Transcript: Nightly Business Report – March 24, 2017

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

(BEGIN VIDEO CLIP)

REP. PAUL RYAN (R-WI), SPEAKER OF THE HOUSE: Obamacare is the law of the land. It`s going to remain the law of the land until it`s replaced. We did not have quite the votes to replace this law bill.

(END VIDEO CLIP)

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Bill pulled. House
Republicans yank their health bill minutes before it was due for a vote,
leaving investors scratching their heads.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Affordable housing. Why
some investors may be starting to get cold feet.

HERERA: Gridlock on the ground. What`s being done to alleviate traffic
jams on the tarmac?

Those stories and more tonight a NIGHTLY BUSINESS REPORT for Friday, March
24th.

MATHISEN: Good evening, everyone. And what a day it has been.

Drama in Washington minutes before the Republican health care bill was due
for a vote on the House floor, leadership pulled it, unable to garner
enough support and marking the first legislative setback for the Trump
administration and House Speaker Ryan.

Speaker Ryan now telling fellow Republicans they`re moving on, but it won`t
be easy.

(BEGIN VIDEO CLIP)

RYAN: Yes, this does make tax reform more difficult, but it does not in
any way make it impossible. We will proceed with tax reform, we will
continue with tax reform. That`s an issue I know quite a bit about. I
used to run that committee.

I spoke with the president, the treasury secretary and his economic
advisors earlier today about tax reform. So, we are going to proceed with
tax reform. This makes it clearly more difficult.

MATHISEN: John Harwood is following the story from Washington.

I don`t remember, John, a day quite like this one in decades. Is there any
possibility that this health care repeal and replace gets resurrected later
this here even before the midterms next year?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Yes, but I think
expectations are going to be quite low for what that produces this was the
moment when you had a new Republican Congress, a new president at the peak
of his influence and I should say, it`s not a high peak because his
approval ratings are pretty low. But nevertheless, your greatest clout is
when you begin your presidency. This was a top promise for Republicans and
when they outlined this plan they simply could not get a majority of their
caucus even with a large majority in the House.

What that suggests and President Trump alluded to this after the defeat was
that whatever they come up with later might involve Democrats, which
necessarily means it would be a much smaller revision that could be
categorized as a fix to Obamacare, and interestingly that is precisely what
former House Speaker John Boehner predicted a couple of months ago would be
the outcome.

HERERA: Now, Paul Ryan, the president got praise for Paul right or gave
praise to Paul Ryan for working so hard. However, he wasn`t able to
deliver the votes. What does — what does that mean for his leadership
going forward as they start to tackle tax reform and infrastructure?

HARWOOD: It`s a blow, Sue, to the prestige of both Paul Ryan, the leader
of this Republican House, and to President Trump. He said he was the
master negotiator, the closer. His aides had confidently predicted that he
would get the votes for this. They both failed to do that.

Now, each issue is different. Tax reform inspires a lot more consensus
within the Republican Party. I still believe they will be able to pass a
corporate tax cut later this year, may not be able to get the broad
comprehensive reform. Infrastructure will be a tricky challenge, sort of
like health care because he may need some Democratic support to push it
through.

MATHISEN: His gridlock bed or is gridlock alive and kicking when a
minority of the majority can really control what gets done and what can?

HARWOOD: It`s a very good question, Tyler, and it`s relevant because we
have seen this modern Republican Party have a faction within it that is so
anti-government that is very difficult for them to get to yes on any
government program. So, while we`ve talked in the past about Republican
Democrat gridlock under President Obama and under President George W. Bush
before that, we could have a situation here with this idiosyncratic new
president where he can`t get a consensus within his party on important
things. That is a new territory for us.

MATHISEN: All right. The weekend shows are going to be fascinating.

John Harwood, thanks so much.

HERERA: Well, the drama in Washington rippled through Wall Street. Shares
of hospital operators finished higher on relief that the benefits that
sector has seen from Obamacare will not go away, at least not for now.

Medicaid-focused insurers also rose. Stocks like Centene (NYSE:CNC) and
Molina Health and WellCare.

But the broader market appeared confused after the vote was pulled moving
down then up and then down again. The Dow Jones Industrial Average closed
lower by 59 points to 20,596, the NASDAQ rose 11, and the S&P 500 fell
nearly two.

And today`s action capped the biggest weekly percentage loss of the year
for the major indexes.

