Transcript: Nightly Business Report – June 6, 2017

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Flashing yellow. Investors
appear cautious but business leaders are the most confident they`ve been in
years about the direction of the U.S. economy.

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Gold rush. The precious
metal hits its highest level in months. But does it belong in your
portfolio?

HERERA: New deal. Amazon (NASDAQ:AMZN) Prime is offering a discount to
some and it`s taking on Walmart in the process.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, June
6th.

Good evening, everybody. I`m Sue Herera.

GRIFFETH: And I`m Bill Griffeth, in tonight again for Tyler Mathisen.

Stocks slipped a bit ahead of a number of key events that are still to come
this week. Investors seem to have struck a cautious tone as they await the
testimony by former FBI Director James Comey, the upcoming election in the
United Kingdom, and next week`s meeting of Federal Reserve policy makers.
While stock were a little changed overall, investors bought bonds, and that
sent the yield to the 10-year to its lowest level for this year. Gold
prices also hit their highest level in months. We`ll have more on that in
a little bit.

But, first, today`s closing stock prices, the Dow Industrials Average fell
by 47 points. It closed to 21,136. The NASDAQ was down 20. The S&P 500
dropped by six.

HERERA: And while investors aren`t making any big moves, business leaders
are optimistic. In fact, a new survey shows CEOs are more confident in the
U.S. economy than they`ve been in years.

Kayla Tausche has more.

(BEGIN VIDEOTAPE)

KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Each quarter, the
Business Roundtable takes the temperature of 148 CEO members about their
plans for the next six months and their optimism about the U.S. economy.
The survey out today showed a reading that is the highest since 2014, but
that`s flattened after a big jump in March.

On sales, the group remained bullish. On capital spending, they expected
small increases. The plans for U.S. hiring in the next six months actually
dropped, as did the outlook for this year`s GDP growth. Now, CEOs expect
2.0 percent GDP for 2017, down from 2.2 percent.

The CEO of the group, Josh Bolten, former chief of staff for President
George W. Bush, said that optimism is underpinned specifically by tax
reform, an that if it hits the skids, CEOs are going to be quick to reduce
their current plans. Bolten said, quote, what policymakers should take
away from that, if U.S. businesses remain very optimistic, he says, that
there is also a potential downside from failure. That should add to the
urgency with which they pursue the reforms.

The survey took place between May 3rd and 24th, three weeks when the House
passed its health care bill and the president fired then-FBI Director James
Comey. But corporate America has made it clear, it is optimistic but
conditionally so.

For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche in Washington.

(END VIDEOTAPE)

GRIFFETH: Right now, there are more job openings here in the U.S. than
ever before. According to the Labor Department, a record 6 million
positions were posted at the end of April. Hiring, however, decreased.
And that gap between job openings and hiring may suggest employers are
having trouble finding qualified applicants.

HERERA: It may be one of the hottest housing markets in history. A new
report from Core Logic shows that nearly 7 percent rise in home values
versus April a year ago. But that 7 percent is down just slightly from the
prior month`s annual gains and may indicate that homes are getting too
expensive and unaffordable for some prospective buyers. And that`s why
Core Logic lowered its forecasts for annual gains to just about by 5
percent.

GRIFFETH: Well, while the stock market was quiet today, it has been up
quite a bit this year. The Dow Jones Industrial Average has gained about 7
percent just since January. But not all 30 stocks in that index are
enjoying this rally.

Dominic Chu looks at what`s driving it and what`s not.

(BEGIN VIDEOTAPE)

DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Dow Jones
Industrial Average has gained close to 1,400 points so far in 2017. And
with regard to what`s powering the Dow, it`s been a pretty narrow range of
stocks. Now, eight stocks in the Dow have been responsible for just about
every point in those gains so far. And three of those stocks are
responsible for half of them.

So, when it comes to the Dow, which stocks are the ones driving the gains
and which ones are the biggest drags on it? We put up our thermometer to
give you a sense of what`s powering the Dow.

First of all, no surprise here, Apple`s stock has been on a tear so far
this year. As a result, and because of its price weighted index nature of
the Dow, it`s added about 263 points overall. Boeing (NYSE:BA), also a
bigger point contributor, 225 points of that near 1,400-point gain comes
from Boeing (NYSE:BA). And then 207 from McDonald`s (NYSE:MCD).

So, again, those three stocks responsible for about half the overall point
gains so far this year.

As for the biggest drags, take a look at these stocks here. You`ve got
IBM, Big Blue, taking 93 points off the overall index`s value year to date
so far. Chevron (NYSE:CVX), about 98 points.

