SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: New analysis. The number of uninsured could rise and deficits could fall if the Republican-backed health care bill becomes law.
Losing its luster. Tiffany reports a surprise slump in sales as it and other retailers fall out of fashion on Wall Street.
Role reversal. The rise of goods now made by China in America.
Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday, May 24th.
Good evening, everyone. I’m Sue Herera. Tyler Mathisen is off tonight.
The S&P 500 closed at a record — more on that in just a moment. But we begin with the Republican-backed health care bill. The long-awaited analysis of the newly passed House bill was released tonight by the Congressional Budget Office. In the first calculation of its potential impact, the number of uninsured would increase an estimated 23 million by the year 2026, and federal deficits would fall.
Kayla Tausche has the details from Washington.
Kayla, what are basically the most important aspects of this particular bill? We do see a slight rise in the number of uninsured compared to past bills.
KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, Sue, actually the CBO said that there would be a slight improvement in the number of uninsured compared to previous versions. The CBO said there would be 23 million fewer people insured, compared to 24 million in the previous bill.
What changed over the course of time was there were two amendments that were put forth, one by Congressman MacArthur, one by Congressman Upton. The MacArthur amendment sought to give states flexibility while upholding protections for customers with preexisting conditions or kids who wanted to stay on their parents’ plan until age 26. They did that by offering states the ability to opt out of offering certain mandatory benefits.
The Upton amendment created a funding pool for those preexisting conditions to guarantee that there would be at least a little bit more of a cushion for them. What the CBO found was that there were fewer people who would not have insurance but it would come at a cost to the deficit, precisely $30 billion to the deficit, although a $119 billion benefit to the deficit by repealing and replacing Obamacare with this legislation.
HERERA: Do they have to vote again on this particular piece of legislation?
TAUSCHE: It does not appear they do. The reason why they were potentially going to have to vote again was because House leadership said that it’s unpredictable what the CBO can come out with, they don’t know the exact methodology that the CBO uses, and it need to show that the deficit would fall by at least $2 billion to fit into the rule that they are trying to use to actually get this vehicle, get this legislation through the Senate, because it is seen as a $119 billion benefit to the deficit, that would appear to fit. But it will all come down to what the Senate parliamentarian for one decides.
HERERA: You pointed out there is a very slight decrease in the number of people who would be uninsured, 23 million compared to 24 million. But nonetheless, that’s a lot of people.
How do you think this is going to fare on the hill? There was outrage at the 24 million figure the last time around.
TAUSCHE: There was, Sue. And, of course, that is on top of 20-some million uninsured under the Affordable Care Act. Predictably, Democrats have already come out swinging, saying that it proves what they knew all along, that there will be millions upon millions more people uninsured.
Notably, the White House is already knocking down the CBO estimate saying that it is inaccurate. So, there are already sparks flying. It’s going to be a very raucous debate.
HERERA: It is certainly going to be that.
Kayla, thank you so much. Kayla Tausche in Washington.
If you were looking for a diamond in the rough, don’t look to Tiffany. The iconic jeweler is the latest retailer to get knocked after reporting quarterly results. There was a surprise drop in sales in the Americas, its largest market. Tiffany says it’s been hurt by some of the same things other retailers are struggling with, like broader concerns about the economy.
The stock was off more than 8 percent, making at it worst performer on the S&P 500. Then there’s Chico’s, the women’s apparel retailer fell short of both profit and sale expectations. The CEO citing what many of her peers have, a challenging environment. A weak forecast punished that stock, it fell 11 percent.
And the damage wasn’t confined to apparel and jewelry. Advance Auto Parts reported earnings and sales that missed estimates. Again, the CEO cited macro headwinds. But unlike rival AutoZone, which reported weak results yesterday, the company did not blame the impact of delayed tax refunds. The end result, though, was a stock decline of 5 percent.
And then there is Lowe’s. Expectations were high after rival Home Depot last week reported a standout quarter. But the home improvement retailer struggled with increased competition and higher cost. As a result, the stock slid, down about 3 percent.
Expectations were also high for the housing market’s spring selling season. But so far, April’s reports have been less than stellar. Today, we learned that sales of previously owned homes fell more than 2 percent. This follows the sharp decline in new home sales which we told you about yesterday.