Bob Pisani explains the late day market moves.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Stocks ended modestly
weaker with the Dow down just 59 points. But that small drop does not
subscribe the high drama we saw today. The markets dip when it looked like
the bill would fail if it went to a vote, but then rallied would were
leaked out that the president was pulling the bill rather than call a vote.

Why the rally? Traders said that keeping the Obamacare repeal bill alive
even if nothing will happen for months was important because getting rid of
the taxes embedded in Obamacare would help offset the corporate tax cuts
the president is proposing.

Now for the week, the Dow was down one and a half percent. That`s its
worst week since September 9th. Now, traders right now are very eager to
move on to two other topics. First, a tax cut and then earnings. Next
week, it`s the last week of the quarter and with earnings of ten percent,
the best showing in nearly six years, traders are eager to change the
subject to an improving economy.

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

(END VIDEOTAPE)

HERERA: The CEO of Charter Communications (NASDAQ:CHTR) was at the White
House today to announce its decision to invest in broadband infrastructure
move offshore call centers back to the U.S. and create 20,000 jobs.

(BEGIN VIDEO CLIP)

TOM RUTLEDGE, CHARTER COMMUNICATIONS CEO: We also committed to spend $25
billion in infrastructure capital over the next four years. That`s the
deployment of new infrastructure which also creates jobs. And the whole
thing is really predicated on an opportunity to live in a better regulatory
climate with more consistency that our tax climate, which is really
conducive to making investments both in people and an infrastructure.

(END VIDEO CLIP)

HERERA: The second largest U.S. cable company had previously disclosed
plans to hire 20,000 workers as part of its acquisitions of Time Warner
(NYSE:TWX) Cable and Bright House Networks.

MATHISEN: Eli Lilly (NYSE:LLY) is also making investment in U.S.
operations. The drug company plans to spend more than $800 million on its
research labs in manufacturing sites. According to the company, the
investments are being driven by demand for Lilly products, as well as its
pipeline of medicines that target things like cancer, diabetes.

HERERA: President Trump formerly green-lighted the construction of the
controversial Keystone XL Pipeline, reversing an earlier decision by the
Obama administration. The president called it part of a new era of
American energy policy that he says will lower costs and create jobs.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Today, I`m pleased to
announce the official approval of the presidential permit for the Keystone
XL Pipeline. TransCanada will finally be allowed to complete this long-
overdue project with efficiency and with speed. We`re working out the
final details, as we speak. It`s going to be an incredible pipeline,
greatest technology known to man or woman, and frankly, we`re very proud of
it.

(END VIDEO CLIP)

HERERA: Shares of TransCanada, the company behind the pipeline, fell just
slightly.

MATHISEN: So, while much of the focus has been on Washington politics down
there the U.S. does find itself awash in oil. U.S. crude stockpiles record
levels, leading some to predict that the nation will be oil independent
within a decade. If so, what will this mean for the U.S. and our ties to
the Middle East?

Kyle Cooper is director of research at IAF Advisors and he joins us now to
discuss.

What would it mean if the United States were finally, once and for all, to
achieve something that was talked about back in the `70s, true independence
from foreign oil?

KYLE COOPER, IAF ADVISORS DIR. OF RESEARCH: Well, certainly, it changes
the geopolitics significantly, right? For the last 10 years or 20 years,
20-30 years, our focus has been on Middle East stability because we relied
so much on the oil coming from there. Now with the Keystone pipeline being
approved, with additional supplies presumably coming from Canada`s as a
result of that, and then obviously most importantly, the development of the
U.S. shale oil.

The North America is really on the verge or certainly has the possibility
of becoming energy independent in a decade or so.

HERERA: And does that necessarily translate to kind of permanently lower
oil and gasoline prices or not?

COOPER: I would certainly think so. The U.S — the U.S. E&P companies
have made tremendous strides since 2014, the last time we saw oil above a
hundred in reducing their costs and increasing their efficiencies. Many
companies now report that even at $45 and $50, they`re actually more
profitable today than they were when prices were above a hundred.

So, it certainly seems that we have the opportunity for much longer time of
oil in the $50s or, you know, right around this area because the
improvements and efficiency and the oil that they can supply at these
levels.

MATHISEN: What investable U.S. companies are benefiting from this, Kyle?

COOPER: Certainly, the mid-caps that already have exposure in the seven
U.S. shale regions that the EIA`s drilling productivity report focuses on,
those for oil primarily being the Bakken and the Permian. But really the
ones that are probably most in store for additional business and revenues
are the service companies. Regardless of whether or not the E&P is small
or large, they still have to go to the service companies for the fracking
technology, the sand, the pipe the steel to put in these, you know —

MATHISEN: Those service companies include who — name a couple of `em.