And the biggest drag so far has been on the financial side of things —
perhaps no surprise there — Goldman Sachs (NYSE:GS) dragging about 167
points off, as financials have been lagger so far in trading this year.

So, as we talk about the Dow, fairly narrow range of stocks powering the
gains. They are much like the S&P 500 where the top five stocks in there,
like Apple (NASDAQ:AAPL), like Alphabet, like Microsoft (NASDAQ:MSFT), like
Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB), are powering many of the
gains there. These few stocks are the ones driving the gains for the Dow
so far this year. The question is whether that becomes a detriment in the
future. We would like to see larger participation for that bull market.

For NIGHTLY BUSINESS REPORT, I`m Dominic Chu.

(END VIDEOTAPE)

HERERA: As stocks have rallied, so has the price of gold. That`s a bit of
a surprise since gold is often viewed as a safe haven and stocks slightly
riskier investments. But this year, gold is up about 13 percent, closing
in on $1,300 an ounce. As we told you last week, a new report suggests
that adding alternative investments to a traditional portfolio of stocks
and bonds has historically increased returns.

So, should investors consider adding some gold to their holdings?

Here for a strategy session is Brad McMillan, chief investment officer at
Commonwealth Financial Network.

Brad, welcome. Nice to have you here.

BRAD MCMILLAN, COMMONWEALTH FINANCIAL NETWORK: Thank you for having me.

HERERA: Let`s start first of all with how you feel about gold overall. As
we mentioned, it has had quite a run.

MCMILLAN: Well, I think gold does deserve to be part of your portfolio
longer term. But the question is not, should it be there? Yes, it should.
The question is, if you`re not into it right now, should you add it now?
And I think the answer is probably not.

GRIFFETH: You want to wait to see, get back to the old high, is that the
idea? Prove itself. If it`s going to go much higher from here, it needs
to exceed that previous high before you get in here, right?

MCMILLAN: Not necessarily the all-time high, but what we know is over the
past several years, gold has typically stalled out at $1,300, maybe $1,350.

GRIFFETH: Right.

MCMILLAN: We`re getting to the point where it stalled before.

HERERA: So, if it breaks through that level where it stalled before, you
would go in? And if so, how would you do it, for the average investors,
what type of vehicle would you use to own gold?

MCMILLAN: For the average investor, it doesn`t really make sense to own
bouillon or coins. The best way to invest for the average person, two of
the ETFs that hold gold. One is GLD, the other is IAU. They`re both
actually good ways to get exposure to that without the costs and risks of
holding the physical metal.

GRIFFETH: I`ve been asking for the last few years here, what makes gold
move. Do you view it as the traditional inflation hedge, or has it become
a risk asset to some degree here?

MCMILLAN: I see gold as insurance. I see gold as something that goes up
when everything else goes down. If you look at the data, it`s actually not
an inflation hedge, although people do see it that way. And that seems to
be part of what`s driving it.

But when concerns rise, gold is want place to be. And that`s actually what
makes it a good part of a portfolio.

HERERA: On that note, Brad, thank you very much. Brad McMillan with
Commonwealth Financial Network.

MCMILLAN: Thank you.

GRIFFETH: Still ahead, does hope float? Why the troubled oil tanker
industry is betting on it.

(MUSIC)

GRIFFETH: The U.S. and Mexican governments have reached a new agreement in
principle on trading in sugar. The deal was announced by Commerce
Secretary Ross and it calls for Mexico to export a smaller portion of
refined sugar and a larger proportion of raw sugar to the U.S. U.S.
producers have not endorsed the agreement and in a statement, they
expressed concern that the deal contains a major loophole.

HERERA: The companies that transport crude around the world are hitting
some rough seas. Tanker industry profits are getting squeezed as a result
of good old supply and demand.

And as Morgan Brennan tells us, it`s not clear when the tide might turn.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Anne is the
largest oil tanker ever to call on a Gulf of Mexico port. It did so
recently in Texas. A test by Occidental Petroleum (NYSE:OXY) to see if the
shale producer can more directly load its crude onto ships destined for
Asia.

This comes at a time when oil shippers are desperate for new markets. The
global oil supply has treaded water amid OPEC production cuts. At the same
time, dozens of new tankers ordered several years ago during the oil glut
are now being delivered.

ERIK BROEKHUIZEN: The reason for the market challenges is mainly on the
supply side, meaning there`s too many ships relative to the amount, the
number of cargoes, the number of oil cargoes in the market.

