Transcript: Nightly Business Report – March 23, 2017

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

Funded in part by —

(COMMERCIAL AD)

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR:  Big vote postponed.  The
House will not vote on the health care overhaul today, as tensions on
Capitol Hill run high.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR:  Blind spot.  Ford surprises
investors with a profit warning, just as the automaker tries to transform
its business.

MATHISEN:  Boycott spreads.  Why some of the world`s biggest advertisers
are pulling their money from Google`s YouTube.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
March 23rd.

HERERA:  Good evening, everyone, and welcome.

The vote on health care delayed.  It will not happen tonight.  Last minute
negotiations to convince more lawmakers to vote in favor of the Republican
health care bill failed.  The postponement left the first major legislative
effort by the president and the House Speaker Ryan hanging in the balance.
Tensions were high all day.  Health care stocks fell.

As a result, the broader market turned negative as investors tried to
figure out what this delay might mean for the timing of tax reform
legislation.

John Harwood has been following the drama on Capitol Hill all day.

So, John, what was really the biggest obstacle here?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Well, the core
problem, Sue, is that you have a health bill which is going to inevitably
be less generous than Obamacare in terms of subsidies for people to buy
insurance.  That`s why Obamacare was to difficult to pass.

You have two groups of people.  One, the Freedom Caucus, that wants it to
be much more stripped down than it is.  They think the House bill is
Obamacare light.  You`ve got another group of people, 23 House Republicans
in districts won by Hillary Clinton in November, who thinks it needs to be
more generous.  That needs to be closer to what Obamacare was.

It`s very hard to square that circle and they ultimately with only being
able to lose 21 members, they were not able to make a deal and it`s not
clear they can make one tomorrow.

MATHISEN:  So, what does happen next?  They`ve been talking about maybe a
vote tomorrow.  Is that likely?  What`s next?

HARWOOD:  It is possible.  But remember, in Congress, you typically don`t
put something on the floor unless you know you have the votes.  And I had
an exchange by text message with a House Freedom Caucus source this evening
who said, when I asked could they bill past tomorrow, if you negotiate all
night, and the answer was nope, no way.

So, the distance between the two factions and this speaker who`s trying to
bring them together is very, very difficult to do.  Not clear that anything
ambitious in terms of rolling back Obamacare as opposed to just fixing it,
is going to be able to pass this Congress.

HERERA:  And I`m sure part of the discussion tonight will be the
Congressional Budget Office, which put out a new estimate on the bill`s
cost.  What did it show?

HARWOOD:  Well, a couple of things.  One, it showed it was more expensive,
so there`s less deficit reduction.  Initially, they estimated $330 billion
over ten years.  That was a selling point for members who care about the
debt.  Now, that deficit reduction is down to $150 billion because the
House revised the bill to make it more generous.

But it doesn`t do anything, according to the CBO, in the number of people
who would lose health insurance.  CBO says by 2026, there will be 24
million fewer Americans with insurance than under Obamacare, that`s very
difficult and polls out today show that this bill — as the public is
perceiving it — is not popular right now.

HERERA:  All right.  John, we will wait and see.  I know you`ll be on the
case for us.

John Harwood in Washington.

MATHISEN:  On Wall Street, the health care vote is viewed as a tense of the
Trump administration`s broader agenda, which includes tax cuts.  The major
indexes were higher early in the day, but then turned lower once reports
surfaced that the vote would not happen tonight.  And by the closing bell,
the Dow Jones Industrial Average was off four points to 20,656, the NASDAQ
down by nearly four, and the S&P 500 dipped two.

HERERA:  Our next guest tonight says growing concerns about what will get
done in Washington may cause problems for the market in the weeks ahead.
Joining us is Chris Meekins.  He is the research policy analyst at FBR
Capital Markets (NASDAQ:FBCM).

Chris, nice to have you here, as always.

CHRIS MEEKINS, FBR CAPITAL MARKETS:  Thanks, Sue.

