Transcript: Nightly Business Report – May 1, 2017

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Setting records. The tech
dominated NASDAQ closes at a new high, as more and more technology
companies go old school and pay or raise dividends.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Stormy weather. Insurers got
walloped with claims from tornadoes and ice storms in the first three
months of the year. Why your premiums may now head even higher.

MATHISEN: And curdled relations. America`s dairy farmers are not happy
that some of their Canadian customers disappeared with no warning.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Monday, May
1st.

Good evening, everyone. I`m Tyler Mathisen, reporting tonight from New
York City.

HERERA: And I`m Sue Herera.

We begin with the hottest sector of the year getting even hotter.
Technology stocks, they started the month of May off with a gain and that
helped power the tech-heavy NASDAQ to a record, less than a week after it
breached 6,000 for the first time ever. So far this year, the NASDAQ has
risen 13 percent, easily outpacing the other major indexes.

So, here are today`s closing numbers. The Dow Jones Industrial Average
fell 27 points to 20,913. The NASDAQ added 44 to a new high. And the S&P
500 gained four.

MATHISEN: Well, Sue, Apple (NASDAQ:AAPL) shares are up more than 26
percent this year, and they have, of course, helped power the NASDAQ so
far. And tomorrow, the world`s most valuable publicly traded company will
report earnings.

Historically, this is the quarter when Apple (NASDAQ:AAPL) typically
announces its annual dividend hike. Last year, Apple (NASDAQ:AAPL) paid
out the most in the tech sector by far, followed by Microsoft (NASDAQ:MSFT)
and IBM.

So, how should dividends figure into your technology stick picking
strategy?

Kim Forrest is a portfolio manager at Fort Pitt Capital and she joins us
now.

Kim, welcome. Good to have you with us.

You know, I`ve always thought of the tech stocks fundamentally as growth
stocks like Apple (NASDAQ:AAPL), even Microsoft (NASDAQ:MSFT) and others.
Are they different now? Are they yield stocks? Are they income stocks?
Or are they still growth with a little sweetener?

KIM FORREST, FORT PITT CAPITAL PORTFOLIO MANAGER: I think they`re that —
the last one, growth with a little sweetener. And I`ll tell you why. I
think their shares trade with too much variation. The volatility is too
high for them to be really one of those dividend-paying stocks that low
risk investors love, like utilities.

But they also don`t have to invest a high proportion of their earnings back
into their business. But they — so they can pay it out as dividends. So,
you get the best of both worlds, growth and a dividend.

HERERA: You say that you need to take a barbell approach to investing in
tech. Tell me a little bit more about that.

FORREST: Well, you know, to have some distributed risk, you could have
some of the older stocks like Apple (NASDAQ:AAPL) and Microsoft
(NASDAQ:MSFT) and Intel (NASDAQ:INTC) in your big cap portfolio. And then
here on this side of your barbell, you could have smaller stocks that do
not pay a dividend, some of the small cap stocks that are really high
growth sort of plays.

MATHISEN: So, let`s talk about some of these stocks that are out there for
the picking, if you like them.

Which of these big cap tech stocks that pay a dividend are at the top of
your buy list? And we know we`ve got Apple (NASDAQ:AAPL) tomorrow coming
out with earnings. So, I`d like to get your thought on that, whether it`s
at the top of your list or not.

FORREST: Sure. Well, let me give you the list and then we`ll talk about
Apple (NASDAQ:AAPL), because Apple (NASDAQ:AAPL) doesn`t make it quite
there for me. We tend to like Microsoft (NASDAQ:MSFT) and Intel
(NASDAQ:INTC) as our two kind of old school plays. They both pay nice
dividends. And we don`t think either one of those dividends is in any sort
of trouble. So, if that`s what you`re looking for, tech with a dividend,
take a look at those two names.

And I think Apple`s a big head scratcher. Everybody`s buying this company
in anticipation of its next product releasement, which should be later this
year. So that`s the big question. Do you feel like Apple (NASDAQ:AAPL) is
going to produce this must-have phone that is going to drive all of these
people there? I don`t know. I can`t tell you.

