Transcript: Nightly Business Report – March 29, 2017

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Bluest of the blue chips.
Should investors look to the technology sector for the next generation of
high quality must-own stock?

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Breaking ground. More homes
are needed but home builders don`t have the workers to keep up with demand.

MATHISEN: Medical puzzle. With a string of recent Alzheimer`s, drug
failures, are researchers focusing on the right thing? A look at the
growing debate tonight.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
March 29th.

HERERA: Good evening, everyone. Welcome.

There were two market forces at work today — one took place overseas, the
other right here on Wall Street. And as a result, a tug of war ensued with
the Dow and the S&P 500 making slight moves, but the NASDAQ headed north
for its fourth straight day of gains. The Dow Jones Industrial Average
lost 42 points to 20,659, the NASDAQ added 22 and the S&P 500 rose 2.5.

So, let`s begin overseas, where divorce proceedings between the United
Kingdom and the European Union officially got under way. Now begins the
messy process of leaving — the U.K. leaving that trading bloc.

Steve Sedgwick reports from Westminster.

(BEGIN VIDEOTAPE)

STEVE SEDGWICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Nine months after
the British referendum where the U.K. decided to leave the European Union,
the British finally sent their letter to the E.U., to the president of the
council, Donald Tusk, saying, we`re enacting Article 50 and that actually
the divorce proceedings will start apace. It`s only five short paragraphs
in Article 50, but part of that is a two-year timeline, a very tight
timeline for leaving the European Union and hoping the British are at least
getting a trade deal as well.

Now, that is already a thorny issue because Michel Barnier, who is the E.U.
chief negotiator, has said we need to sort out the U.K.`s divorce bill,
which he estimates is somewhere in the region of 60 billion euros before we
can talk about a new trade deal for the United Kingdom. Mrs. May`s
government for their part want these things to move at the same pace, i.e.,
divorce bills and those terms of separation moving with the trade deal as a
part of a final deal.

Whether they can do this in a tight two-tier period which also is going to
be punctuated by German and French elections remains to be seen. But as
Donald Tusk, the E.U. council president, put it today, he fears that there
is nothing to win from anyone but the U.K. and the E.U. in this process.
He said, in essence, this is all about damage control and he said, “We miss
you already, United Kingdom.”

This is Steve Sedgwick for NIGHTLY BUSINESS REPORT in Westminster.

(END VIDEOTAPE)

MATHISEN: The other big force at work today is a stock market phenomenon
that takes place practically every year, it doesn`t last long. But some
sectors typically make notable moves.

Bob Pisani explains.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: History tells us
investors might want to brace for a seasonal dip ahead. It`s a well known
phenomenal, April usually begins with a flat and slightly down market for
the first two weeks. Now, the usual explanation is that investors withdraw
money to pay taxes. The good news is that the market tends to rebound
immediately in the two weeks after Tax Day, which falls on April 18th this
year, with several sectors showing notable gains.

Analysis shows that since 2000, the S&P 500 has been down an average of 0.2
percent in the first two weeks of April, up only 41 percent of the time.
Two weeks after Tax Day, the S&P is up 2 percent on average, rising 75
percent of the time. That`s significant for a two-week period. A few
sectors are worth noting in particular, technology, financials,
industrials, and energy, all tends to trade flat to down in the two weeks
leading up to Tax Day, and jump about 2 percent in the two weeks after Tax
Day.

Oddly, this trade doesn`t work with larger defensive sectors like health
care and consumer staples. What`s going on?

Well, besides the tax factor, earning season may also play a role here.
Earning season begins right around April 15th, banks and industrials are
among the first to report in those two weeks, in the back half of April.
So, it`s possible reactions to earnings could also be a factor.

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

(END VIDEOTAPE)

HERERA: With just a few trading days left in March, the NASDAQ is the only
major index that`s higher for the month. It`s easily outpacing both the
Dow and S&P 500 this year. The NASDAQ has been held by well known names,
like Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB),
that are trading at all time highs.

