Transcript: Nightly Business Report – June 14, 2017

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

(BEGIN VIDEO CLIP)

JANET YELLEN, FEDERAL RESERVE CHAIR: We continue to expect that the
economy will expand at a moderate pace over the next few years.

(END VIDEO CLIP)

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: With the economy on solid
footing, the Federal Reserve raises interest rates, sending the Dow to
another record close.

The clock is ticking. Health insurers will soon have to submit rate
requests for next year. But there is a lot of uncertainty and patients are
left waiting and wondering.

High-tech security. CT Scans aren`t just for hospitals. You may soon find
them at airports as well.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
June 14th.

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

The Federal Reserve did something today that will affect your money. It
raised interest rates for just the fourth time since the end of 2015. The
decision by the central bank signals confidence in the economy. A healthy
economy is believed to be able to withstand an increase in borrowing costs.

But the hike came despite a double whammy of weak economic reports today.
Retail sales recorded their biggest drop in 16 months, suggesting consumers
remain cautious. And consumer prices fell unexpectedly last month. And
its data on prices and inflation that the Federal Reserve is watching
closely.

Kate Rogers (NYSE:ROG) has more.

(BEGIN VIDEOTAPE)

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Federal Reserve
raising rates for the second time this year because the economy looks
stronger. The Fed hiking the target range for the federal funds rate by a
quarter point to between 1 percent and 1.25 percent.

Fed Chair Janet Yellen citing strength in the U.S. economy and the labor
market.

YELLEN: Our decision to make another gradual reduction in the amount of
policy accommodation reflects the progress the economy has made and is
expected to make toward maximum employment and price stability objectives
assigned to us by law.

ROGERS: The fed`s forecast suggests it pay hike one more time this year
for a total of three increases. The rate hikes could mean higher monthly
payments for credit card users and adjustable rate mortgages. The Fed was
looking at inflation of 2 percent this year, but now believes inflation
will be a little less than that.

The Fed also announcing a detailed plan to wind down its balance sheet this
year, selling off some of the assets the central bank bought to stabilize
the economy during the financial crisis. Right now, the Fed is sitting on
more than $4 trillion.

YELLEN: We currently expect to begin implementing a balance sheet
normalization program this year. Consistent with the principles and plans
we released in 2014, this program would gradually decrease our
reinvestments and initiate a gradual and largely predictable decline in our
securities holdings.

ROGERS: Chair Yellen also addressed questions about her own future with
the Federal Reserve as reports have surfaced the Trump administration is
looking for a potential successor.

YELLEN: What I`ve said about my own situation is I fully intend to serve
out my term as chair, which ends in early February. I have not had
conversations with the president about future plans.

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

(END VIDEOTAPE)

HERERA: The market reaction to the Fed was choppy and somewhat muted.
That response is something that many would have considered unusual years
ago. But a lot has changed since the Fed last embarked on a cycle of
interest rate hikes.

Today, the Dow Jones Industrial Average rose 46 points to 21,374, that`s a
record. The NASDAQ lost 25. The S&P 500 was off two.

As for oil, prices settled at a seven-month low on concerns that the global
glut isn`t going anywhere. And it was crude and today`s two-week economic
reports, in addition to the Fed, that investors were focused on.

Bob Pisani has that part of the story.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: May CPI (NYSE:CPY) fell
0.1 percent with year over year gains down 1.9 percent. Gasoline prices
also fell roughly 6 percent. Now, not surprisingly, that drop in gasoline
prices weighed on May retail sales. It fell 0.3 percent. That`s compared
to April, below expectations that sales would be flat.

But there may not be cause for alarm just yet. Broader retail trends are
still very much intact. So, for example, home improvement is continuing to
do well. E-commerce is continuing to do well, and gain at the expense of
department stores.

Consumer electronic sales are notoriously volatile, so that might explain
that. And, by the way, April retail sales, April, were revised upwards.
So, the markets also turned lower on the weekly inventory report which saw
a smaller than expected drawdown in crude inventories. Oil promptly sank
below $45. That`s the lowest level since November.

So, here`s the good news, after two down days on Friday and Monday, the
tech selloff has abated. It`s basically gone away. And with that, I think
the odds of a broader market correction for the moment appear to have
abated as well.

Here`s the bad news. The choppy economic data and the stubborn refusal of
inflation to rise towards the Fed`s target is making the Fed`s job a little
more difficult.

But keep this in mind. Cheap oil has been a huge factor in the inflation
and retail sales equation. But lower oil is good for the consumer. So, we
shouldn`t be rooting for higher oil just to satisfy some inflation targets
the Federal Reserve has.