MATHISEN: All right. Kim Forrest, love the jean jacket. Kim Forrest with
Fort Pitt Capital.

FORREST: Thank you.

MATHISEN: All right.

HERERA: And it`s not just technology stocks that investors are buying up,
but ETFs as well. Investors plowed on average more than $1 billion a day
into exchange traded funds last month.

And as Bob Pisani tells us, the trend is expected to continue.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: For the EFT business,
April came in like a lion and out like a lion. ETFs flows which have been
strong all year continued strong in April, roughly $42 billion in new money
came in, with this roughly the same inflow we`ve seen every month this
year. So, the four-month total is $170 billion. That`s the highest ever
for four months. At this pace, we could have a $500 billion year for
inflows, which would be a record.

So, three sectors saw particularly strong inflows. First, plain vanilla
ETFs, like S&P 500 Index Fund. Second, flows were strong into European
funds. Third, emerging markets saw inflows. And finally, we also saw
money flow back into high yield funds even. Everything.

So, who`s losing? Gold miners. After months of strong performance in
flows, gold mining stocks funds had outflows. Mexico also saw outflows, a
continuation of the war of words between that country and President Trump.

So, where do we go from here? The EFT business will top $3 billion in
assets under management any day now. It`s still a long way from the
roughly $16 trillion in assets that the mutual fund industry has, but the
trend has been unmistakable for years. ETFs are winning the war.

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

(END VIDEOTAPE)

MATHISEN: Lawmakers reached a $1 trillion deal to fund the U.S.
government. Republicans and Democrats agreed last night to fund the
operations of virtually every federal agency through the end of the fiscal
year in September.

Among other things, the bill includes money for defense programs, an
additional border security, but not the border wall. It also plugs an
emergency shortfall for Puerto Rico. It funds health benefits for retired
union mine workers and provides additional money for medical research.

The House and Senate are expected to vote on the package later this week.

HERERA: Well, no vote is yet scheduled on health care. The Trump
administration appears to be pushing for one, although there are some mixed
messages. John Harwood is covering that story from Washington.

Good to see you as always, John.

Is the House anywhere near voting on another version of the health care
bill? And how is this particular version different from the last?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Sue, I think they`re
closer than they were the last time this bill collapsed. Principally, the
change they made is to give states the option to eliminate some of the
regulations that conservatives had complained about with some protections
attached to that. That has gotten them votes among the conservatives in
the Republican caucus, so it`s gotten them closer. But there`s still
strong resistance from the moderates. There may be enough of them to stop
this bill. And as one of them, Charlie Dent told me today, I`m not aware
of anybody on the center right who has moved from a no to a yes because of
these changes.

MATHISEN: Let me get a couple of questions in in a hurry here. What
happens to the individual mandate in this plan? The business mandate?
What happens to the exchanges? And finally, what happens with tax reform?
Anything new there?

HARWOOD: Well, the individual mandate is not eliminated, but they`ve
changed from enforcing it via the tax penalty, which is under current law,
but enforcing it via insurance companies being able to charge a higher
premium if you exit the system and then come back in. That is not
considered to be as strong. But it is something.

And in terms of tax reform, we are still in a position where we`ve got to
see more detail from the administration before the house can know what to
do. They have sidelined the border adjustment tax, but we don`t know if
they`re going to replace it with something else.

HERERA: John, thank you as always. John Harwood in Washington.

MATHISEN: President Trump said he would consider raising the federal tax
on gasoline to help pay for his infrastructure investment plan. In an
interview with “Bloomberg News,” he said a higher gas tax has the support
of truckers if the money is earmarked for highways. The federal gas tax
has not been raised since 1993. The president also told Bloomberg he is,
quote, “looking at splitting apart giant U.S. banks and returning to a
system that separated traditional commercial and riskier investment
banking.” Bank stocks were little changed on that news.

HERERA: Treasury Secretary Steven Mnuchin said that the economy will grow
by 3 percent in the next two years. He also said the tax reform and
deregulation will help spur that growth.