So, should investors view big cap tech stocks like these and others as the
bluest of the blue chips.

Joining us now is James Wang, analyst with Ark Invest.

James, welcome. Nice to have you here.

JAMES WANG, ARK INVEST INTERNET ANALYST : Nice to see you, guys.

HERERA: Do you — do you agree those are the bluest of the blue chips in
tech?

WANG: They are absolutely the bluest in blue chip tech by both market cap
and the strength they have in their relative businesses. Amazon
(NASDAQ:AMZN) is really eating the world in terms of retail and cloud.
They`re the largest cloud provider by far, bigger than Microsoft
(NASDAQ:MSFT) and Google (NASDAQ:GOOG) combined. And in terms of retail,
they acquired a Middle Eastern retailer today. So, they`re expanding their
global footprint, giving them a really long growth path ahead.

HERERA: Uh-huh.

MATHISEN: If I wanted to assemble a portfolio of blue chip tech stocks
that go beyond those guys, what other names would be in it potentially?

WANG: OK. So, that`s the kind of question we ask ourselves all the time
and Nvidia is a name that obviously became famous last year. It was the
top performance stock of the S&P 500. If you read any major newspaper or
watch a business nightly event like this one, you will hear about
artificial intelligence being used everywhere, finance, media, tech.

And really, Nvidia is a semiconductor company and they make the processors
behind all of the companies who need to build artificial intelligence
solutions. Their chips run AI ten times faster than existing chips. And
they have essentially a monopoly in this space. So, Nvidia is a name that
I think will continue to do well in 2017.

Another one to contrast with that is IBM. IBM is not everyone`s favorite
stock. Most analysts are bearish on IBM. And we`ve had a very vigorous
debate about IBM within our firm. Our conclusion is actually I think
people are a little too pessimistic and not giving it credit.

Everyone is talking about AI. But IBM has the secret sauce for AI, with is
data. They spent about $4 billion and acquired a number of companies that
have the richest health care data in the world. And we think once they tap
into that, they`ll build some popular businesses.

HERERA: You also like Facebook (NASDAQ:FB), which is a social media stock
as well as a tech stock in many ways, correct?

WANG: That`s right. The story with Facebook (NASDAQ:FB) right now is the
contrast story with Snapchat. Snapchat had a very exciting IPO. A lot of
millennials got into it parking their cash just without doing anything
productive.

But what`s happened with Facebook (NASDAQ:FB) is that it`s taken the best
feature of Snapchat which is quote stories. These are full screen,
vertical videos that play back-to-back on your phone, very popular with
teens. And they have put that feature into every single app owned by
Facebook (NASDAQ:FB). They started with Instagram.

And this week, they added that feature into Facebook (NASDAQ:FB) proper, so
the Big Blue app. And that will now show these great, very fun full screen
videos and with facial filters like “Minion” characters for upcoming movie.
And this will give them new advertising opportunities, will give them long-
term revenue growth beyond their current advertising loads.

HERERA: All right. Well, thank you so much for joining, James. We
appreciate it.

WANG: You are welcome. Good to see you.

HERERA: James Wang of Ark Investment.

MATHISEN: The president of the Boston Federal Reserve wants the central
bank to get a lot more aggressive this year. Eric Rosengren believes four
rate hikes this year would be appropriate and would like to see an increase
at roughly every meeting unless economic data come in much stronger or
weaker than forecast. The fed already increased interest rates at its
meeting earlier this month. Officials at that time said two more hikes
would likely be the right recipe this year.

HERERA: The Supreme Court is ordering a lower court to take another look
at a New York law that prohibits businesses from imposing fees on credit
card purchases. The fees in question are the ones that merchants pay to
credit card issuers each time a customer charges a purchase or swipe fees.
The issue before the judges is whether the measure violates merchant free
speech rights. A New York court said that the law regulated conduct, not
speech. The justices said the law deals with speech and that it should be
reevaluated.