And as Diana Olick reports, the culprit is clear. There just aren’t enough homes for sale.
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Put a house on the market today, and it will sell in less than a month. Average days on market in April, just 29, according to the National Association of Realtors. That’s the fastest since they began tracking six years ago.
DANIELLE HALE, NATIONAL ASSOCIATION OF REALTORS: One thing we added this month to our realtor’s confidence index is analyzing data on their comments. And their two biggest phrases in comments this month were low inventory and multiple offers.
OLICK: The housing supply situation is getting worse. Demand is really strong but you can’t buy a house if you can’t find an affordable one. The number of listings nationally dropped 9 percent in April compared to a year ago, and listings are slimmest at the lower end of the market. That’s why sales of homes priced under $100,000 fell 17 percent year over year, and those under $250,000 dropped over 6 percent.
The median price of an existing home sold in April was $244,800. So, half the market is really hurting. And that’s the half where the strongest demand is.
GLENN KELMAN, REDFIN CEO: The inventory is reaching historic lows. It’s never declined faster than it did last month. It’s freaking us out. It’s affecting our business. It’s limiting our sales.
OLICK: Even a drop in mortgage rates didn’t help last week. Mortgage applications to buy a home fell as well.
So, why aren’t builders just putting up more homes? Well, they are, slowly. But not the starter priced homes that this market sorely needs. Until they do, today’s younger potential homebuyers will continue to rent.
For NIGHTLY BUSINESS REPORT, I’m Diana Olick in Washington.
HERERA: On Wall Street, the S&P 500 closed at a record as investors brushed off the housing data and the lousy retail results and instead looked to the Federal Reserve and its possible plan for interest rates. We’ll have more on that in just a moment.
By the close, the Dow Jones Industrial Average had advanced 74 points to 21,012. The NASDAQ rose 24 and the S&P 500 added nearly six.
The White House budget director is warning that the government could run out of cash sooner than expected. Mick Mulvaney says that tax receipts are coming in slower than expected. So, here’s how it works.
The government spends more money than it brings in, and it borrows to cover the difference by issuing debt. But there is a limit, which is why the treasury secretary urged lawmakers today to increase that limit.
(BEGIN VIDEO CLIP)
STEVEN MNUCHIN, U.S. TREASURY SECRETARY: I urge you to raise the debt limit before you leave for the summer. It is absolutely critical that where we spent money, that we keep the credit of the United States as the most critical issue.
(END VIDEO CLIP)
HERERA: In the past, Republicans have tried to pare debt limit increases with spending cuts.
Most Federal Reserve policymakers say an increase in interest rates is coming soon, perhaps as early as next month.
Steve Liesman has more on the release of the minutes from the central bank’s last meeting.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Minutes of the Federal Reserve’s May meeting affirmed market expectations for a June rate hike with most of the meeting saying a rate hike would, quote, soon be appropriate if the economy rebounded as expected. There were some concerns, and officials at the meeting say they wanted evidence that the economy was indeed on the mend from a weak first quarter before hiking again. The economy grew less than a percent in the first quarter but it’s expected to bounce back to around 3 percent this quarter.
There’s also some worry about recent soft inflation readings and deep uncertainty over the timing of any fiscal stimulus from the White House and Congress. In fact, the minutes show a number of participants at the meeting took a general swipe at all the high jinx going on in Washington, with the minutes saying, quote, clarification of prospective fiscal and other policy changes would remove one source of uncertainty to the economic outlook.
In other words, that’s the Fed telling Washington, get on with this fiscal policy stuff. On the other hand, most said the fiscal policies under consideration presented upside risks to their forecasts. And others were worried about a labor market that was running too tight and could pose an inflation risk.
The minutes show all participants agreed to reduce the Fed’s $4.4 trillion balance sheet this year, and they would do so in a gradual way, according to a plan presented by the staff but not yet approved by the committee members. That plan would reduce the balance sheet a bit every month and increase the amount they reduce it by every three months, until it got back to some normal level. But they’re not saying yet what that normal level would be.
For NIGHTLY BUSINESS REPORT, I’m Steve Liesman in Washington.
HERERA: Still ahead, driving away with a new job perk.
(BEGIN VIDEO CLIP)
MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: In Ridgefield, New Jersey, I’m Morgan Brennan. In the midst of a truck driver shortage, one company is turning to the stock market to attract more workers. We have that story coming up on NIGHTLY BUSINESS REPORT.