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

(END VIDEOTAPE)

HERERA: Kristina Hooper is here with us now for more on the Fed, the
economy, and the stock market. She`s the global strategist at Invesco.

Welcome, Kristina. Good to see you.

KRISTINA HOOPER, INVESCO GLOBAL STRATEGIST: Great to see you.

HERERA: Let`s start with the Fed and then we`ll work our way into the
economy. This was pretty much, as I recall, what you were forecasting,
correct?

HOOPER: That`s correct. We expected a rate hike. We also expected that
we would get more information on balance sheet normalization, which is
really the 800-pound gorilla.

HERERA: Yes. That`s what the Fed has on its balance sheet that it`s
trying to taper — it`s trying to, you know, put back into the market,
right?

HOOPER: Sure. We saw this historic increase in the Fed`s balance sheet
through what was called QE1, QE2, and QE3. And there was always this
question mark about, how exactly will the Fed get back to normal? And
we`re starting to get some pretty significant details on that plan.

HERERA: What about the economy? Because as I mentioned in my introduction
to Bob Pisani`s piece, the Fed watches inflation very closely, and it
watches the economy and economic stats very closely. And we got two
reports today that were certainly less than what the street was hoping for.

HOOPER: Certainly. I think what we need to do is take a step back,
though, and look at trends. Now, with inflation we`ve had a few months now
of lower inflation.

But there are some reasons for it, including one of the drivers of lower
inflation was lower wireless cellphone costs. And some of that actually
has to do with calculations. So it isn`t necessarily a reflection on
demand or diminished demand. So I wouldn`t take it to be as significantly
negative. Our view is that we`re going to see relatively tepid inflation
this year.

HERERA: What about the stock market? Dow at a record high. Are you still
bullish on stocks?

You`re the global strategist. So, if you had to choose where to allocate
cash, where would that be?

HOOPER: I would make sure we had a significant allocation outside the
United States. I think what we`ve seen is this really significant rally
since November. Now, America woke up on November 9th and realized, wow,
after years of incredible roadblocks in Washington, so little getting done,
now we have an executive and legislative branches that are of the same
party, so much is going to get accomplished.

And so, there was a lot of optimism. I think that was largely driving
stocks up. I mean, certainly earnings improvement was part of the picture,
but the bigger component was that optimism. And then, of course, reality
sets in. The legislative agenda doesn`t seem to be coming to fruition, at
least not —

HERERA: As quickly.

HOOPER: As quickly and with as much depth and breadth as expected.

HERERA: So, if you would have a significant allocation outside of the
United States, where would that be?

HOOPER: European stocks and emerging market stocks. There`s a lot of
potential in both, for different reasons. Certainly emerging markets and
European stocks both look attractive valuation-wise relative to the U.S.
Beyond that, we see significant growth in the emerging market space in a
number of the countries.

I wouldn`t look at — I wouldn`t say collectively every country is
deserving of investment dollars. But there are some very significant tunes
in the emerging market space. And the same is true for Europe, where we
could see some macro catalysts. I think the European Union looks to be in
better shape than it did just a few months ago.

HERERA: On that note, Kristina Hooper, thank you very much, good to see
you.

HOOPER: Thank you.

HERERA: And Kristina is with Invesco. She`s the global market strategist
there.

BlueCross BlueShield will offer Affordable Care Act plans throughout the
state of Michigan next year. The good news is some areas will have at
least one option. The bad news is the insurer is requesting a significant
rate increase and said those rates could go even higher, potentially rising
about 30 percent if the Trump administration does not fund the cost sharing
payments.

Separately, Aetna (NYSE:AET) is leaving the door open to staying in
Nevada`s Obamacare exchange. But emphasizes that no final decision has
been mailed. Last month the insurer said it did not plan on participating
in that program at all next year.

And the deadline to file those proposed 2018 rates for individual insurance
policies is coming up next week. And as Congress wrestles with long term
health reform legislation, insurers, state regulators and patients have a
more immediate concern about what might happen next year.

Bertha Coombs has our story.

(BEGIN VIDEOTAPE)

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: For Mercedes Ibarra,
getting insured under Obamacare was a godsend three years ago. She finally
got treated for lupus, an autoimmune disease that nearly ended her ability
to teach flamenco.

MERCEDES IBARRA, DANCE TEACHER: The Affordable Care Act totally saved my
life.