(BEGIN VIDEO CLIP)

STEVEN MNUCHIN, TREASURY SECRETARY: There`s really three parts that will
drive that. The first is tax reform. This will be the most sweeping tax
reform we`ve ever had. The second part is regulatory relief. We can have
sound regulations, but make sure we have proper regulations. And the third
part is fair trade, renegotiating the trade deals. So, we think those
three things together will create sustained economic growth at 3 percent or
higher.

(END VIDEO CLIP)

HERERA: But in an interview on CNBC, former federal reserve chair, Ben
Bernanke, said a growth rate of 3 percent may be hard to come by.

(BEGIN VIDEO CLIP)

BEN BERNANKE, FORMER FEDERAL RESERVE CHAIRMAN: On a sustained basis, it`s
certainly possible, but probably not that likely. I think if there`s a big
tax cut, for example, that lowers tax rates, you might have a bump, because
of the increased demand, increased consumer spending.

INTERVIEWER: It gets you over 3 percent?

BERNANKE: Probably not. I would — I would take the under on that.

(END VIDEO CLIP)

HERERA: So, if 3 percent growth is the most you can expect at best for
years to come, how should you invest?

Kevin Caron is market strategist and portfolio manager at Stifel Private
Client Group.

Always good to see you, Kevin. Welcome back.

KEVIN CARON, STIFEL PRIVATE CLIENT GROUP: It`s great to be here.

HERERA: So, you say the investors want steady as she goes and safety in
this environment, in this market, correct?

CARON: Yes, I think so. The very low growth scenario that was just laid
out is one that has been around for quite a while now. It`s become rather
a common chorus that we hear. And I think investors have adapted to that
new reality and you can see it in things like the savings rate, which has
jumped up from about 2 percent a few years ago, to about 6 percent now as
investors have come to terms with the fact that return — growth and
returns will likely be lower than they have been heretofore.

MATHISEN: You know, modest growth and low inflation and low interest
rates, Kevin, is usually a good recipe for stocks, isn`t it?

CARON: I think so. As a matter of fact, if you think back to where we
were in the late `90s, very much the opposite was the case. There was a
lot of expectation for growth that didn`t materialize. Consequently, there
was a lot of under-saving, underinvestment, and the growth that has
followed has been relatively low. So, we`ve adapted now to this lower
growth environment.

And I just wonder if as we go forward from here, maybe some more savings in
anticipation of slow growth. Ironically fuels more investment. And the
possibility that maybe growth might surprise to the upside over the long
term.

HERERA: So, if indeed the case that we just set out continues, steady as
she goes and low growth environment, what kind of stocks or groups of
stocks do you want in your portfolio, if you`re a longer term investors?

CARON: As Tyler said before, it`s slow and steady, it`s a very desirable
characteristic, particularly if you have low interest rates. So, I think
consumer is a very important theme. I think the consumption patterns have
been very stable, expect them to stay that way, particularly with what
we`re seeing in the data.

So, consumer discretionary, consumer staples makes sense. I would also
throw into that utilities. And I think health care also plays a very good
role in providing companies that have very good balance sheets for the long
term.

So, those — that would be a nice pairing of three sectors that I think
play well off this slow and steady theme.

HERERA: On that note, thank you, Kevin, as always.

CARON: Thank you.

HERERA: Kevin Caron with Stifel Private Client Group.

Ty?

MATHISEN: And still ahead, Sue, a sour issue for American dairy farmers.

(BEGIN VIDEO CLIP)

CONTESSA BREWER, NIGHTLY BUSINESS REPORT CORRESPONDENT: American farmers
squaring off for a milk war with Canada. I`m Contessa Brewer in Upstate
New York. How Canada`s prices are putting a American farms in danger.

(END VIDEO CLIP)

(MUSIC)

HERERA: The Trump administration is waiting for Congress to approve trade
talks so the North American Free Trade Agreement, or NAFTA, can be
renegotiated. It is the trade pact the commerce secretary describes as
being outdated, and ripe for reform.