(END VIDEO CLIP)
HERERA: Congressional Democrats are asking Deutsche Bank for information on President Trump’s accounts. That request is part of the investigation into alleged ties between his campaign and Russia. Democratic lawmakers are trying to determine if loans for the president’s real estate business were backed by the Russian government.
Iraq and Iran both say that they support extending oil production cuts. At a meeting in Vienna, the oil ministers from those countries say that they’re ready to back a deal through the first quarter of next year. Iran and Iraq are critical because they are the second and third biggest producers. Today, the price of domestic crude fell just slightly.
China’s debt rating was cut by Moody’s for the first time in nearly three decades. That country’s rising debt and slower growth prompted the rating agency’s move, which could mean higher borrowing costs for the world’s second largest economy. The Chinese government called the downgrade inappropriate.
For years, as you probably know, there’s been talk about Chinese workers taking American jobs. But now, there seems to be a new trend that’s creating jobs in the U.S.
Eunice Yoon is in Hangzhou.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: In Xu Chiang Xing’s (ph) vision of the future, everything you see produced at his factory in China will be made in America.
Xu (ph) founded a textile manufacturer here in Hangzhou, but three years ago, he started building a plant in South Carolina, an investment that will total $220 million.
The U.S. has obvious advantages, he says.
There’s a lot of concern in Washington that the U.S. isn’t competitive compared to countries like China. But more and more Chinese businessmen like Xu believe the opposite, that the U.S. is gaining competiveness in manufacturing, and they’re looking to invest.
American John Ling makes a living helping Chinese companies find locations to buy or build factories in the U.S. He introduced Xu to South Carolina.
JOHN LING, COUNCIL OF AMERICAN STATES IN CHINA: Chinese companies are going to the U.S. because they think by doing so, they can lower their costs of production. In certain pockets of the U.S., the land will be much, much cheaper than China. The electricity, natural gas, believe it or not, the logistic costs.
YOON: In addition, Xu says his raw material, cotton, is also cheap, bringing his total costs down by 25 percent compared to China. American workers are more expensive, but Xu says with wages in China rising 30 percent a year for most of the past decade, that gap is closing.
In the U.S., the labor cost is just a little over double what we pay in China, he says.
Xu plans to have 500 workers at his U.S. plant by the end of the year. If President Trump gets some of his agenda done, Chinese manufacturers could find the states even more attractive.
LING: If we got our Congress or the president to agree to something, we probably would be able to lower our tax rate, corporate tax rate.
YOON: How big a trend is this right now?
LING: I don’t believe we have scratched the surface yet.
YOON: For NIGHTLY BUSINESS REPORT, I’m Eunice Yoon in Hangzhou.
HERERA: Puma Biotech’s experimental breast cancer drug gets a thumbs up from an FDA panel and that’s where we begin tonight’s “Market Focus”.
An advisory committee voted in favor of the treatment, saying it reduced the risk of the disease recurring. Food and Drug Administration often takes the recommendation of its panel. Investors saw it as a win for Puma and sent its shares up more than 29 percent to $74.95.
Drugmaker Inovio Pharmaceuticals said its HIV vaccine performed well during a trial. The company said almost all of the participants develop an immune response to the virus. Inovio said that it plans to continue testing the medication with its partners and its collaborators. Shares of the small cap spiked nearly 22 percent to $8.68.
Japan’s Softbank has reportedly taken a nearly 5 percent stake in graphics chip maker Nvidia. “Bloomberg News” says the position is worth $4 billion. The investment is part of Softbank’s strategy to aggressively grow its tech holdings. Nvidia shares rose 1 percent to $138.57.
American Eagle and private equity firm Cerberus have reportedly teamed up to make a takeover bid for teen apparel retailer Abercrombie and Fitch. “The Wall Street Journal” says the two aren’t the only interested parties, though. Clothing chain express and other buyout firms could be potentially suitors. American Eagle rose 2 percent to $11.23. Abercrombie took off, up nearly 6 percent to $12.89.
Home furnishings retailer Williams Sonoma beat profit expectations, saying results were helped by improvements in its pottery barn brand. Revenue was in line with estimates, and the company gave an upbeat forecast for the current quarter. Shares popped in after-hours trading and also ended the regular day up 1 percent to $49.61.