MATHISEN: The warmest February in decades may have been just what home
buyers needed to get out and sign a deal, a monthly index of pending home
sales, that signed contracts to buy existing homes jumps 5-and-a-half
percent to the second highest level of the year. Home sales could be
stronger if there were simply for homes available to buy. Home builders
have been very slow to recover from the recession and now, they`re being
hit by new challenges.

Diana Olick reports tonight from Denver.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: At a sprawling home
construction site, just 15 minutes from downtown Denver, workers are moving
ground and framing walls and windows, but the work is slow because the
workforce is slim.

GENE MYERS, THRIVE HOME BUILDERS CEO: The big challenge right now is
getting the houses built.

OLICK: Veteran home builder Gene Myers has weathered more than one
recession, but he`s never seen a labor shortage like this, made worse by
the threat of President Trump`s new immigration policies.

MYERS: Let`s be honest, the backbone of the industry in Denver is Hispanic
labor.

OLICK: Because Americans won`t do the work?

MYERS: Exactly right.

OLICK: Myers verifies documentation on his contractors but has very little
control over subcontractors who do the basic work.

You don`t always know who is building the houses?

MYERS: We do our best. But we don`t always know.

OLICK: And so, you could have undocumented workers on the site here?

MYERS: That`s possible.

OLICK: Myers has been working with Juan, an excavator for ten years. Juan
who preferred we use his first name says he`s been a citizen since 1999,
but he still worries he could be deported back to Mexico.

JUAN, CONSTRUCTION WORKER: I don`t know what to think anymore, you know,
with all these laws changing, you know?

OLICK: Juan says some of his construction friends are already moving back
to Mexico.

The competition for labor is so fierce that builders are outbidding each
other. In fact, wage growth in residential construction is twice what it
is for the rest of the work force. And some builders are actually driving
by site like these, holding up spray-painted piece of plywood offering more
cash.

ROBERT DIETZ, NAHB CHIEF ECONOMIST: Do you see poaching? There are sixes
where you can recruit a worker, they work for you a quarter or two, and
then they`re working with another subcontract contractor down the road.

OLICK: Myers says he could be putting up 50 percent more homes on this
site if he had the hands to do it. As it is, it`s taking two months longer
to build the average home today.

MYERS: And time is money.

OLICK: Meaning builders have to raise prices and pass the labor burden on
to today`s buyers.

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

(END VIDEOTAPE)

MATHISEN: And to read more about the labor shortage in housing, head to
our website, NBR.com.

HERERA: Still ahead, rise of the machines. What investors need to keep in
mind as stock picking and financial advising becomes more automated.

(MUSIC)

MATHISEN: New promise for treating cystic fibrosis. Vertex
Pharmaceuticals (NASDAQ:VRTX) reported positive clinical data on an
experimental drug. The studies show that the treatment improves patient`s
lung function. The CEO says the findings are strong enough for the company
to file an application for approval with the FDA and shares took off,
soaring 20 percent or thereabouts, in trading today.

HERERA: The FDA approved the first drug to treat severe multiple
sclerosis, and patients with relapsing MS. The drug appeared to halt
progression of the disease with few serious side effects and patients with
the more severe form, the drug modestly slowed patient`s decline. The drug
will be sold by Genentech, which is owned by the Swiss firm Roche. It will
have a list price of $65,000 a year.

MATHISEN: Conquering Alzheimer`s. The disease is a puzzle the medical
community is trying hard to solve. And after a couple high profile drug
failures, the debate over precisely how to tackle the disease is
intensifying.

Meg Tirrell has the first part of our “Modern Medicine” series on
Alzheimer`s.

(BEGIN VIDEOTAPE)

MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: The track record for
developing a new medicine isn`t great, only about one in ten experimental
drugs ever makes it to market.

But in Alzheimer`s disease, that number is one in 244.

DR. STEVE PAUL, VOYAGER THERAPEUTICS PRESIDENT & CEO: We have nothing to
slow it down right now.

