Transcript: Nightly Business Report – March 27, 2017

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Losing streak. The Dow dipped
for eight straight days, as Wall Street weighs the potential for tax
reform. And investors wonder if there`s more selling ahead.

A town divided. Why Steele City, Nebraska, is split on the construction of
the Keystone pipeline.

Protecting the power grid. How vulnerable is the key infrastructure from
hackers?

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Monday, March
27th.

Good evening, everyone. I`m Sue Herera. Tyler Mathisen is off tonight.

It is the longest losing streak for the Dow since 2011 when the fight over
the debt ceiling prompted fears of a default by the U.S. government. This
time the string of losses is for a different reason. Investors are
starting to doubt the president`s ability to push through pro-business
policies, following the defeat of the Republican health bill on Friday.
The losses extended to the overseas markets this morning and continued into
today`s trading session, although stocks did come off of their lows by the
close.

The Dow Jones Industrial Average fell 45 points to 20,550, its eighth
straight loss. The NASDAQ rose 11 and the S&P 500 was off two.

Bob Pisani explains today`s market move.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The markets started on
a very weak note with the Dow down nearly 200 points at the open. No
surprise. The weaker sectors were those that would be hurt if the Trump
agenda of tax cuts and infrastructure spending failed to materialize, the
banks, the industrials, materials, dollar was lower, bond yields were
lower. Oil levels were lower.

And then, shortly after the open, it all turned around. The dollar, bond
yields and oil reverse as did stocks, including bank stocks. S&P 500 went
positive in the last 20 minutes of the day, though ended slightly negative.

All right. What happened? It`s still being debated, but the S&P held
above the 50-day moving average. That`s a technical level.

Second, the Trump agenda may be a bit more iffy, but it`s not dead and the
trading community still believes some kinds of tax cut is coming.

Third, earnings season is about to begin. And the early signs are very
promising. Now, we may have the best quarter for earnings gains in nearly
six years. More on that later.

Finally, remember all those people who wished the market would drop 5
percent to 10 percent so they could buy at lower levels? Well, they have
an opportunity now and some may be actually doing it. Volume was not heavy
overall today, but we saw heavy volume in financial ETFs. That`s important
because the banks are well into correction territory already. Most of the
big names are down more than 10 percent.

So, it looks like some traders were indeed betting at least on a short-term
bottom, for at least that group.

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

(END VIDEOTAPE)

HERERA: As Bob just reported, traders believe some kind of tax reform is
coming. Here`s what some on Wall Street are saying. Goldman Sachs
(NYSE:GS) portfolio strategists believe the reduction of the corporate
income tax rate will be smaller and sign into law later than originally
anticipated. Bank of America (NYSE:BAC) is warning that the tax
legislation could be a watered-down version of current proposals.

So, what do you do now with your investments, concerns about what will or
will not get done in Washington weigh on Wall Street?

Kevin Caron is the senior portfolio manager at Washington Crossing Advisors
and he joins us now to talk about that.

Kevin, always good to see you. Welcome back.

KEVIN CARON, WASHINGTON CROSSING ADVISORS SENIOR PORTFOLIO MANAGER: It`s
great to be here. Thank you.

HERERA: This market, some say, has been climbing and has been built on
expectations. Expectations of what`s coming out of Washington.

Do you agree with that?

CARON: I think that`s partly true. If you look at where we`ve come since
the election, it`s been a very strong rally. Of course, some of that has
to do with an expectation for tax cuts, regulatory reform, maybe some
spending. But on the other hand, the other part of it has to do with the
underlying economy, which actually began to turn around and show some signs
of improvement well before the election, summertime of last year.

So, I think it`s a combination of an improving economy with some
expectation for some pro-growth strategies.

HERERA: Have you been adjusting your portfolio balance, or the types of
stocks that you`ve been investing in, given the landscape that you just
laid out for us?