And the clothing retailer Guess said strength in its foreign markets helped to post a narrower than expected loss. The company also reported revenue grew and topped estimates. But its quarterly outlook for earnings disappointed the street. Even so, shares initially took off in after-hours trading but they ended the regular session down a fraction to $9.98.
A new company is trying to throw a jolt into America’s pickup market with a new strategy. It is rolling out an electric truck.
Phil LeBeau takes us for a ride.
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: In the world of pickups, change comes slowly. For years, GM, Ford, and Chrysler have led the market with heavy duty trucks that take a beating day after day and keep on rolling.
So, why does Workhorse think its new pickup can cut into the big three’s dominance?
Primarily because it’s electric.
STEVE BURNS, WORKHORSE CEO: We think we’ll save an average, over the ten years they might over the pickup truck, $35,000 to $40,000. Again, fairly conservative, considering the gas. That calculates gas to stay where it is for ten years.
LEBEAU: For utility operators, construction firms, and other businesses where workers put millions of miles on their company pickups, saving money on gas could be a game changer.
Workhorse says its pickup will go 80 miles fully charged. And with the gas assist motor, it could go over 300 miles before needing more fuel. The price, just over 50 grand.
Workhorse says it already has orders for more than 5,000 pickups. But cutting into the sales of the most popular trucks like the ford “F” series won’t be easy, mainly because pickup buyers, including thousands of companies large and small, are unlikely to drop their trucks unless the replacement is just as capable.
JESSICA CALDWELL, EDMUNDS. COM: I think these new automakers have to prove that there is, you know, payload capacity, there’s towing, there’s range. I mean, those are all things that are very important for pickup truck drivers that are going to be different than the passenger cars.
LEBEAU: Steve Burns knows people may be skeptical of his plug-in pickup until they can take it for a thorough test drive. That will happen after the first models roll off the line next year. But, already, he’s considering extending sales to include retail customers.
BURNS: It’s a good looking vehicle. You get 75 miles per gallon. You can feel safe in it. So, and it’s fast and fun to drive. It’s completely silent when it’s on electric mode.
So, I think we’re — we thought consumers would be a few years out for us, but it might be sooner rather than later.
LEBEAU: Workhorse may be the first plug-in pickup to hit the market, but it certainly won’t be the last. Tesla is also working on an electric pickup truck. And you can bet as battery costs drop, the big three will also start looking at developing electric pickup trucks.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.
HERERA: And if you drive a truck for a living, one company just made the job a little more financially enticing.
Morgan Brennan reports on the new job perks.
MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Despite a two-year-long industry downturn, trucking is still struggling to get and keep enough drivers. That’s why one company, Daseke, is rolling out an employee stock program.
DON DASEKE, DASEKE CEO: To our knowledge, this is the first time a company, any carrier in the United States, has done this specifically for drivers.
BRENNAN: CEO and president Don Daseke, who began building a trucking empire in 2008, took the company public earlier this year with a goal of offering his drivers an ownership stake.
DASEKE: We think in order to grow, we need to do things a bit differently. And a stock plan for drivers is a way to think out of the box, to help our drivers, at the same time attract the drivers we need in order to grow.
BRENNAN: Daseke, which owns many trucking fleets, is the largest operator of flatbed trucks in the U.S. it’s a small cap stock, but one with big ambitions, to double in size through acquisitions over the next three years.
Through the new plan, drivers and other employees will get grants after a full quarter with the company. He does that incrementally over five years.
The initial reaction from company drivers?
DON BOHREN, OPEN DECK TRUCK DRIVER: It’s not normal. For somebody to give us ownership of the company, legitimate ownership, is impressive.
JOHN SANDROVICH, OPEN DECK TRUCK DRIVER: I think it’s a great idea. You know, not a lot of bosses, especially owners of companies, would be willing to give lower truck drivers and all of the other smaller employees, just give them free money, pretty much.
BRENNAN: For both men, this will mark their first forays into the world of equity investing.
It’s the latest example of how trucking companies are responding to a tight labor market, responses that also include higher pay, more benefits like health care, even newer, more comfortable trucks.