HERERA:  So, is it — is it a case of, if they can`t get this health care
bill done, they probably won`t be able to get — or at least get to it as
quickly — the other aspects of the president`s agenda?

MEEKINS:  There are three potential paths forward in our view.  Either they
pass the bill, the health care bill in the House and Senate, in which case,
tax reform becomes much more likely.  If they pass it out of the House
sometime on Friday or Monday, but they can`t get it out of the Senate, then
sentiment probably stays about neutral to where it is for tax reform.  If
they fail to get this out of the House and do nothing on health reform,
then that does negatively impact the future options related to tax reform
and we think it makes it a much, much heavier lift.

MATHISEN:  How can you do tax reform if you don`t know the price of health
care reform to the federal government?

MEEKINS:  Well, largely speaking, at least with health care discussions
they`re having now, they want the changes they`re making to health care to
be budget neutral.  So they would look at from a tax perspective, trying to
get tax reform itself to be budget neutral related to a whole different set
of items.  And they`ll probably use dynamic scoring, which is assuming some
type of economic growth, more positive economic growth than the current
status quo, to look at ways to try to reduce the deficit and make those
numbers add up.

HERERA:  So, Chris, handicap what you think all of this will mean given the
three different paths for the market.  I would assume we may see more
volatility?

MEEKINS:  Yes, no question.  We think that over the next six weeks, you
have a lot of specific items related to policy that could negatively
influence the market one way or the other.  So, you have the health care
bill in the next couple of days.  If they get health care done out of the
House, this continues the discussion in the Senate about health care.  You
got a Supreme Court nominee in two weeks and we anticipate a contentious
confirmation vote.  And then at the end of April, you have a government
funding which expires.

So, you face the threat of a government shutdown if Republicans and
Democrats aren`t able to reach some sort of bipartisan compromise to
continue government funding.  All things considered means there`s a lot of
volatility potentially over the next weeks in the market.

MATHISEN:  A little more on tax reform, does tax reform necessarily mean
reform of both the corporate tax code and individual tax code or could you
break the two apart and do the one that is most important to business,
which will be reform of the corporate tax code, going to a territorial
system, bringing back foreign health profits and so forth?

MEEKINS:  There`s no question they could only do corporate tax reform.  I
think politically speaking, it`s difficult to see them doing so.  When
you`re trying to do tax reform, you want to be able to give something to
every day Americans.  The president`s approval rating based on Gallup is
below 40 percent.  Congress`s approval rating is not much higher — is
about half that right now.

They`re going to be looking to do something to show that every day average
Americans benefit from Republicans controlling the White House and
Congress.  So, we believe, at least at this moment, corporate tax reform
has to be tied to individual tax reform going forward.

HERERA:  Chris, thank you as always.

MEEKINS:  Thanks, Sue.

HERERA:  Chris Meekins with FBR Capital Markets (NASDAQ:FBCM).

President Trump`s pick to lead the Securities and Exchange Commission said
he has specific plans to dismantle the rules that govern Wall Street, but
at today`s confirmation hearing, Jay Clayton said the law known as Dodd-
Frank should be examined.

(BEGIN VIDEO CLIP)

JAY CLAYTON, SEC CHAIR NOMINEE:  I do believe that Dodd-Frank should be
looked at in particular rules that have been in place as to whether they
are achieving their objectives effectively.  But I have no specific plans
for attacking a particular provision of Dodd-Frank, Senator.

(END VIDEO CLIP)

HERERA:  Democrats raised concerns that Mr. Clayton`s work as an attorney
on behalf of Wall Street firms would be a conflict of interest.  Mr.
Clayton said his past experience would be a strength.

MATHISEN:  Meantime, President Trump`s choice to lead the Department of
Agriculture was pressed about the administration`s proposed cuts to the
agency.  At Sonny Purdue`s confirmation hearing, the former Georgia
governor told lawmakers that he had concerns about the budget blueprint,
but was committed to the wellbeing of the nation`s farmers.