CARON: We`ve been focusing on companies that are going to survive whatever
the next difficult environment is. So, we focused on companies that had
very good balance sheets, that are consistent in terms of their overall
businesses, whose dividends would be able to survive a slight downturn in
the economy or their own business. Those are the kind of things that we`re
focusing on, because we`ve been through a very good period of time for both
the stock market and the economy.

But we know that these things don`t last forever. So, we want to be ready
whenever the next thing goes bump in the night.

HERERA: Yes. You`ve given us four questions that you think individual
investors should ask themselves, deciding whether or not to keep a stock in
the portfolio.

Does the company rely on debt or financial engineering? Has the business
proven to be relatively steady during tough times in the past? Is the
dividend at risk of being cut if earnings slip and does the price of the
stock reflect reality or wishful thinking?

So, say you come up with, yes votes on all of those four key questions. I
would assume that means you keep the stock?

CARON: Well, that if we are — if we have good company, then we want to
hold on to them. But we`re doing as much on the search part of the
adventure here, too. Because we want to make sure that we`re looking
constantly for companies that are going to fit the bill, that have those
characteristics. And anytime we can upgrade the quality of the portfolio,
particularly with the Dow near record highs, over 90 months since the last
recession, we want to make sure we`re taking advantage of the ability to
make those changes.

So, it`s both of those things, looking at the existing portfolio, but also
looking for new opportunities.

HERERA: Kevin, thank you so much. We`ll leave it there.

CARON: Thank you.

HERERA: Kevin Caron with Washington Crossing Advisors.

Well, the health care bill may have been pulled, but there are still some
legal cases looming that could change the prognosis of any future reform.

Bertha Coombs explains.

(BEGIN VIDEOTAPE)

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: The defeat of the
GOP health bill removes some uncertainty for insurers in 2018, but there
are still unresolved legal issues, starting with cost-sharing reduction
subsidies for low-income people on Obamacare plan.

MICHAEL NEIDORFF, CENTENE CHAIRMAN & CEO: It impacts low-income
individuals, who really would not have the means to cover all the
deductibles or the insurance premiums themselves.

COOMBS: People who earn up to $29,000 a year, not only get subsidies for
their Obamacare premiums, they also get cost-sharing reduction funds that
bring down their out-of-pocket costs. It`s a big deal for insurers,
because they pay the costs up front. And the Obama administration
reimbursed them.

But Republicans in the House sued to stop those payments, arguing funding
for those subsidies had not been approved by Congress. And last year, a
federal judge agreed. When President Trump won, the House put its lawsuit
on hold. The big question is what happens now?

PROF. JOSH BLACKMAN, SOUTH TEXAS COLLEGE OF LAW HOUSTON: This puts
Republicans in a very, very strange spot, where they`re making the same
illegal payments that they accuse the Obama administration of making.

PROF. ABBE GLUCK, YALE LAW SCHOOL: If Congress decides to keep going with
that lawsuit, the insurers will sue, or leave the markets. And the markets
will implode.

COOMBS: Anthem CEO Joe Swedish told President Trump in a private meeting
that maintaining those payments which amount to $9 billion for 2017, is
critical. Insurers want assessment.

DR. J. MARIO MOLINA, MOLINA HEALTHCARE CEO: We`ve said all along one of
the things that was important to settle the issue on the cost-sharing
reductions. Congress has the ability right now to appropriate the money.
If they want to put this behind us, they can do it.

NEIDORFF: I think they recognize individuals are talking, that come the
May period, they need to deal with that.

COOMBS: More than a dozen insurers have also sued the government over
payments originally promised to make up for big losses on high-cost
enrollees during the first few years of Obamacare. Congress fought funding
for that, too, so the Obama administration only paid a fraction of the
claims, which helped contribute to some insurers leaving the exchanges.
One insurer said if the Trump administration could settle those cases now,
it would buy an awful lot of goodwill from the industry.

Bertha Coombs, NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

HERERA: Whatever happens next in Washington will likely impact Wall
Street.