BRENNAN: As a result, shipping rates are down dramatically, and fleet
operators are feeling some pain.

BROEKHUIZEN: If you look at the VLCCs, which is sort of the largest ships,
the bellwether of the market that everybody focuses on, I think that market
was averaged in the $50,000, $60,000 a day range in 2015. At the moment,
we`re looking at the market in the high teens, low 20s. So, it`s
definitely a quite significant downturn.

BRENNAN: Tanker stocks have tanked this year. But analysts say investors
would welcome consolidation, since it would create more discipline for
supply and capacity. And the deals have already begun. TK Tankers is
merging with Tanker Investments. And Frontline (NYSE:FRO) has reportedly
set cites on Generate Maritime.

Meantime, crude exports from the U.S. have doubled since last year, to more
than 1 billion barrels a day. And more is heading to Asia. Meaning, once
the infrastructure is there, more super tankers like the Anne may soon call
to ports in the U.S., creating a new bright spot for the struggling sector.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.

(END VIDEOTAPE)

GRIFFETH: Sales flat lined at arts and crafts retailer Michael`s, and
that`s where we begin tonight`s “Market Focus”.

The company spent less in the latest quarter, resulting in overall revenue
roughly the same as a year ago, and missed expectations. Profits also came
up short, with Michael`s adding that same store sales would be lower than
expected in 2017 due to a weakened Canadian dollar. Shares fell more than
8 percent, as a result to $18.16.

Macy`s (NYSE:M) warned that its profit margins are tightening and will be
weaker than originally forecast. The company did reaffirm, though, its
full year revenue and earnings outlook but investors did not care about
that. They sent shares down about 8 percent today to $21.90.

G3 apparel group posted a smaller than expected loss and said it expects to
return to profitability this year. The parent company of brands such as
Donna Karan and Tommy Hilfiger saw sales rise as strong demand for its
Calvin Klein dress has helped results. G3 also raised its sales outlook
for 2017 and the shares soared by 15 percent to $22.92.

HERERA: Speaking of apparel, the clothing retailer Land`s End says its
loss widened as overall sales edged lower. And those results were weaker
than what analysts were expecting. Nonetheless, the company said there
were some bright spots in the latest quarter, including higher same store
sales. Land`s End also said it focused on several initiatives that it
hopes will drive its future performance. The shares, though, were off 10
percent to $14.95.

General Motors (NYSE:GM) shareholders rejected a proposal by investor and
hedge fund Greenlight Capital to split the automaker`s stock into two
classes, one offering dividends, the other benefiting from earnings growth.

CEO Mary Barra spoke about Greenlight`s plan.

(BEGIN VIDEO CLIP)

MARY BARRA, GENERAL MOTORS CEO: We value the voice of all our
shareholders. But as we went through and looked at the aspects of this
particular proposal, we thought it provided several elements of risks and
was not in the best interests of our shareholders. So, it wasn`t one
thing. It was doing a very careful, thorough and objective analysis.

(END VIDEO CLIP)

HERERA: GM shares fell three cents to $34.43.

And restaurant and gaming chain Dave and Busters reported profit and
revenue that grew and topped estimates. The company also raised its full
year forecast. But investors seemed to focus on only one thing: same store
sales. They grew but not enough to beat expectations. Shares initially
fell in after-hours trading, but finished the regular session up nearly 3
percent to $70.17.

GRIFFETH: The CEO of J. Crew is stepping down. Mickey Drexler, he`s going
to be replaced in July but he will remain as chairman. Drexler is known
for his turnaround of the Gap (NYSE:GPS) back in the 1990s. He came to J.
Crew in 2003 and succeeded in introducing the idea of providing designer
quality clothing for the masses. But the retailer has hit a sales slump
lately, just like other apparel brands and is currently burdened by a heavy
debt load.

HERERA: There`s a new front in the battle between the world`s largest
traditional retailer and the world`s e-commerce juggernaut. Amazon
(NASDAQ:AMZN) is offering a discount on its prime membership for people who
have low incomes and receive government assistance. Those consumers can
pay $5.99 a month for a prime membership which typically costs about $10.99
monthly.

According to Morningstar (NASDAQ:MORN), the discounted rate will be
available to nearly 20 percent of the U.S. population. It`s a segment of
the market that Walmart has long dominated. Last year alone, nearly one
out of every $5 spent using the assistance program was spent at Walmart.

GRIFFETH: So, is Amazon`s discount prime membership for low income
shoppers on government assistance a good idea? Or not?