(BEGIN VIDEO CLIP)

GOV. SONNY PURDUE, AGRICULTURE SECRETARY NOMINEE:  As a member of the
administration, I view this budget similar to what as governor when I get a
revenue estimate that I didn`t like as well.  I didn`t like it and — but
we managed to it.

(END VIDEO CLIP)

MATHISEN:  And Mr. Purdue added that it is possible to do more with less.

HERERA:  Ford is warning shareholders that profits in the first quarter
will fall sharply and come in well below what Wall Street was expecting and
that sent shares of the automaker lower in trading today.  Ford says rising
costs are hurting its bottom line at a time when the company is trying to
make some big changes to its business.

Phil LeBeau has the details.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Ford is trying to
steer through a bumpy period where business is strong, but feeling
pressured, while investments in future technologies like autonomous drive
vehicles are pushing up costs.  As a result, Ford`s first quarter earnings
will be at least 20 percent lower than what Wall Street was expecting.

One factor is the growing investment CEO Mark Fields is making in the
Silicon Valley, where Ford is doubling the size of its staff.  The company
has spent more than a billion dollars on tech firms that will help Ford
vehicles steer their way through traffic.  As autonomous drive vehicles
become more common.

But it may be years before we see that technology in the cars and trucks
we`re driving.  In the meantime, it`s what Ford sees in showrooms right now
that worries Wall Street.  Customers are still buying, but increasingly,
they can drive better deals, in part because there`s a glut of used
vehicles for sale.  So, as their prices drop, there`s a concern that could
eventually weigh on Ford`s new vehicle profits.

For now, Ford says industry sales this year in the United States should
still reach close to a record high, one reason why the company is still
maintaining its earnings guidance.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

MATHISEN:  Still ahead, will truckers keep on trucking?

(BEGIN VIDEO CLIP)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  I`m Morgan Brennan
in Ridgefield, New Jersey.  More than two-thirds of America`s goods move by
truck, this is an industry with a direct take on the economy.  Well, now,
truckers are sounding off on how President Trump boost business.

We got that story coming up on NIGHTLY BUSINESS REPORT.

(END VIDEO CLIP)

(MUSIC)

HERERA:  Health care was also on the agenda at the White House today when
the president met with a group of trucking executives.  He praised their
work and told them they played a vital role in the economy.  But after a
tough 2016, are things looking up for the sector, especially under an
administration that wants to roll back some regulations?

Morgan Brennan reports today from a truck stop in Ridgefield, New Jersey.

(BEGIN VIDEOTAPE)

BRENNAN:  Big rigs rolled into the White House today as trucking executives
met with President Trump to talk health care regulation and infrastructure.
The trucking industry is the top employer in 29 states, including three and
a half million drivers who haul ten and a half billion tons of freight each
year.  It`s a highly regulated industry.

Many rules ensure drivers are at their best on the road.  And companies are
in favor of those safety standards.  But there are other regulations the
industry would like to see scaled back.

Covenant transportation chief David Parker says one example is the EPA
emissions rules.

DAVID PARKER, COVENANT TRANSPORTATION CEO:  Our engines have had EPA
mandates since 2004.  Since that time, my truck prices have doubled.  And
so, the industry has been a very tough position for the last few years from
a profitability standpoint because our costs have been rising much faster
than what our pricing has been able to rise.

BRENNAN:  He and others would like to see the age requirement moved freight
across state lines lowered from 21.  They argue that would help ease the
driver shortage the industry suffered for years.

Don Daseke, CEO of Daseke Trucking says infrastructure is also crucial.

DON DASEKE, DASEKE INC. CEO:  We need the infrastructure bill and we`re
willing to do our part.  Let`s increase the gas tax.  We`ll pay part of it.
If you want to have tax changes, tax reform for part of it, that`s fine,
too.