John Harwood joins us from the nation`s capital tonight.

Good to see you as always, John.

So, Bertha laid out some of the issues that still remain. So, tell us
what`s next for reforming the health care system?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, the question is
whether or not the Trump administration wants to let Obamacare deteriorate,
or whether it wants to focus on resolving its current problems. There are
ways they could do that. They could work with Democrats on some fixes.
The president`s talked about that. His press secretary, Sean Spicer,
talked about that.

But that is not consistent with the desires of the Republicans who control
the House and the Senate. So I`m not sure that`s going to happen anytime
soon. Speaker Ryan made some noise today about returning to health care
later in the year, after they deal with other priorities like health care
and the budget — excuse me, tax reform and the budget.

HERERA: Right, exactly. Well, I was going to go to tax reform. I mean,
health care reform is very complicated. Tax reform is very complicated as
well. Perhaps not as emotional an issue, though.

What can we expect on the tax reform front?

HARWOOD: I think prospects, Sue, are a little better on tax reform.
Republicans like to come together to cut tax rates. Cutting rates is
easier than the reform part, because if you reform a system, you`re closing
loopholes and those tend to be popular with the people who have them.

The real question is, what is the scope of tax reform? Is it just
corporate or individual as well? And do members decide that it`s going to
be revenue neutral? That is, it does not increase deficits, or are they
willing to let the deficit get bigger? I`m not sure the Freedom Caucus
will go along with that.

HERERA: There seems to be a growing buzz about a possibility of a
government shutdown at the end of next month. Are we headed that way?

HARWOOD: There`s a distinct possibility that could happen, and that is
going to ripen a lot sooner than these questions about tax reform or health
care. If they don`t fund the government by April 28th, the government is
going to run out of money and they`re going to shut down.

Now, it ought to be easy to do that, just to keep funding on a steady
state. The problem is, Congressional Budget Office has projected that if
action isn`t taken to reduce the deficit, in six years, they`re going to be
at $1 trillion levels again. Many Republicans do not find that acceptable.
So far, the Trump administration has not proposed either tax increases or
net spending cuts that would allow the deficit to come down.

HERERA: We will see. John, thank you, as always.

HARWOOD: You bet.

HERERA: John Harwood in Washington.

The Supreme Court has rejected a bid to revive a $7 billion settlement
reached between retailers and the credit card companies. The decision
means that retailers can still challenge swipe fees in the future. The
move by the Supreme Court is considered a win for large store chains, and a
blow to Visa (NYSE:V), MasterCard (NYSE:MA) and other payment companies.
By some estimates, swipe fees exceed $40 billion annually.

But the court did agree to hear a case that could limit lawsuits for
omissions in shareholders` disclosures. The issue is whether publicly
traded companies can be sued for securities fraud by third parties for
omitting certain trends or uncertainties in filings to shareholders. A
ruling last year by a New York court found that companies can be sued for
alleged disclosures shortcomings.

The U.S. attorney general has a warning for sanctuary cities. Today, Jeff
sessions said cities and states that protect immigrant felons from federal
immigration laws may see funds cut from the Justice Department.

(BEGIN VIDEO CLIP)

JEFF SESSIONS, ATTORNEY GENERAL: It is a policy of the executive branch to
ensure that state and cities comply with all federal laws, including all
immigration laws. Failure to remedy violations could result in withholding
grants, termination of grants, and disbarment or ineligibility for future
grants.

(END VIDEO CLIP)

HERERA: The attorney general also said that one Justice Department office
was expecting to award more than $4 billion in grants this fiscal year.

Still ahead, a small Nebraska town`s big role in moving Canadian crude to
the Gulf Coast.

(BEGIN VIDEOTAPE)

JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Behind me where
two pipes become one. This is theoretically the keystone for the Keystone
pipeline. That story coming up on NIGHTLY BUSINESS REPORT.