BOB COSTELLO, AMERICAN TRUCKING ASSOCIATIONS: There are so many companies going out there and trying to get a limited pool of truck drivers that they are looking at different ways to attract drivers to their companies. They’re constantly looking at, you know, not only raising pay, but what can they do in terms of benefits.
BRENNAN: The American Trucking Association estimates the industry is facing a shortfall of 48,000 drivers. Although truckers say the work can be grueling, meaning from their perspective, it’s about getting compensated for a tough job.
BOHREN: Taking care of the driver, that’s what causes churn. When you’re just a number, you’re always looking for the greener pasture. When you find something that’s good, you want to stick with it.
BRENNAN: And receiving stock in a publicly traded company, Bohren says, is one way to make it good.
For NIGHTLY BUSINESS REPORT, I’m Morgan Brennan in Ridgefield, New Jersey.
HERERA: Uber admits to underpaying New York city drivers by millions of dollars. The ride hailing company said it plans to refund the money after miscalculating its commissions for the past 2 1/2 years. It is the second time in two months that Uber has acknowledged a mistake with worker pay.
Coming up, feeling overworked? Why American workers are leaving a ton of vacation time on the table.
HERERA: As we approach the holiday weekend, you’re probably thinking about your summer vacation. But not everyone is taking vacation. A Project Time Off Report found more than half of all Americans forfeited paid time off last year, which adds up to more than $66 billion in lost benefits.
So, why are so many not taking their vacation?
Scott Dobroksi, a community expert at Glassdoor, joins us now to talk about that.
Scott, welcome. Nice to have you here.
SCOTT DOBROKSI, GLASSDOOR COMMUNITY EXPERT: Nice to be here. Thank you.
HERERA: In your experience, why do Americans, especially versus say the European counterparts, why do we not take vacation?
DOBROKSI: Well, according to the new data that Glassdoor put out today, what we really know is that Americans are just really bad about it. And when we look at why, the underlying reasons are fear. The number one reason, Americans say, is fear of getting behind in their work, and number two, fear that no one else can do their work.
HERERA: And also maybe being replaced? And fear of —
HERERA: Go ahead.
DOBROKSI: Yes, that is certainly among them. Fear of being replaced, fear of being a burden to their colleagues. Even fear of seeming selfish, and then even some of the reasons below the ones we just saw are fear of not getting that promotion or fear of not getting a pay raise. So a lot of it tied to fear.
HERERA: How do we change that culture? Is there a way to change that culture?
DOBROKSI: There is. So, we’ve really studied benefits at a variety of companies all over the world at Glassdoor. One thing that we have realized, when it comes to vacation and paid time off, is it’s the responsibility of both the employer and the employee to set really clear expectations and have a plan in place when you are going to take off on vacation.
So, number one, overall, employers actually should be encouraging their employees to take time off. There’s a ripple effect to benefits. And number two, it’s on the employee to make sure there is a backup plan so that he or she can take vacation and actually vacate their job and enjoy that rest and relaxation.
HERERA: Now, when people do take vacations, something that I’ve read happens is that, you know, they’re contacted by somebody at work with a question or their boss has a question, and so, they’re not really completely disengaging in getting away. Did you find that in your research as well or not?
DOBROSKI: We did. The Glassdoor data out today actually confirms that. We found that when we compared this year’s data to three years ago, more Americans are actually working when they’re on vacation. So, it’s a little depressing, two or three of us say they’re doing work when on vacation, and then nearly one in three of us say that we’re being contacted by a colleague and/or our boss while on vacation. So, there is a problem.
HERERA: What about productivity? I would assume if you don’t take your vacations and you do get stressed out and you do get overworked, productivity goes down.
DOBROSKI: Absolutely. There have been countless research studies published to date that show when people are allowed to actually rest and actually vacate their jobs, the root word of vacation, even for a few days, they will come back feeling more productive, re-energized, more creative. And so, if you’re a business leader who is really thinking about vacation, there’s actually benefits to your bottom line by letting people fully take that rest and relaxation and not contacting them.
HERERA: Scott, thank you so much, appreciate it.
DOBROSKI: Thank you.
HERERA: Scott Dobroksi with Glassdoor.
And that will do it tonight for NIGHTLY BUSINESS REPORT. Thanks for joining us. I’m Sue Herera. Have a great evening, and we’ll see you tomorrow.
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