(BEGIN VIDEO CLIP)

WILBUR ROSS, SECRETARY OF COMMERCE: NAFTA is an ancient treaty. It`s
decades old. And neither our economy nor the Mexican nor Canadian
economies are remotely similar to what they were back when the deal was
done. There`s nothing in it really about the digital economy. There`s
relatively little in it about the service economy. And the sections that
it does address, some of those who are also clearly obsolete.

(END VIDEO CLIP)

HERERA: Secretary Ross also said that the closer the NAFTA talks get to
the Mexican election, the more difficult they will become.

Ty?

MATHISEN: Well, Sue, trade relations with Canada have also become
strained. President Trump recently accused the country, which is one of
our largest trading partners, of intentionally undercutting American prices
on dairy products.

Contessa Brewer reports tonight from Skaneateles, New York.

(BEGIN VIDEOTAPE)

BREWER: With 1,400 cows and 26 employees, Dirk Young runs a successful
mid-sized dairy farm in Upstate New York. Successful, but not certain.

DIRK YOUNG, DAIRY FARMER: It is unpredictable. It`s not fun. It takes
the fun out of it.

BREWER: The milk produced here goes to Cayuga Milk Ingredient, a company
owned by Twin Birch and 20 other farms. They process the milk into an
ultra-filtered product that Canada imported for cheese making. That is,
until April 1st — when Cayuga`s Canadian customers evaporated.

KEVIN ELLIS, CAYUGA MILK INGREDIENTS CEO: The processors can now take
advantage of that low price milk in Canada, which has basically made our
price uncompetitive.

BREWER: In three days, Cayuga lost 25 percent of its business, $30
million. Its competitor Grassland Dairy in Wisconsin lost $100 million,
laid off employees and starting today, stopped buying milk from 75 diaries
across the state.

The catalyst? A new pricing scheme in Canada`s dairy industry, which the
government regulates in a managed supply system.

But that system is not fair, according to former Agriculture Secretary Tom
Vilsack.

TOM VILSACK, FORMER AGRICULTURE SECRETARY: Canada has created in its
pricing system new classifications for certain dairy products which has
created the opportunity for Canada to essentially dump onto the world
market a substantial amount of milk powder, protein concentrates and things
of that nature, which is going to drive prices down for American dairy
producers.

BREWER: That`s already happening. Cayuga had a purchase order from
Bangladesh, but Canada came in at a far better price.

ELLIS: I lost the deal by 12 cents, which equates to about 13 percent.

BREWER: And normally, you would be competing, what, on a 1 cents basis or
2 cents basis?

ELLIS: Max. Business is won and lost by 1 cent per pound.

BREWER: President Trump is tweeting about the dairy standoff with Canada
and talking tough.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Canada, what they`ve done to
our dairy farm workers is a disgrace.

BREWER: And he`s winning support from one of his staunchest Democratic
opponents, New York Senator Chuck Schumer, who promised to fight with him
to help farmers.

But Canada is also squaring off for a dairy war, defending its preferential
pricing for its own farmers. Its ambassador to the United States wrote a
scathing letter, accusing America of scapegoating Canada, saying Canada is
not a contributor to the overproduction problem.

The oversupply situation is real. At this dairy farm, the cows produce
twice as much milk as they did a generation ago, because of efficiencies in
farming. Production is going up, but American consumption is not keeping
pace. And that`s why free trade and foreign markets are so crucial.

YOUNG: Dairy used to be about producing lots of good quality products at a
cheap price. And I see that as changing now where market access is going
to dominate.

BREWER: But uncertain times for dairy farmers trying to keep their little
piece of the American dream.

For NIGHTLY BUSINESS REPORT, Contessa Brewer, Skaneateles, New York.

(END VIDEOTAPE)

HERERA: Cardinal Health (NYSE:CAH) tops profit expectations despite
falling generic drug prices. That`s where we begin tonight`s “Market
Focus”.

The health care company said strong performance in its medical segment
helped its results. Overall, revenue rose, but it wasn`t enough for the
streets. Cardinal health said it`s seen some improvements in generic drug
pricing, but it still reaffirmed its downbeat outlook for the year. Shares
fell just a fraction to $72.19.