(END VIDEO CLIP)

HERERA: Blackrock and Vanguard want the introduction of new retirement
rules to be delayed. The world`s largest asset managers warned that the
fiduciary rule could confuse investors and add unnecessary costs to the
financial industry. The rules were endorsed by the Obama administration
and are set to fake effect in April. President Trump has ordered a review
of the measure, which requires financial advisers to put their clients`
interests first. The retirement industry is estimated to be worth $16
trillion.

The Trump administration recently granted final approval for the completion
of the Keystone pipeline. The approval comes nearly a year after the Obama
White House blocked its construction over environmental concerns. But the
energy market is a lot different now than it was then. And many are
wondering if the country today really needs more oil.

Jackie DeAngelis reports from Steele City, Nebraska.

(BEGIN VIDEOTAPE)

DEANGELIS: A hundred miles south of Omaha, Nebraska, is Steele City. The
sign says population 84, though locals say the number is closer to 54 now.
It`s an unsuspecting city that has become the keystone to the next and
final phase of the Keystone pipeline. Patrons of the local and only bar in
town, the Salty Dog Saloon, have split views on how the project will impact
the town.

MARGO D`ANGELO, SALTY DOG SALOON OWNER: Well, you know, it`s funny to sit
in the bar and the bartender here is everything. One side of the bar is
cheering for the pipeline coming through. They`re like, yes, we get some
income to town, and the other side`s more worried about the environment.

DEANGELIS: Just a mile away from the bar, surrounded by farmland and dirt
roads is where the long contested Keystone XL will eventually connect to
the existing lower leg, bringing roughly 800,000 additional barrels of
Canadian oil per day to refiners on the gulf coast. But with crude prices
already under $50 a barrel, despite OPEC`s efforts to stabilize the market,
the concern is that more oil will flood an already unbalanced market.

JOHN KILDUFF, AGAIN CAPITAL FOUNDING PARTNER: This additional oil from
Canada is significant, and it will help to depress prices even further and
force OPEC`s hand to cut even more barrels to support prices.

DEANGELIS: So, what will the U.S. do with the additional barrels? Some
speculate they`ll be refined and exported.

KILDUFF: The U.S. Gulf Coast is already swamped with oil. So, you can bet
that most of this Canadian crude that`s flows down through the Keystone XL
pipeline will be heading overseas, likely to Asia.

DEANGELIS: But even then, without an uptick in demand, it`s tough for the
product to be absorbed. Back in Steele City, though, the owner of the
Salty Dog since 1985, Margo D`Angelo, is hopeful the area will reap the
benefits of having the pipeline run through their backyard.

D`ANGELO: Definitely brings a lot of money into the area, whether it`s
mined locally or the hotels, the Ford dealerships, Chevy dealerships.
Gosh, just everything. Grocery stores. Everybody makes money off of them
when they come.

DEANGELIS: The irony here, when this project was first proposed some years
ago, the argument could be made that we needed the Canadian crude. Now,
with a pipeline-friendly administration, some would argue the opposite is
true.

For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis, Steele City, Nebraska.

(END VIDEOTAPE)

HERERA: Pipelines, of course, are a key part of our infrastructure. So is
the electric grid and a growing challenge is keeping it safe, especially
from hackers backed by governments.

Andrea Day reports.

(BEGIN VIDEOTAPE)

ANDREA DAY, NIGHTLY BUSINESS REPORT CORRESPONDENT: It came out of nowhere
late last year in the Ukraine. Part of the nation`s capital city cut off
from power.

LIAM O`MORCHU, SYMANTEC SECURITY RESPONSE DIRECTOR: Order for Ukraine to
recover the power, they have to switch off the computers and go back to a
manual system for distributing the electricity.

DAY: And it was the second time the Ukrainian government faced a major
outage, blaming Russia for the first attack. The assault exposed security
gaps here in the U.S.

O`MORCHU: Turning off water, turning off electricity, those are all
realistic attacks now.

DAY: Real now, he says, because the criminal groups are backed by
governments and big money.