BRENNAN:  Daseke`s fleet would benefit from better roads, but also the
demand for transporting all those building supplies.

It`s all speculation for now, but if new policies do deliver more growth,
that will drive demand for more trucking.

PARKER:  I think there`s going to be some exciting times in the trucking
industry.  I think the economy is going to go very strong for the next few
years.  I think it will see many quarters of three to 4 percent GDP growth.

BRENNAN:  With trucks hauling 70 percent of America`s freight, that would
be good news after the industry`s rough financial ride last year.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan in Richfield, New Jersey.

(END VIDEOTAPE)

MATHISEN:  Well, strong demand for memory chips helped Micron`s earnings
beat expectations and that is where we begin tonight`s “Market Focus”.

The semiconductor maker said demand along with a price rise for its DRAM
memory helped results, revenue up 58 percent, year over year.  And shares
of Micron initially spiked after hours following report, adding to a more
than 1 percent gain during the regular session.  They closed that session
at $26.47.

The packaged foods maker Conagra said fewer discounts helped its quarterly
profit topped estimates, but the maker of Chef Boyardee pasta and Ready
Whip, they don`t really go well together —

HERERA:  No, no.

MATHISEN:  — said overall profit and sales slipped due to foreign exchange
rates and the company stopping the sale of some of its less profitable
items.  It`s moving to more premium products.

Conagra shares off a fraction at $40.35.

HERERA:  Penn National Gaming (NASDAQ:PENN) raised its first quarter
guidance, thanks to strong, broad-based property performance.  Also last
night, the casino and racetrack operator said it will be added to the S&P`s
Small Cap 600 index starting on Monday.  Penn National Gaming (NASDAQ:PENN)
rose nearly 12 percent today to $17.18.

And shares of the apparel company PVH continued to rise following
yesterday`s after the bell earnings that beat estimates.  The owner of
Calvin Klein and Tommy Hilfiger brands, she tried to say, also increased
its current share buyback program by another $750 million.  PVH rose about
8.5 percent to $98.55.

MATHISEN:  Johnson & Johnson (NYSE:JNJ) is the latest company to suspend
its digital advertising on Google`s YouTube.  The concern is that the
company`s ads may have appeared next to offensive videos.  As we reported
yesterday, AT&T (NYSE:T) and Verizon (NYSE:VZ) also pulled their business.
Google (NASDAQ:GOOG) has committed to better police its website, but that
didn`t help shares of the parent company, Alphabet, which fell by 8 percent
or more today.

Julia Boorstin has more on Google`s YouTube ad problem.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Johnson & Johnson
(NYSE:JNJ) and AT&T (NYSE:T), among the biggest advertisers in the world,
are dealing a blow to Google`s YouTube, pulling their ad spend globally.
AT&T (NYSE:T), which spends over $1 billion on ads last year, saying,
quote, “We are deeply concerned that our ads may have appeared alongside
YouTube content promoting terrorism and hate.”  They`re joining Verizon
(NYSE:VZ) and Enterprise here in the U.S. following a U.K. boycott of more
than 250 companies.

This wave of boycotts after “The Times of London” flagged anti-Semitic
videos Google (NASDAQ:GOOG) failed to quickly remove and Volkswagen ads
playing on the YouTube channel of a pro-terrorism extremist.

JIM BANKOFF, VOX MEDIA CEO:  It`s timing was a broader realization across
the advertising community that`s not all digital advertising is the same.

BOORSTIN:  These brands are not just concerned about optic, but about
financially supporting offensive content creators.  YouTube pays creators
with revenue from ads.

Google (NASDAQ:GOOG) saying, quote, “We`ve begun an extensive review of our
advertising policies and have made a public commitment to put in place
changes that give brands more control over where their ads.  We`re also
raising the bar to further safeguard our advertiser`s brands.”

But this problem could be much harder to fix at YouTube than the rest of
Google (NASDAQ:GOOG).