Several companies are reportedly eyeing Tribune Media as a takeover target.
According to reports, media giant 21st Century Fox and private equity firm
Blackstone have entered into a partnership to potentially bid on the TV
station operator. Sinclair Broadcast Group (NASDAQ:SBGI) and Nexstar Media
are also said to be considering a buyout. Final bids are due on Thursday.
Tribune Media shares soared nearly 6 percent to $38.75.

Valeant Pharmaceuticals made an unscheduled payment of $220 million to trim
its multibillion dollar debt load. The embattled drug maker said the
transaction was made possible by the sale of a manufacturing plant and the
earlier than expected closing of a skin care deal with L`Oreal. Shares
rose more than 4 percent on the news to $9.66.

MATHISEN: Subscriber losses accelerated at Dish Network. The satellite TV
provider reported a larger than suspected drop in subscribers during the
latest quarter. And that hurt results. The company posted disappointing
revenue while its lower profit did manage to beat expectations. Shares,
though, off more than 2 percent to $62.93.

And the food distributor Bob Evans said it completed a previously announced
unit sale of its Bob Evans restaurant, and its acquisition of Pineland
Farms Potato Company. The company followed that news by saying it plans to
issue a special dividend of $7.50 a share. Shares of Bob Evans up 1
percent to $67.41.

HERERA: The first three months of the year were expensive ones for the
insurance industry. In fact, it was the most expensive quarter for
property insurers in 20 years. And there are a few reasons why.

(BEGIN VIDEOTAPE)

HERERA: Floodwaters —

UNIDENTIFIED MALE: Debris everywhere, violent tornado!

HERERA: — and tornadoes led to dramatic rescues. Some were lucky to
survive.

UNIDENTIFIED MALE: I don`t know how we got out of the house.

HERERA: Others less fortunate. At least 15 people were killed across five
states just this past weekend. Texas alone saw at least four tornadoes.
Dozens were injured along a 35-mile path of mayhem and destruction. In
Missouri, floodwaters left whole communities under water.

GOV. ERIC GREITENS (R), MISSOURI: In many parts of Missouri, this will be
a flood of historic proportions.

HERERA: Severe flooding and tornadoes are an unfortunate rite of spring.
But in 2017, it`s been happening across the country since the first of the
year. The number of tornadoes more than doubled in Q1, and the spike in
claims has investors watching and insurance industry weathering an unusual
burden. From 2000 through 2016, first quarter costs averaged about $1.5
billion. But this year`s first quarter has been the most expensive ever,
nearly $7 billion, with severe storms accounting for about $6 billion.

BRIAN MEREDITH, UBS: It`s been a fairly active first quarter. I think
it`s probably going to be among the highest loss activity of the first
quarter that we`ve seen.

HERERA: Travelers announced 9 percent first quarter jump in catastrophe
costs to almost $350 million. Profit fell 11 percent.

Allstate (NYSE:ALL) reporting tomorrow has estimated a slight drop in
catastrophic payouts from last year`s first quarter. But it`s more than
$780 million.

Another major property insurer, AIG, reports on Wednesday.

MEREDITH: Anybody else who`s got any personal lines, homeowners` insurance
exposure, even U.S. commercial lines exposure will have some of that. I
think most consensus estimates factored it in already, though.

HERERA: Home insurance costs are up 16 percent on average since 2014, due
in part to catastrophic activity in the years just prior to that. And
there`s no relief in sight, as more dangerous weather is forecast tonight
across the Midwest and the Southeast.

(END VIDEOTAPE)

HERERA: And the harsh weather in parts of the country is also sending
grain prices higher. Corn, soybean and wheat prices are rallying. The
damage from the storm in Kansas which is the top grower of wheat is still
being assessed. But the early estimates suggest losses could exceed 50
million bushels.

MATHISEN: And coming up, entrepreneurial obstacles.

(BEGIN VIDEO CLIP)

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: I`m Kate Rogers
(NYSE:ROG) in Atlanta. And tonight on NIGHTLY BUSINESS REPORT, we`re going
to tell you which generation is on track to become the least
entrepreneurial in recent history. The answer may surprise you.