Security expert Liam O`Morchu —

O`MORCHU: We`re tracking over 100 different groups operating all the time
that are backed by governments.

DAY: And he says that`s way up from just five groups a few years ago.

O`MORCHU: Sometimes launching real-time attacks, and sometimes just
setting up to have a back door, they have a foothold that they can use in
the future when they need it.

SCOTT AARONSON, EDISON ELECTRIC EXECUTIVE DIRECTOR: Electric utility
companies take this issue very, very seriously.

DAY: Scott Aaronson, Edison Electric, the trade group that represents the
nation`s investor-owned electric companies.

AARONSON: Whether it`s an act of war or act of god, that is impacting the
grid, we have ways to be resilient, to make sure that we can keep the
electricity flowing.

DAY: And that includes, he says, sharing information with grid operators
across the country, along with top government officials.

AARONSON: We have begun to pursue a capability for manual operations so
that we can be prepared if a similar incident happens here in the United
States.

DAY: The grid extends to Canada and into Mexico, and is worth more than $1
trillion, bringing power to some 334 million every year.

O`MORCHU: We`re talking about a government and the resources and the money
and the expertise that a government can wield going up against private
companies. So, the real mismatch there in the power of attack and power of
defense.

DAY: So, what`s being done to protect the electric grid? The Government
Accountability Office or GAO found over two dozen government efforts in
place right now to increase reliability, including threats from hackers.
But they admit that more needs to be done.

For NIGHTLY BUSINESS REPORT, I`m Andrea Day.

(END VIDEOTAPE)

HERERA: Falling egg prices hurt Cal-Maine Foods (NASDAQ:CALM) and that`s
where we begin tonight`s “Market Focus”.

Cal-Maine which is the largest producer of shell eggs in the U.S., posted
quarterly results that missed estimates, citing the volatile market
conditions in the egg industry, that they experienced this year. Still,
shares of Cal-Maine scratched out a gain of 15 cents to close at $37.50.

Apparel company G-III posted disappointing quarterly results and issued
full year guidance that was well below Wall Street targets. G-III also
announced a partnership with Macy`s (NYSE:M), where Macy`s (NYSE:M) will
become the exclusive retailer of the Donna Karan line DKNY. That wasn`t
enough for investors. They focused on the weak guidance numbers, sending
shares down 14 percent to $19.69.

Dow Chemical (NYSE:DOW) and DuPont said they had received conditional
approval from the European Commission for their proposed $77 billion
merger. The chemical company said it is a significant step towards
completing the deal. After which the plan is to spin off into three
independent publicly traded companies. The deal still needs U.S. approval.
Dow chemical up 1.5 percent to $64.02; DuPont up nearly the same to $80.58.

Sealed Air (NYSE:SEE) is selling the cleaning products business and said
its food hygiene and cleaning business to private equity firm Bain Capital.
Price tag, more than $3 billion. The maker of bubble wrap said
collectively, the division`s being sold, and will continue to employ nearly
9,000 people. Shares of Sealed Air (NYSE:SEE) fell 2.5 percent to $43.55.

The decline in home ownership may have something to do with the sluggish
economic recovery. A new study suggests that the slowdown in home
construction activity took a $300 billion toll on the economy last year.
According to “The Wall Street Journal,” tighter lending standards are also
contributing to the below-normal rate of home ownership. It currently
stands at a 50-year low.

But whether you`re shopping for a home to live in, or looking for an
investment property, take note — housing demand is strong nationwide. But
some markets are still struggling, and some are healthier than you might
expect.

Diana Olick breaks it all down.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: The hardest hit market
from the housing crash are now some of the healthiest, and the hottest are
cooling. A new report ranks the nation`s top 50 and the leader is a
shocker. Real estate auction and analytics company Ten-X ranked markets
based on population growth, job growth, wage growth and home sales, prices
and construction.

Tampa, Florida, came in as the healthiest housing market in the nation,
even though it had one of the highest foreclosure rates during the crash.
Jacksonville also rounded out the top five and Orlando made the top ten.