We have both sides of that debate right now. Derek Thompson is senior
editor at “The Atlantic.” He says it is. While Joe Ridout, a spokesperson
for a consumer advocacy group, Consumer Action, disagrees.

Joe, you feel why this discount won`t actually serve the targeted audience
it is going after. Why?

JOE RIDOUT, CONSUMER ACTION: Well, I — to begin with, I think it`s just
too much money for someone who is struggling to put food on their table
without assistance, to expend another $72 a year to sign up for this
service. It`s something of a discount from $110 a year and kudos to Amazon
(NASDAQ:AMZN) for trying to come up with ways to reach out to new groups.
But I just don`t think thermal makes that much of a difference,
particularly when it comes to getting groceries.

HERERA: And, Derek, I think you think it does make a difference?

DEREK THOMPSON, THE ATLANTIC SR. EDITOR: Sure, it makes a difference.
They have 50 percent discount on the products, that`s much better than a
lot of other tech companies do, a lot of other companies don`t offer
discounts to people just because they`re on SNAP, they`re on food stamps.

Look, no one is forcing any of these families to buy prime memberships. I
have some friends who have prime memberships, love them. I have others who
don`t, right? People can make their own decision. I think it`s good,
though, for a company, even if this is pro profit, even if it helps them in
the long run, it`s good for the company to recognize that income inequality
is a huge part of this country`s picture and to develop policies based on
it.

GRIFFETH: But what about to Joe`s point, Derek, that this could be
tempting for people in the lower income bracket? Now, some of these
products are available to them with that easy shipping that Amazon
(NASDAQ:AMZN) offers here.

THOMPSON: Sure. There`s nothing evil about easy shipping. There`s
nothing evil about buying anything from Amazon (NASDAQ:AMZN).

You know, pizza is tempting. Food is tempting. Candy is tempting. But I
don`t think there should be moralists who say that people who are on low
income, who are on SNAP, shouldn`t by potato ships or pizza or candy. I
think that we should have government programs that help people who have low
incomes have more income. That`s the point of government transfers.

But once we transfer that money to households, we should allow them to
spend money on what they value. If they value toilet paper, they can buy
toile paper on Amazon (NASDAQ:AMZN). If they want towels, they can buy
towels on Amazon (NASDAQ:AMZN). If they want food, food on Amazon
(NASDAQ:AMZN).

But this puts — this doesn`t necessarily put money in people`s pockets,
but it`s a discount for low income families and that`s a good thing.

GRIFFETH: Yes.

HERERA: Joe, do you want to respond to that? Because I think there is
worry about perhaps — the thought that Amazon (NASDAQ:AMZN) may be
exploiting the fact that these people are lower income people, that are
trying very hard to put food on the table.

RIDOUT: Sure, yes.

HERERA: And at lower prices certainly with the prime. But tell me how you
feel about the points that Derek just made.

RIDOUT: Well, to Derek`s point, I will certainly agree that more
competition, that`s good for consumers. And here`s another option for
them. The problem is it`s a bad option and it`s not going to save low
income consumers any money.

To Derek`s point about once the government distributes benefits, it`s
someone`s option to spend it as long as they see fit as long as it`s a
qualifying purchase, let`s look at what Amazon (NASDAQ:AMZN) does. You
can`t use food stamps to buy Amazon (NASDAQ:AMZN) food in 47 out of 50
states. If they really want to help low income Americans who are
struggling financially, they could start right there and allow all
Americans to use their food stamps to buy food.

And to add on to the $72, I really should point out for anybody who thinks
that we`re going to be helping low income Americans in food deserts with
this Amazon (NASDAQ:AMZN) prime reduced rate, to get Amazon (NASDAQ:AMZN)
grocery delivery, you actually have to sign up to another service with
another fee of $14.99 a month called Amazon (NASDAQ:AMZN) fresh. That
makes the total bill over $250 a year.

The math just doesn`t work out for somebody who is financially struggling.

GRIFFETH: Joe, clearly, Amazon (NASDAQ:AMZN) is going after Walmart with
this strategy.

RIDOUT: Oh, yes.

GRIFFETH: But, let`s face it, Walmart has made a mint off these low-income
people with these low everyday prices.

RIDOUT: That`s true. When you get into government benefits, I think
there`s a real case to be made about how Walmart has profited from all of
us in how they pay their workers so little that they have to essentially
game the system in order to make enough money to feed their families and to
survive.

Really, we are subsidizing this corporate giant`s profitability to a large
degree. So, it`s certainly about time somebody challenged them. I just
don`t see how this is going to help individual people on government
assistance.