TIRRELL: The disease already takes a massive toll on public health. More
than 5 million Americans are thought to have Alzheimer`s today and that
number is expected to triple by 2050 without new interventions that flow or
stop its course.

RUDY TANZI, MASS GENERAL HOSPITAL NEUROLOGY VICE CHAIR: Already, one in $5
of Medicare and Medicaid goes to Alzheimer`s. As 71 million baby boomers
like I head toward this stage, it`s going to go to one in three and one in
$2, and then Alzheimer`s will singlehandedly collapse our health care
system, will singlehandedly collapse Medicare and Medicaid.

TIRRELL: Despite the urgency, science still doesn`t know how to stop
Alzheimer`s from ravaging memories and minds. The prevailing theory is
that plaque buildups in the brain known as amyloid drive the diseases. In
medicine, this is called the amyloid hypothesis. But in one clinical trial
after another, targeting amyloid plaque has failed to affect the disease.

GEORGE PERRY, UNIVERSITY OF TEXAS AT SAN ANTONIO DEAN & PROFESSOR: Efforts
have been made to effectively to remove amyloid from the brain and just
(ph) metabolism. And none of those pathways have improved patient`s
cognition, lifestyle. The idea has been tested and shown to be incorrect.

TIRRELL: It`s one of the biggest disagreements in medicine. And the
University of Texas, San Antonio`s Dr. George Perry is in the minority.
Believers like Harvard Dr. Rudy Tanzi are convinced by genetic data linking
amyloid to Alzheimer`s.

TANZI: Any scientist or clinician who`s reading the literature carefully,
and paying attention to all the details for the last 30 years of the
journey of the amyloid hypothesis would have to come to only one
conclusion, and that is that the trials have failed the hypothesis.

TIRRELL: Trial failures that most recently included one from Merck
(NYSE:MRK) in February and from Eli Lilly (NYSE:LLY) in November. Lilly
has spent more than $3 billion in two decades on Alzheimer`s, to no
success. Many in the field believe those failures may have been due to
timing.

PAUL: What we`ve realized in Alzheimer`s disease is that the disease
process itself in the brain begins, you know, somewhat somewhere between 10
and 20 years actually before neurons actually. If you wait too late, if
you are treating patients who are already severely impaired, cognitively,
it`s probably too late to be treating them with the kinds of treatments
that we are now using.

TIRRELL: Ongoing work from Biogen, Roche, Merck (NYSE:MRK), Lilly and
others is still targeting amyloid, but earlier in the disease`s course.
Biogen alone is investing $2 billion to answer the question of whether
targeting amyloid this time and in this way will work. It`s a question
society is waiting impatiently to have answered.

For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell.

(END VIDEOTAPE)

MATHISEN: Tomorrow, our series continues with a look at the new approaches
the medical community is taking to combat Alzheimer`s.

HERERA: The Food and Drug Administration says no to Mylan`s generic asthma
drug. That`s where we begin tonight`s “Market Focus”.

The pharmaceutical company said the FDA rejected its application for the
treatment, which is a generic version of GlaxoSmithKline blockbuster drug
Advair. Mylan (NASDAQ:MYL) didn`t say why the drug was turned down, but
the company is reviewing the response. Mylan (NASDAQ:MYL) shares down 3
percent to $40.35.

Athletic apparel company Lululemon posted quarterly results after the bell
that beat analysts` expectations, but the company`s outlook for the current
quarter was bleak. It said a slow start to 2017 would cause earnings and
revenue to fall short of estimates. The shares initially plunged more than
15 percent after-hours, wiping out a 4 percent gain during the regular
session where they closed at $66.30.

The Chinese conglomerate CEFC China is taking the nearly 20 percent stake
in financial services firm Cowen Group (NASDAQ:COWN) for $100 million.
CEFC`s new position gives it the right to appoint three directors to
Cowen`s board. Cowen shares rose 9 percent to $15.15.

