA: And to read more about untraditional retirement, you can always
head to our website, NBR.com.

MATHISEN: And before we go, let`s take another look at this down day on
Wall Street, worst of the year worst of the Trump era. The Dow tumbled 237
points to 20,668. NASDAQ off 107, and the S&P dropped 29. First one
percent losses in many, many weeks, Sue.

HERERA: Yes, indeed. We`ll see what tomorrow brings.

That does it for a NIGHTLY BUSINESS REPORT tonight. I`m Sue Herrera.
Thanks for joining us.

MATHISEN: I`m Tyler Mathisen. Have a great weekend, everybody. We`ll see
you tomorrow.

END

Nightly Business Report transcripts and video are available on-line post
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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
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