HERERA: Yes. Derek, you get the last word here. Does Amazon
(NASDAQ:AMZN) have to — does, rather, Walmart have to answer to Amazon`s
move or not?

THOMPSON: Well, the big picture is this: Amazon (NASDAQ:AMZN) is trying to
become Walmart faster than Walmart can become Amazon (NASDAQ:AMZN). Amazon
(NASDAQ:AMZN) is trying to go, build products for low income households
faster than Walmart can build e-commerce sort of offshoots of its company.
They`re competing against each other and that`s good that they`re competing
against each other.

I agree with Joe`s final point. I think we`re dealing with two extremely
separate issues, government policy and corporate policy. Government
policy, we should have transfers to low income to help them pay their bills
and buy food. But on corporate policy, it is good, it is good for
companies to offer lower income families a discount so they can buy certain
products if they so choose. I can`t think of a good argument against a
company doing so.

GRIFFETH: Very good discussion, gentlemen. Derek Thompson from “The
Atlantic,” Joe Ridout from Consumer Action — thank you both.

THOMPSON: Thank you.

RIDOUT: Thank you.

HERERA: Coming up, smart medicine. Meet the startup that helps patients
take their meds.

(MUSIC)

HERERA: Uber has reportedly fired 20 employees. This follows a company
investigation into sexual harassment claims at the ride hailing company.
Privately held Uber also told staff today that it will expand its employee
relations unit to better investigate claims and that it plans to increase
management training.

GRIFFETH: Anthem plans to exit most of the Ohio Obamacare market next
year. The health insurer says its decision is due to the uncertainty over
whether the government will continue to provide subsidies aimed at making
those plans affordable.

Republicans are trying to cut off the payments in court proceedings, and
the president has made conflicting comments about whether the government
should in fact continue paying them. Anthem is, of course, one of the
largest sellers of individual plans on those health exchanges.

HERERA: Seattle has become the latest city to tax sugary drinks. The
measure, which was passed late yesterday, will go into effect in January.
The new tax is expected to generate $15 million in revenue a year. The law
was opposed by the beverage industry which said the tax would hit working
class families and small businesses the hardest.

GRIFFETH: Entrepreneurs and innovators are gathering in New York for the
iConic Conference presented by “Inc. Magazine” and by CNBC. Its purpose is
to help business owners revolutionize the way that they do business.

And Kate Rogers (NYSE:ROG) spoke to one businessman who is rethinking the
way we take our medicine.

(BEGIN VIDEOTAPE)

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: One of the biggest
challenges for health care providers today is getting patients to actually
take their medication.

AdhereTech is out to change that.

JOSH STEIN, ADHERETECH CO-FOUNDER & CEO: We make patented smart pill
bottles that track and improve medication adherence in real-time.

ROGERS: The bottles are loaded with state of the art technology to tell
when patients take the medication, with sensors that measure the open and
close of the bottle, and additional sensors that measure the contents. If
a dose is missed, the bottles light up and chime to remind patients to take
their pills.

The technology can also prompt reminder phone calls, text messages, or even
activate doctor interventions. But you don`t have to be tech savvy to use
them.

STEIN: Our average user is 70, and about a third don`t even own
cellphones.

ROGERS: AdhereTech partners with pharma companies, pharmacies and
hospitals, including Dana Farber Cancer Institute and Weill Cornell
Medical, to provide the smart bottles to patients for free, distributed
from some of the largest pharmacies across the globe.

DR. LEAH BURKE, WEILL CORNELL MEDICINE: They`re being better at
remembering. It puts them on a schedule. So, patients have actually
changed their behavior in response to having the bottle.

ROGERS: To date, they`ve raised $2.4 million in funding from investors
including GE Ventures and of thousands of bottles on the market in four
continents, streaming patient data back to providers in real-time.

AdhereTech is continuing to expand in the U.S. and internationally. And
the startup says it`s already profitable.

For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG) in New York City.

(END VIDEOTAPE)

GRIFFETH: I can think of lots of people that would benefit.

HERERA: Absolutely.

GRIFFETH: You`re looking two of them right here.

HERERA: Two of them right now.

GRIFFETH: Exactly.

HERERA: On that note, that`s NIGHTLY BUSINESS REPORT for tonight. I`m Sue
Herera. We want to remind you that this is the time of year your public
television station seeks your support.

GRIFFETH: I`m Bill Griffeth. Thank you for your support. Have a great
evening. We`ll see you tomorrow.

END

Nightly Business Report transcripts and video are available on-line post
broadcast at http://nbr.com. The program is transcribed by ASC Services II
Media, 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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