MATHISEN: The uniform provider UniFirst said sales rose more than expected
in its latest quarter, thanks in part to strengthen the company`s specialty
garment segment. Profit also came in ahead of expectations. UniFirst up
more than 3.5 percent, finishing the day at $141 on the button.

Bass`s Pro Shops $4.5 billion offer for rival Cabella`s, which had run into
trouble may have gotten a lifeline. As a part of the original deal, the
credit card issuer Capital One was also supposed to acquire Cabella`s
banking operations, but Capital One said it wouldn`t be able to get
regulatory approval before the deadline. Now, “The Wall Street Journal”
says Synovus Financial (NYSE:SNV) may be acquiring that business. On the
news, Cabella`s popped 12.5 percent to $52.04.

HERERA: The world`s large asset manager is overhauling its stock-picking
business, and at the heart of the change, robots. BlackRock (NYSE:BLK)
will increase its use of machines when deciding what shares to buy and what
shares to sell. As a result, the firm will offer its retail customers
lower cost funds that rely on computers to make decisions. The move comes
as investors move more of their money into passive investments, like index
funds, from those actively managed funds. The changes will result in job
losses. BlackRock (NYSE:BLK) has roughly $5 trillion under management.

MATHISEN: Well, as the financial services industry, including BlackRock
(NYSE:BLK) becomes more automated, there are some things investors need to
keep in mind, especially within it comes to what are known as robo adviser
options.

Here to discuss that with us is Arielle O`Shea, she`s Nerd Wallet`s
investing and retirement specialist.

But you are no nerd, I know this, Arielle. Welcome. We`re glad to have
you with us.

ARIELLE O`SHEA, NERD WALLET INVESTING AND RETIREMENT SPECIALIST: Thank
you.

MATHISEN: Let`s just for those who may not be familiar. When we talk
about robo advisers — what are they? What do they do? And do they work
with me the consumer?

O`SHEA: Sure. So, robo advisers are really computers that manage your
investments for you. Some of them are strictly computer based, so you`ll
only be working with the computer. And some of them also pair that
computer with a human adviser, so you get that human support along with
computer algorithms that are managing the investments directly.

HERERA: So, what do you look for or how do you determine if a firm that
has a robo advisory arm is right for you? And what — how do you evaluate
it?

O`SHEA: Sure. So, you know, these firms vary widely. So, you really want
to look at the factors that matter most to you. If you don`t have a lot of
money to invest, you`ll want to look at a firm that has a low minimum
investor requirement. So, some of these firms require zero money to get in
the door, sometimes $500, sometimes as much as $50,000 or $100,000.

So, obviously, you want to rule those higher balance firms off if you don`t
have that kind of money. Other things to look are the management fees.
Robo advisers are going to be less expensive generally than human advisers.
But the fees can vary pretty widely. So, if costs are important to you,
and they should be, you should always look at those management fees.

I think customer service is really important, alongside the investment
portfolios that the adviser offers. So, they tend to be pretty comparable
among firms, but you do want to make sure that the firm is offering the
investments that you want because you generally can`t customize the
portfolio. So, they`ll have, you know, several different portfolios that
they offer you based on your risk tolerance, and that`s going to be the
choices that you have to pick from.

MATHISEN: You all have looked at several of the offerings in this
particular marketplace and have identified five or so that you think are a
cut above. Which ones?

O`SHEA: Yes. So, we looked at a lot of different level advisers, and the
two that we picked as our best overall for most consumers are Betterment
and Wealthfront. So, those are both independent advisers. We like them a
lot because they have low minimums, low fees, really innovative tools that
are kind of constantly competing with each other, which means they are
innovating really quickly and providing management for consumers and really
good support.

We also like for someone who wants a human adviser element, we like
Vanguard Personal Adviser Services. So, you can pay a little more. They
also have a little bit of a higher balance requirement, but you will be
able to have access to human financial advisers as well. And so, that`s a
benefit if you want to be able to get someone on the phone.

MATHISN: All right. Arielle, thank you so much for being with us. We
appreciate your help tonight.