COOPER: Well, certainly, like the Baker Hughes (NYSE:BHI).

MATHISEN: Right.

COOPER: The Halliburton`s, the Schlumberger (NYSE:SLB), some of the sand
companies. Those types of companies that specialize in the actual services
to the oil company into the drilling projects, those are the ones that
every company has to go to. So, certainly, those types of companies are
really poised for an increase in their business in the coming years.

HERERA: Does it also change our relationship with Canada, you know, our
northern neighbor?

COOPER: Absolutely, with obviously Trump`s now permitting of the Keystone
pipeline, this helps the Canadian oil sands producer because just as the
U.S. producers lowered their service costs primarily through lower service
costs, a pipeline generally is much less expensive to transport on, and
thus the net back for the Canadian oil producer, for the Canadian oil sands
producer gets lower — or gets increased because of transportation costs
are lower.

MATHISEN: OK.

COOPER: So, their economics improve because now they have less cost to get
their oil all the way down to the Gulf Coast going into the U.S.

MATHISEN: Kyle, you`re always clear and concise. I appreciate it. Kyle
Cooper, IAF Advisors.

COOPER: Thank you. You have a great weekend.

MATHISEN: You too, sir.

HERERA: Some new insight today into the health of the U.S. economy. Order
for durable goods, products designed to last at least three years, rose 1.7
percent in February from the prior month. That was more than expected.
Market watchers say that this report is the latest evidence that the recent
pick up and confidence has translated into stronger capital spending
overall.

MATHISEN: The president of New York Fed says the economy is in a pretty
good place right now as it inches closer to full employment. Bill Dudley,
an influential Fed official, has a permanent vote on interest rates, added
that rising interest rates will be a delicate adjustment for the economy.

(BEGIN VIDEO CLIP)

BILL DUDLEY, NEW YORK FED PRESIDENT: By taking out a little bit of that
accommodations, moving up interest rates just a little bit, we think it`s
more likely that will achieve a soft landing and keep the economy about
where it is today in terms of employment and inflation. So, it`s a
delicate adjustment. It`s not something that`s very harsh. We think it`s
appropriate and necessary.

But, you know, I think it`s — you know, I think the economy will be able
to adjust to this just fine.

(END VIDEO CLIP)

MATHISEN: He also said that the unemployment rate is pretty close to its
lowest level without sparking too much inflation.

HERERA: Still ahead, are you looking for growth? Our market monitor says
it`s time to invest your money in some very well-known company.

(MUSIC)

HERERA: The Senate voted to undo Internet privacy rules. Those rules were
approved by the Federal Communications Commission last fall and had not yet
gone into effect. The regulation would have required Internet service
providers to get permission before collecting and sharing your information,
like your web browsing history, or your location. Senator Jeff Flake
introduced the resolution to repeal the rules, calling them unnecessary.

MATHISEN: Well, the market has high hopes that the corporate tax rate will
be lowered. It is a different story for some real estate developers, just
the idea of a tax cut is rattling the low income housing market.

Aditi Roy explains why from East Palo Alto, California.

(BEGIN VIDEOTAPE)

ADITI ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT: This low-income housing
project in San Jose, California, just broke ground, but it almost didn`t
happen. Developer Jeffrey Morgan says it took years for him to line up the
investors, partners and builders for the Second Street Studios, a housing
development for the homeless where residents of 134 units with paid 30
percent of their income towards rent, a typical one-bedroom apartment in
San Jose goes for about $2,000. Then, came Election Day.

GEOFFREY MORGAN, FIRST COMMUNITY HOUSING EXEC. DIRECTOR: In a nutshell, we
got Trump.

ROY: By that, he means President Trump`s election victory rattled the low-
income housing market, that`s because once Donald Trump won the election, a
cut in the corporate tax rate became more likely. If that happens,
investors won`t get as much financial benefit from buying low income
housing tax credits.

So, housing developers are saying some investors are getting cold feet,
including the one behind the Second Street Studios.

MORGAN: We were literally driving through the title office after signing
documents with the city of San Jose, and when we were ready to go, they
backed off. And our lenders committed anyway and we wound up meeting with
the investors later on, but it was a really scary time.

ROY: Eventually, the investor stayed in the projects but renegotiated the
financing, leading Morgan with a two and a half million dollar funding gap.
The city of San Jose stepped in and paid the shortfall, saving the project.