COOMBS: This year, the Los Angeles dancer and her husband face a financial
setback. But she`s able to afford coverage thanks to a premium tax credit
and a cost sharing reduction subsidy which cuts her out of pocket costs.

IBARRA: My specialist, who I do have to see once a month, my
rheumatologist, before the subsidy is $75 co-pay, and I`m now paying $16
when I see her. It`s a huge difference, and it`s a lifesaving difference
because again, if I didn`t have access to health care right now, I wouldn`t
be able to do the things I do.

COOMBS: But the fate of those cost-sharing subsidies is up in the air,
with just one week until the deadline for insurers to submit rate requests
for 2018 plans, the Trump administration has not said whether it will
continue to make those payments.

Republican strategist Lindsay (NYSE:LNN) Bealor Greenleaf says there needs
to be clarity.

LINDSAY BEALOR GREENLEAF, ADVI HEALTH: They view it as some sort of
leverage going forward with these Obamacare negotiations, the Obamacare
repeal negotiations. That certainty lacking is certainly not helping shore
up the exchanges.

COOMBS: The uncertainty has pushed some insurers to pull out of the
exchanges for 2018, but with the clock ticking, there`s some movement. In
Iowa, which could be left with no insurers next year, officials are asking
the administration for a waiver and funding to prop up their exchange. And
one of the large national exchange insurers, Centene (NYSE:CNC), now says
it will expand from six to nine states next year.

GREENLEAF: So, that we have these last-minute exits that we have to worry
about, there`s also potential for a last-minute expansion of these insurers
that are already in the marketplace.

COOMBS: A senior official at CMS, the Centers for Medicare and Medicaid,
says they continue to work with states to try to provide greater
flexibility on the exchanges. Mercedes Ibarra hopes that means funding the
subsidy that keeps her on her feet.

IBARRA: I don`t want to go on disability. I want to be able to keep
working.

COOMBS: Bertha Coombs, NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

HERERA: There was a message of unity today in Washington following a
horrific attack in northern Virginia. A gunman opened fire on a group of
congressional Republicans during a morning baseball practice. Congressman
Steve Scalise, the GOP`s third ranking House member, was injured as were
four others before the shooter was killed by police. The alleged shooter
has been identified as a 66-year-old man from Illinois who is reported to
have volunteered for Bernie Sanders` presidential campaign.

(BEGIN VIDEO CLIP)

SEN. BERNIE SANDERS (I), VERMONT: I am sickened by this despicable act.
And let me be as clear as I can be — violence of any kind is unacceptable
in our society. And I condemn this action in the strongest possible terms.

REP. PAUL RYAN (R-WI), SPEAKER OF THE HOUSE: We are united. We are united
in our shock. We are united in our anguish. An attack on one of us is an
attack on all of us.

(END VIDEO CLIP)

HERERA: The president today also said that we are strongest when we are
unified.

Still ahead, gone missing. Why another business leader in China is nowhere
to be found.

(MUSIC)

HERERA: Remember the large Chinese insurance company that purchased the
Waldorf-Astoria in New York? Well, the chairman of that company has
mysteriously disappeared.

Eunice Yoon reports tonight from Beijing.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: The big question in
the financial markets here today was where is Wu Xiaohui? We woke up this
morning to Anbang, the Chinese insurance giant, issuing a statement, saying
that the chairman was no longer able to perform his duties for personal
reasons. The company said the management team was going to take over his
responsibilities and that the day-to-day running of the company would be
normal.

But what wasn`t so normal was that the statement came after local media
reported that the chairman was taken away by authorities last Friday and
that he hasn`t been heard from since. Those stories have disappeared from
the Internet. But the news is raising questions about whether Anbang might
be forced to sell off assets to meet obligations or demands of its
policyholders.

Anbang is seen as an aggressive investor overseas. It`s probably best
known for buying the Waldorf Astoria for $2 billion. In China, the
chairman is most well-known for being married to the granddaughter of
former leader, Deng Xiaoping. He`s believed to be politically well-
connected and that`s why the news sent a tremor throughout the insurance
industry today.

Stocks of Chinese insurers and Anbang related companies dropped. And one
industry insider told me that the government is trying to clean up the
industry. Companies such as Anbang have been offering insurance, but they
resemble wealth management products, alternative investments that promise
high returns for investors, rather than traditional insurance, which offers
long term protection for life and health.

Anbang was heavily involved in these types of products, which some analysts
believe is the reason why Anbang was able to raise so much money so fast.
We still don`t know whether or not Anbang`s chairman status has anything to
do with this backdrop. But what we do know is that the government has been
frowning upon this practice.

For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.