O`SHEA: Sure. Thanks for having me.

MATHISEN: You bet. Ariel O`Shae is with personal website Nerd Wallet.

And still ahead, greener pastures? The spread of digital revolution into
America`s agriculture heartland.

(MUSIC)

HERERA: Westinghouse Electric has filed for bankruptcy. The company that
was once at the forefront of nuclear energy developments has seen some big
losses stemming from projects in the southeastern part of the country. It
was also hit by both the cost overruns and also tumbling prices for natural
gas, which have eroded the economics of nuclear energy. Bankruptcy however
will allow Westinghouse to assess whether it should continue construction
of the first new U.S. nuclear power project in three decades. Westinghouse
is owned by Japan`s Toshiba.

MATHISEN: BuzzFeed will reportedly go public next year as first reported
by the online site Axios. The digital news and entertainment website has
already raised hundreds of millions of dollars of venture capital from
firms like NBC Universal (NYSE:UVV). The talks are in the early stages
and, of course, NBC Universal (NYSE:UVV) is the parent company of CNBC,
which produces this program.

HERERA: Robots, drones and artificial intelligence are pretty common, of
course, in Silicon Valley. But now, investors want to use those
technologies to transform traditional farms.

Aditi Roy is in Burlingame, California, at the Agri-Tech Innovation Summit,
where tech and agriculture are all coming together.

(BEGIN VIDEOTAPE)

ADITI ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s a bit odd to see
dairy cows on farms wearing what looks like brightly colored necklaces.
They`re actually smart collars. Their makers say they can save farmers
hundreds or even thousands of dollars per cow by detecting diseases before
they become life-threatening or monitoring ovulation cycles to breed
efficiently.

Two different companies Connecterra and Y Combinator batch Cowlar have come
out with their own bovine devices, both startups call themselves Fitbit for
cows. Livestock is just one area of agriculture that`s being disrupted by
tech. John Hamer is the managing director of Monsanto (NYSE:MON) Growth
Ventures.

JOHN HAMER, MONSANTO GROWTH VENTURES MANAGING DIR.: We`re seeing more and
more investment dollars coming into agriculture. And there`s a unique
aspect of that investment. It`s backing entrepreneurs.

ROY: Big ad companies like Monsanto (NYSE:MON) and Dow have started their
own V.C. arm to tap into the birth of innovation. Ad tech companies raised
a record amount last year and this year could top that, according to CV
Insights. Some of the hottest companies include Drone Deploy which makes
software for drones to map out fields more precisely.

And then, there`s Blue River Technology. The company uses cameras and
computers to make lettuce box to harvest the crop more efficiently.
Industry watchers say startups can bring innovation solutions to market
faster than large companies.

HAMER: They`re going to be nimble. They`re going to be fast. They`re
going to change direction quickly. They`re not going to be sitting in
meetings. And it`s exciting to work with those entrepreneurs because
they`ll tackle very, very challenging ideas. They don`t have to have the
whole answer before they get going.

ROY: Farmer`s business network is part social network, part digital co-op
for farmers, to help them find the best prices for things like feed or
fertilizers. One barrier entrepreneurs face is getting farmers to adopt
their technology. Farmers Business Network dealt with that challenge by
putting resources close to farmers, physically and virtually.

AMOL DESPHANDE, FARMERS` BUSINESS NETWORK CO-FOUNDER: We go and find the
most innovative farmers. We will hire our own sales force to use online
marketing. We use our virtual store, online store, to be able to attract
farmer`s interest and then engage with them.

ROY: Experts say part of the reason why we are seeing such an explosion of
tech in agriculture is that the cost of technology are much slower,
especially with innovations like cloud computing, providing a backbone for
many of these startups.

For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, Burlingame, California.

(END VIDEOTAPE)

HERERA: And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera.
Thanks for joining us.

MATHISEN: And thanks for me as well. I`m Tyler Mathisen. Have a great
evening, everybody. We`ll see you back here tomorrow.

END

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

 

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