RICK SHARGA, TEN-X CHIEF MARKETING OFFICER: Florida fell the furthest,
really, of any state in terms of peak-to-trough pricing. And it still has
a ways to go before it gets back to its prior peak. But that really shows
us that there`s still room for growth in the Florida market.

OLICK: Other surprisingly healthy markets, Las Vegas, thanks to strong
population and job growth. Prices there are still 20 percent below the
peak of the housing boom, but demand is high and construction is coming
back.

Not so healthy, New Jersey and Long Island, New York. Employment is just
not keeping up with the cost of living. Los Angeles and San Francisco are
suffering from their own successes. High demand in the last five years
pushed prices beyond affordable, which does not bode well for either market
in the coming years.

Overall, the south is the real winner, as both population and jobs move to
the warmer states, and home builders respond accordingly.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.

(END VIDEOTAPE)

HERERA: To read more about housing markets across the country, you can
always head to our website, NBR.com.

Coming up, Uber`s rocky road. The latest headache for the fast growing
ride-hailing company.

(MUSIC)

HERERA: North Carolina`s controversial law limiting LGBT protections will
cost that state close to $4 billion in lost business over a dozen years.
The estimate was put together by the “Associated Press” after analyzing
interviews and public records. Over the past year, concerts were canceled,
PayPal pulled its expansion plans and the NBA moved last year`s all-star
game out of Charlotte.

The National Football League has approved the Oakland Raiders move to Las
Vegas. The NFL said it was not satisfied with Oakland`s new stadium
proposal, and couldn`t pass up Las Vegas` offer of $750 million in public
money for the project. The team will move to Las Vegas in the year 20.

In Arizona, one of Uber`s self-driving cars was involved in an accident.
It`s the latest blow to the ride-hailing startup, and it`s also arguably
the most impactful, because as Deirdre Bosa reports, Uber has a lot riding
on that program`s success.

(BEGIN VIDEOTAPE)

DEIRDRE BOSA, NIGHTLY BUSINESS REPORT CORRESPONDENT: This self-driven
Uber-owned Volvo ended up flipped on its side in Tempe, Arizona. A police
spokesperson tells us there were no serious injuries, and Uber wasn`t
responsible for the crash. But at a time when some of the biggest
companies in the world are racing to develop autonomous vehicles, and
people need to get comfortable taking their hands off the wheel, every
accident can be a big deal.

After the collision, Uber pulled its entire fleet of self-driving cars off
the roads in its three testing grounds. Arizona, where the collision
occurred over the weekend, Pittsburgh and San Francisco. By Monday, the
cars were back on the roads in all three cities.

The crash is the latest setback for Uber as it races tech companies and
automakers to develop autonomous vehicles. A few months ago, one of Uber`s
self driving cars was caught driving through a red light in San Francisco.
Shortly after, Uber pulled all the vehicles off roads in California after
the state`s regulator them.

There`s also the lawsuit from Alphabet self-driving car unit Waymo and
high-level departures at startup.

This could have major implications for the startup`s entire business model.
Uber`s future and its nearly $70 billion valuation depends on Uber leading
the way and figuring out autonomous driving. Right now, the company loses
billions of dollars a year, eliminating the driver would eliminate one of
its biggest costs.

For NIGHTLY BUSINESS REPORT, I`m Deirdre Bosa, San Francisco.

(END VIDEOTAPE)

HERERA: And finally tonight, the fearless girl will stare down the Wall
Street bull for another year. The popular statue was scheduled to be
removed early next month. As we reported, she was put in place by State
Street (NYSE:STT) Global Advisers to advocate for getting more women on
corporate boards. According to New York City`s mayor, she will remain as
part of a city public art program.

And that is NIGHTLY BUSINESS REPORT for tonight, I`m Sue Herera. Thanks
for joining us. Have a great evening, everybody. And we`ll see you 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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