MATT BRITTON, CROWDTAP CEO:  Hard for these platforms to keep up with the
content and be able to properly categorize it, as it is appropriate.  We
want to juxtapose this advertiser next to it.  I do think once new
technology come about where you can have facial recognition and content
recognition technologies that can analyze images and actually see the type
of content that it is, maybe then they`ll catch it, but it doesn`t exist
yet.

BOORSTIN:  Bank of America (NYSE:BAC) Merrill Lynch cautions it could take
several quarters for spend levels to return to normal.  Mizuho (ph) expects
minimal near term earnings impact to YouTube`s projected $12 billion in
gross revenue this year, but warns that Google (NASDAQ:GOOG) must nip this
issue in the bud to avoid broader repercussions of YouTube`s brand.

The degree of damage to Google (NASDAQ:GOOG) hinges on how quickly it
guarantees this will never happen again.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.

(END VIDEOTAPE)

MATHISEN:  So, let`s turn now to Rob Frankel to talk more about Google`s —
what Google`s ad problems may mean for the brands of both Google
(NASDAQ:GOOG) and the digital advertisers who used YouTube.  He`s a
branding strategist at RobFrankel.com.

How big a deal is this for Google (NASDAQ:GOOG) and YouTube?  I mean, if
they`re starting to see big companies like AT&T (NYSE:T), Verizon
(NYSE:VZ), and Johnson & Johnson (NYSE:JNJ) and others melt away, that`s
serious.  Or is it?

ROB FRANKEL, ROBFRANKEL.COM BRANDING EXPERT:  From a PR standpoint, I`m
sure you`re correct.  But one of the worst secrets in all of advertising is
nobody really knows how well that works.  So, if they decide that you know,
for the public, they want to try to remedy the situation, for them, how
much are boycotts really going hurt and how long these guys are going to
stay out of the game — I don`t think so is going to be that much.

MATHISEN:  So, let me follow on that.  Do you think then that they`re using
this content adjacency issue as a cover potentially for the idea that the
ads just aren`t working?  And if the ads were working better, they`d stick.

FRANKEL:  Well, yes, I think that`s a very astute observation.  Let`s face
it, the business of business is dollars over the transom and if nobody is
going to be that quick to pull something on a political agenda if they know
that it`s bringing in the dollars.  Clearly, and this is always been a
problem with online advertising, nobody knows what works, all they really
sell are eyeballs, they don`t really know where their ads appear.

And this really shows you.  The ad agencies are going to say, hey, it`s
going to work in this content, but they clearly cannot target content.  And
that`s a bigger issue.

HERERA:  I think one of the issues and correct me if I`m wrong, is that
oftentimes a brand like a Johnson & Johnson (NYSE:JNJ) or an AT&T (NYSE:T)
or a Verizon (NYSE:VZ) doesn`t know where the ad is going to be placed
because it`s basically done by a computer.  And therefore, their ad could
be placed next to questionable content and they may not know it until
people complain.

FRANKEL:  Well, that is definitely true, but you also have to remember that
most digital advertising, some of it is content associated, but believe it
or not, most of the ad sales business is still based on 30, 40, 50-year-old
eyeball technology, which means how many eyeballs are looking at it.

They really don`t care who`s looking at it.  They just want to be able,
based on a cost per thousand or cost per million basis —

MATHISEN:  Right.  So —

FRANKEL:  — to get that billing and that`s where — that`s where the deals
are.

MATHISEN:  So, why did this happen this week, Rob?  Did somebody wake up at
AT&T (NYSE:T) and at Verizon (NYSE:VZ) and go, oink, some of our ads are
showing up next to hateful content?  I mean, it`s not like this was new.
What happened?

FRANKEL:  This is a really — this story has such deeper roots than anybody
would imagine.  The same thing happened here that happened with Brexit,
that happened with the populist movement, the rise of everything.  What`s
really happening isn`t so much in the ad sales, it`s in the content
creation.  It`s in these people who are meaning entire movements.