Morgan isn`t alone. Experts say shovel-ready low-income housing projects
across the country are in jeopardy of losing funding because of uncertainty
in the affordable housing tax credit market. Public accounting and
consulting firms Novogradac estimates a low income housing tax credit
market could lose ten to fifteen percent of its value, the problem could be
especially acute in California, where the housing market is tight.

In the Bay Area, skyrocketing rents and low inventory have prompted some
companies like Facebook (NASDAQ:FB) to step in. The social media company
launched a $20 million initiative for affordable housing.

The good news is most developers say the uncertainty around where the
corporate tax rate will end up it`s just a temporary disruption in the
market, one that will likely smooth out once we find out what the corporate
tax rate will be under the Trump administration.

For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, East Palo Alto, California.

(END VIDEOTAPE)

HERERA: Finish Line shares plunged to their lowest level in more than six
years, and that is where we begin tonight`s “Market Focus”.

The athletic wear retailer posted a wider than expected loss, a drop in
same-store sales and poor profit margins. The company`s CEO blamed the
poor results on some footwear products that didn`t resonate with customers,
along with difficulties in the overall retail environment. Shares of
Finish Line fell nearly 20 percent to $12.93.

Blackstone sold its 21 percent stake in SeaWorld to a Chinese investment
firm. As part of the deal, SeaWorld will provide support for developing
theme parts in China, Taiwan, Hong Kong and Macau. Shares of SeaWorld rose
nearly 5 percent to $18.13.

And Twitter is reportedly considering a paid subscription option. The
social media platform is conducting surveys to assess interest in an
enhanced version of its Tweetdeck feature aimed at professionals. Twitter
shares up more than one percent today to $15.14.

MATHISEN: Medicare patients with diabetes will be eligible to receive
reimbursement for Dexcom`s continuous glucose monitoring system. The U.S.
Centers for Medicare and Medicaid Services clarified criteria for coverage
of Dexcom`s device yesterday. On the news, the company up nearly 9 percent
to $82.62.

Moving the other way, U.S. Concrete said its CFO will resign effective July
1st and the company is also replacing Grant Thornton as its primary
accounting firm. Additionally, a private law firm is investigating on
behalf of shareholders whether the company`s officers or directors have
engaged in securities fraud or other unlawful business practices. All of
this adds up to a 9 percent drop concrete overshoes in U.S. Concrete.
Those shares closed at $60.80 today.

HERERA: This week`s market monitor is finding opportunities in some big
tech names he says are leading the way in both cloud computing and mobile
advertising, and who could see their stocks rise as much as twenty percent
over the next year and a half. He is Tim Courtney. He`s chief investment
officer at Exencial Wealth Advisors.

Tim, welcome back. Nice to see you again.

TIM COURTNEY, EXENCIAL WEALTH ADVISORS CIO: Yes, thank you very much.

HERERA: Let`s get right to your picks. Microsoft (NASDAQ:MSFT) is number
one, a very large cap company.

COURTNEY: It is. It is. Microsoft (NASDAQ:MSFT) really missed some of
the move, some of the movement out of PCs and into mobile. But the current
leadership there is really trying to position the company to get in front
of some current trends and cloud computing is one of those. It currently
is the second largest provider of cloud services, behind Amazon
(NASDAQ:AMZN) and they spend $12 billion last year in research and
development, and they`re a leading firm in terms of artificial intelligence
and deep thinking software.

So, their most recent price to earnings is less than 20. They`ve got very
good cash flow. They have $120 billion of cash overseas that if
repatriated could be very useful in buying back shares.

MATHISEN: Let`s move on, Tim, to another company that really nobody else
would have heard of but you and me another small one, Google`s parent
Alphabet. My question — you like it, but, you know, Alphabet has been in
the news this week over the concern that many big companies have pulled ads
because they are worried about adjacencies of their ads with content that
many would find objectionable.

That isn`t a real problem in your mind or is it?

COURTNEY: Well, it is and I think that also speaks to the footprint that
Google (NASDAQ:GOOG) has. They are they`re probably one of the most
innovative companies. They have such a huge reach that they are going to
run into these problems. And so, I think that their growth however and in
their current valuation more than makes up for some of the problems that
they`re seeing.

They also are in cloud computing. They`re the third largest provider in
cloud computing, a huge growth market. And Waymo, their self driving car
units, they`re either in the lead or very close to the lead among their
rivals in that, which is a future growth area.