(END VIDEOTAPE)

HERERA: Back here at home, Caterpillar (NYSE:CAT) hikes its dividend and
that`s where we begin tonight`s “Market Focus”.

The heavy machinery maker raised its quarterly dividend more than 1 percent
to 78 cents a share. The yield on that stock now sits at just under 3
percent. Shares of the Dow component fell nearly 1 percent to $104.71.

The health insurer Anthem reaffirmed its prior forecast for the year,
saying it still expects adjusted earnings to top $11.60 a share. But that
is short of analysts` expectations. Still, Anthem`s shares rose almost 1
percent to $188.77.

The activist investor and hedge fund Elliott Management is urging BHP
Billiton (NYSE:BHP) to shake its board of directors. The mining company is
set to vote on a new chairman this week and Elliott says the new appointee
should review and upgrade the board following years of poor management
decisions. Shares of BHP Billiton (NYSE:BHP) were off more than 1.5
percent to $30.11.

And SeaWorld shareholders have reportedly voted not to reelect the
company`s chairman due to concerns over bonus payments that some company
executives received. That`s according to a “Reuters” report. The report
added an official vote count hasn`t been completed yet. SeaWorld shares
jumped more than 6 percent to $17.07.

The world`s millionaires now own a very large percentage of global wealth.
And according to a new report, that share is growing.

Robert Frank has more.

(BEGIN VIDEOTAPE)

ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: The world is getting
wealthier. But more and more of that wealth is going to millionaires.
Millionaire households who represent the riches 1 percent of the population
now own a record 45 percent of all the personal wealth in the world.
That`s according to a new report from Boston Consulting Group. And all the
millionaires own $75 trillion of the world`s wealth. And it`s just going
to grow.

By 2021, millionaires will own 51 percent of the world`s wealth. Boston
Consulting says rising stock markets, technological change that rewards
highly skilled workers and growing wealth creation in India and China and
other parts of Asia are driving the growing concentration of wealth. The
rich will get richer, of course.

But a lot of the wealth growth in the coming years will be newly created
wealth. The number of millionaires will also grow. There are now nearly
18 million millionaire households in the world.

And much of the new growth will come from Asia. Wealth in Asia expected to
grow 61 percent by 2021, with North America growing by about half that.
Wealth in China will nearly double.

For NIGHTLY BUSINESS REPORT, I`m Robert Frank.

(END VIDEOTAPE)

HERERA: A new JPMorgan (NYSE:JPM) report says stock trading by machines is
dominating Wall Street. The study found that only 10 percent of stocks
trading is regular stock picking. So, what does that mean for you and the
shrinking Wall Street pie?

Jimmy Lee is CEO of the wealth consulting group and he joins us now to talk
about that.

Good to see you as always, Jimmy. Welcome back.

JIMMY LEE, WEALTH CONSULTING GROUP CEO: Thanks, Sue. How are you?

HERERA: I`m good. Thank you.

What does this mean for the average investor? And do you buy into the
thesis that it is a shrinking Wall Street pie?

LEE: I don`t at all. And for the average investor, I think it`s important
to understand that, you know, indexing strategy has been around a long
time. With the explosion of ETFs, that`s why this has gotten much bigger.

But I don`t think fundamental analysis is dead. I don`t think it will ever
go away. In fact, I`m going to take a contrarian view for active investors
that if there`s less people doing research for fundamental gems out there,
to find gems out there, I think that it will give opportunities for
analysts to pick fine companies that investors will miss.

HERERA: Yes. For the average investor, is it smarter to index if you have
a smaller — a larger percentage of the big guys buying the — some of the
individual stocks? Does it skew it for the individual investor? It seems
like you don`t think it does.

LEE: You know, we offer both strategies, both passive and active. But we
think that investors really, especially average investors, should have
both. You know, passive investment strategies work really well in bull
markets. Active strategies tend to work better in down markets because
active managers can go to cash. And so, instead of trying to guess which
cycle the market we`re in, we think average investors should own both.

HERERA: What do you think is behind the fact that fewer companies have
been going public, and we have a lot of — had a lot of M&A activity as
well? How big a part of that is what they`re calling the shrinking Wall
Street pie?

LEE: Well, I think M&A activity has a lot to do with it. We`ve also had
over the last decade a lot of companies listing overseas, I think that has
a lot to do with it as well. Also, companies are taking longer or deciding
to delist or maybe to stay private. I also think regulation in a
complexity and the cost of being a publicly traded company have all
factored into either less publicly traded companies today than before.