And these, and now, more than ever before, there are well-funded movements
that are just throwing content out there like never before, they`re getting
the eyeballs and the number of eyeballs is pulling in the ads.

MATHISEN:  Interesting point.  Rob Frankel with RobFrankel.com — thanks
very much.

HERERA:  Coming up, a man with a plan.  Can Macy`s (NYSE:M) new CEO turn
around the iconic department store?

(MUSIC)

MATHISEN:  A changing of the guard at Macy`s (NYSE:M).  The nation`s
largest department store chain has a new chief executive.  His name is Jeff
Gennette.  And he takes over at a difficult time for the retailer.

Courtney Reagan tells us now who he is and what his plans are for the deep
rooted American company.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Today on his 65th
birthday, Terry Lundgren`s 14-year tenure as Macy`s CEO comes to a close.
As 55-year-old Jeff Gennette moves into the C-suite.

Gennette has been with Macy`s (NYSE:M) his entire career, starting in the
executive training program in 1983.  He was elevated to president and heir
apparent three years ago.

While most Macy`s watchers say Gennette is ready and right for the job, he
inherits the department store at a difficult time.  Macy`s (NYSE:M) shares
have lost half their value in the last two years, as comparable sales have
fallen for eight straight quarters and the retailer is also closing 100
stores as traffic falls at many of its locations and in malls.

OLIVER CHEN, COWEN & CO.:  I think Jeff in general needs to really think
about several factors.  The rise of off price and how do they compete
against stores such as T.J.Maxx, Ross stores and others.  Also, we just
really need more people to go to the mall.  We need more physical traffic.
That`s a big issue, too.

And then the consumer — the consumer has profoundly changed, they need to
get goods in the store quicker in terms of the supply chain, responding to
fashion trends, as well as just getting your stuff really quickly.

REAGAN:  Gennette gave Wall Street a glimpse into its plan for Macy`s
(NYSE:M) last week.  He still thinks the store is relevant today and calls
stores pillars of the community, but the challenge is making them
contemporary.  His plan is to do it by improving the fundamentals, brand
merchandise and the mix between digital and store offerings.

Part of Gennette`s plan includes designating areas in each store for
clearance and simplifying its sale promotions to eliminate what Gennette
says makes shoppers do mass gymnastics.  Macy`s (NYSE:M) is also testing
more do-it-yourself shopping, like putting multiple shoe sizes on the floor
so customers won`t need an employee to fetch them, as well as hands-on
beauty products testing, similar to Ulta or Sephora offers.

Gennette is also looking at adding more shopping shops, many Macy`s stores
already feature their own sun glass hut, finish line and more.  Lens
Crafters is a recent addition and it`s been driving shoppers into stores.

Many worry that even with all the right strategies though, the largest U.S.
department store by sales is fighting an uphill battle against a shrinking
department store sector, but Gennette isn`t discouraged.  He`s been working
for the opportunity his entire career.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan.

(END VIDEOTAPE)

HERERA:  And finally tonight, Americans plan to spend more than ever on
Easter this year.  According to the National Retail Federation, spending
will reach roughly $18.5 billion, which is up 6 percent.  And what will all
that money be spent on?  Well, the survey found that most of the dollars
will go towards clothing, gifts, candy, of course, and flowers.  And a few
toys in there as well.

MATHISEN:  Very nice.  Happy Easter in a few weeks.

HERERA:  In a few weeks.

MATHISEN:  We`ve got time to —

HERERA:  Hope you have a chocolate bunny in your basket.

OK.  That`s NIGHTLY BUSINESS REPORT.  I`m Sue Herera.  Thanks for joining
us.

MATHISEN:  Thanks for me as well.  I`m Tyler Mathisen.  Have a great
evening, everybody.  And we will see you back here tomorrow night.

END

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