So, they`re very large. They`re going to run into some bumps. But they`re
trading at a less than 20 price to earnings — future price to earnings.
Very little debt, very good cash flow, and they look OK appropriately
priced.

HERERA: And another mega-cap will finish up with Facebook (NASDAQ:FB).

COURTNEY: Yes, the undisputed online advertising leader. They — in fact,
almost all their revenue comes from online advertising. I think they and
Alphabet together make up about 70 percent of the market in online
advertising, and Facebook (NASDAQ:FB) is approaching about 2 billion active
users each month.

So, they have $10 billion of free cash flow each year and their earnings
are growing faster than their share price has grown over the last several
years. So, their price is just slightly above a twenty price-to-earnings
but very reasonable for the growth of the generating.

HERERA: All right. Tim, we`ll leave it there. Thank you so much.

COURTNEY: All right. Thank you.

HERERA: Tim Courtney with Exencial Wealth Advisors.

MATHISEN: And coming up, cutting airport congestion.

(BEGIN VIDEO CLIP)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Tired of those traffic
jams keeping your flight from taking off? I`m Phil LeBeau in Chicago with
the story of one airline making changes so that you can get off the ground
sooner. That story coming up on NIGHTLY BUSINESS REPORT.

(END VIDEO CLIP)

MATHISEN: Credit reporting company Experian has been fined $3 million.
The Consumer Financial Protection Bureau alleges that the firm
misrepresented the credit scores it marketed to consumers. The federal
regulator said in some cases, there were significant differences between
what the company provided the consumers and the score used by lenders.
Experian has not admitted to any of the agency`s allegation.

HERERA: As the spring vacation season picks up, it brings with it a
chronic problem at many airports — congestion and delays. But the Trump
administration says renovating many of America`s airports and upgrading the
country`s air traffic control system could use those backups.

Phil LeBeau has more from Chicago`s O`Hare Airport.

(BEGIN VIDEOTAPE)

LEBEAU: It is frustrating and all too common — your flight leaves the
gate, but you`re stuck in a traffic jam on the tarmac.

UNIDENTIFIED MALE: You see a lot of people out there cell phone that
saying, well, I have this meeting and we need to reschedule.

UNIDENTIFIED FEMALE: No, it`s not very fun. Usually, there`s not a lot
you can do. You just have to sit there and wait.

LEBEAU: While the FAA has been upgrading its systems to improve the flow
of flights in the U.S., the reality is airlines have been patting their
schedules so planes have a better chance of taking off and landing on time.
That means the time set aside for flights like those from Washington to New
York or Las Vegas to Los Angeles is up more than 10 percent.

Those longer schedules are due in part to congestion in the air and on the
tarmac at some of America`s busiest airports — a problem many airlines
believe can be fixed by upgrading America`s air traffic control system.

LORNE CASS, AMERICAN AIRLINES: Ultimately, we want the pilot of the
airplane, the air traffic controller, the dispatchers at the airline, to
all have the same information at the same time with which to make the best
decisions.

LEBEAU: American Airlines is already trying new approaches to improving
the flow of flights at its hubs.

But the big improvement for all airlines could come if President Trump can
convince Congress to spend billions to fix America`s airports, and by
extension, the epic jams clogging up airspace over America`s busiest
airport.

CASS: I think there`s a lot of work underway today and the things that are
coming out in the next two to three years, there`s some technologies that
can make a huge difference that have probably planned out over a 10 or so
years period.

LEBEAU: Fixing airport and air traffic so travelers spend less time in a
plane and more time at their destination.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

MATHISEN: And finally tonight, have you been distracted by March Madness
while you`re at work? You`re not alone. A new study by Challenger Gray &
Christmas estimates that for every hour spent rooting for a team or
analyzing a bracket, employers lose a collective $2 billion.

I`m not paid $2 billion an hour.

HERERA: Yes.

MATHISEN: I don`t know how that works. But trust me, it works.

March Madness also considered the third biggest digital distraction at
work. The first, texting, Sue. The second time spent on Facebook
(NASDAQ:FB).

HERERA: I don`t text. And I`m not on Facebook (NASDAQ:FB).

MATHISEN: I`m not on Facebook (NASDAQ:FB) either.

HERERA: I do look at a bracket every once in a while.

OK. That does it for us tonight. I`m Sue Herera. Thanks for joining us.

MATHISEN: I`m Tyler Mathisen. Have a great weekend, everyone. We`ll see
you Monday. I`ll text you, Sue.

HERERA: You got it. I`ll text you right back.

MATHISEN: All right.

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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