HERERA: Well, I couldn`t let you go if I didn`t ask you where you see
opportunity, whether through indexing or stock picking? What are you
watching?

LEE: Well, we`re watching a lot of different factors. Obviously, today,
we had interest rate move up, as expected. And the market really didn`t
react, right? So, we were not surprised by that.

But we`re looking at the continued growth in the U.S. economy. But also
worldwide, we`re having a recovery in Europe. And we think we still have
more room to run on the upside, Sue.

HERERA: All right. On that note, Jimmy Lee with the Wealth Consulting
Group — thanks so much for joining us tonight.

And as we continue, coming up, the future of airport security.

(BEGIN VIDEO CLIP)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: It is a new 3D look
inside your carry-on bags that could change how quickly you get through
airport security. I`m Phil LeBeau. That story coming up on the NIGHTLY
BUSINESS REPORT.

(END VIDEO CLIP)

(MUSIC)

HERERA: Here`s a look at what to watch for tomorrow. The Philadelphia
Federal Reserve will release its business outlook survey. We`ll see if the
labor market is still strengthening with weekly jobless claims. And a
fresh read on homebuilder sentiment is out as well. That`s what to watch
for on Thursday.

There is a new lawsuit contends that Wells Fargo (NYSE:WFC) made
unauthorized changes to home loans held by customers in bankruptcy, even as
it was trying to recover from its fake accounts scandal. According to “The
New York Times (NYSE:NYT),” the changes typically lowered monthly loan
payments but the bank changed the term of the loan in some cases by
decades, thereby increasing the amount that borrowing ultimately owed the
bank.

Airline passenger complaints rose 70 percent in April. That report from
the Department of Transportation comes after a series of high profile
incidents, including the forcible removal of a passenger from a United
Airlines flight. The department received more than 1,900 complaints that
month.

American Airlines nixes its plan to lessen the leg room on some of its new
planes. The company had said that it would not reduce the distance between
some economy seats to make room for higher priced seats near the front.
The airline had wanted to reduce the 30 inches of space to 29 inches, but
reversed course after a wave of pushback.

The Transportation Security Administration is testing new technology that
could dramatically improve the cumbersome process of screening carry-on
bags. It involves giving carry-ons a CT scan.

Phil LeBeau shows us the new view of security that could change what
happens when we go to the airport.

(BEGIN VIDEOTAPE)

LEBEAU: Imagine going through airport screening without unpacking your
bags, or being stopped by TSA agents double-checking what`s in your carry-
on. Just outside of Boston, this machine, built by Analogic (NASDAQ:ALOG),
could make carry-on screening go faster, by giving TSA agents a clearer 3D
view of your bag.

MARK LAUSTRIA, ANALOGIC VICE PRESIDENT: It`s designed to allow passengers
to leave their liquids in their bags and their laptops, all electronics
stay in the bag, and just drop and go.

LEBEAU: Essentially, Analogic (NASDAQ:ALOG) machines do a CAT scan of
every bag that they see, producing a three-dimensional image that will
detect weapons but also potentially explosive that could be hidden in
electronics. Something the current two-dimensional x-ray machines may not
always catch.

It`s one reason the U.S. and Great Britain currently ban passengers on
certainly flights from the Middle East from carrying laptop computers on
board. But electronic bans could fade away thanks to new screening
machines designed to pick up what TSA agents might miss.

JOHN HALINSKI, FORMER DEPUTY TSA ADMINISTRATOR: Most of them have
automatic targeting. What that means is it`s taking a lot of the human
factor out of the equation. In other words, it`s doing the targeting and
identifying the threat immediately for the screener. So the onus is not as
much on the screener.

LEBEAU: With the number of people flying in the U.S. every year, steadily
climbing to an all-time high of just under 800 million passengers, the TSA
is in a tough spot, forced to handle a growing number of travelers while
keeping the lines moving as quick as possible.

HALINSKI: There`s no more room for an airport to put security screening
equipment. We need faster, more efficient equipment. And that`s what —
this is what this does.

LEBEAU: A view inside our bags that could make traveling safer, and with
far fewer security line headaches.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Peabody, Massachusetts.

(END VIDEOTAPE)

HERERA: And before we go, here`s a look at how markets closed following
the Fed`s interest rate hike. The Dow Jones Industrial Average rose 46
points to 21,374. That`s a record. The NASDAQ lost 25, and the S&P 500
was off two.

An that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. Thanks so
much for joining us. Have a greet evening and we`ll see you tomorrow.

END

Nightly Business Report transcripts and video are available on-line post
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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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