(END VIDEO CLIP)

(MUSIC)

HERERA: Here`s a look at what to watch for tomorrow. As we reported,
Apple (NASDAQ:AAPL) reports earnings along with fellow Dow components
Pfizer (NYSE:PFE) and Merck (NYSE:MRK). Auto sales for April will be
released. And on Capitol Hill, the CEO of United Continental will testify
in front of a House panel following the recent removal of a passenger from
one of its flights.

That`s what to watch for on Tuesday — Ty.

MATHISEN: Well, Sue, more than half of Americans either own or work for a
small business. According to the Small Business Administration, they
create about two out of every three new jobs in the United States every
year. A growing number of small businesses are started by millennials, but
this group is facing some challenges.

As part of our “Small Business Week” series, Kate Rogers (NYSE:ROG)
traveled to Atlanta.

(BEGIN VIDEOTAPE)

ROGERS: Like many millennials, 29-year-old Candace Mitchell graduated from
Georgia Tech with student debt. But that wasn`t going to stop her from
pursuing her passion.

CANDACE MITCHELL, MYAVANA CEO: Rather than seeing it as a weakness, I saw
it more as an opportunity to really be even more courageous when it comes
to making sure that I am successful.

ROGERS: In 2014, Mitchell decided to start her own business called
Myavana.

MTCHELL: Myavana specifically recommends the perfect products for your
hair.

ROGERS: The idea came from Mitchell`s personal struggle with brittle hair.
Now, her team uses science and technology to analyze customer`s hair
samples and recommend the best products. Her goal is to one day become the
Amazon (NASDAQ:AMZN) of hair care.

MITCHELL: We want to provide every product, service, content, anything
that women need for their hair care journey.

ROGERS: Millennials like Mitchell have been slow to jump into
entrepreneurship in recent years, being outpaced by the baby boomer
generation. In fact, data from the Small Business Administration finds
millennials are on track to be the least entrepreneurial generation in
recent history. Access to capital and student loan debts are the two key
deterrents for this age group.

Georgia has one of the highest youth unemployment rate in the nation. Its
capital has launched a campaign called Choose ATL in part to lure
millennials to launch new ventures in Atlanta.

KATE ATWOOD, CHOOSE ATL EXECUTIVE DIRECTOR: It`s important to create an
environment in a community that invites, encourages and really provides
resources so that any young person who wants to start a business knows that
Atlanta is the place to do it.

ROGERS: The city is also home to a chapter of youth entrepreneurs, a
nationwide year-long accredited course for high school students in
underserved areas. The goal is to show the next generation that becoming
your own boss is a viable option.

SCOTT BROWN, YOUTH ENTREPRENEURS EAST: If we can use entrepreneurship to
help them find passion, to help them hone in on their natural abilities,
they look at entrepreneurship as a viable option to not only improve their
lives, but the lives of others in their communities.

ROGERS: Over the past decade, 2,600 students in Atlanta have participated,
99 percent graduate high school, and 80 percent enroll in higher ed.

Sixteen-year-old Justice Steers, a sophomore enrollee, said he`s already
caught the entrepreneurial bug.

JUSTICE STEERS, SOUTH GWINNETT HS STUDENT: I want to run my own app
company. The best thing about being my own boss, not having someone tell
me what I can and cannot do.

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

(END VIDEOTAPE)

HERERA: Good for him. Good for him.

MATHISEN: Yes. And I like — I like the young lady who said she wants to
be the Amazon (NASDAQ:AMZN) of hair care. Aim high.

HERERA: Absolutely. That is — exactly, aim high.

Good to see you, Ty.

MATHISEN: I`ll see you tomorrow night.

HERERA: You got it.

That does it for NIGHTLY BUSINESS REPORT. I`m Sue Herera. Thanks for
joining us.

MATHISEN: And I`m Tyler Mathisen. Have a great evening, everybody. And
we`ll see you tomorrow.

END

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Business Report is not and should not be considered as investment advice.
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