Transcript: Nightly Business Report – July 26, 2017

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Up and up away. Everything
seems to be working in Boeing`s favor, sending shares of the world`s
biggest plane maker higher than they`ve ever been before.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Thumbs up. Facebook`s
profit jumps a staggering 71 percent, but the company and analysts worry
that one key part of its business could hit a ceiling.

HERERA: Battle of the sexes. Who are the better investors, men or women?
A new study has the answer.

Those stories and more tonight a NIGHTLY BUSINESS REPORT for Wednesday,
July 26th.

MATHISEN: Good evening, everyone, and welcome.

OK. I confess, this is getting a little repetitive. It was another, yes,
another record-setting day for Nasdaq and for the S&P 500. I don`t know
how many times that has happened in the past month.

But today, something new happened. The Dow Jones Industrials set an all-
time high, too. Sue will tell you in just a minute about the specific
stock that drove today`s record run. But broadly speaking, investors were
cheered by two things, boffo earnings reports and the Federal Reserve`s
decision to keep interest rates unchanged, something we`ll talk more about
later in the program.

But for now, let`s show you the happy numbers that made you a little richer
today. The Dow Jones Industrial Average advanced 97 points to that record
21711. And Nasdaq added 10. The S&P 500 eked out a small gain, but it was
enough for a new high.

HERERA: And the stock that fueled the Dow`s gains was Boeing (NYSE:BA).
Shares of the Dow component flew higher, recording its largest percentage
gain since 2008. The dollar gain of $20 a share was the best point daily
point rise on record, and the reason, strong quarterly results, or as one
analyst called it, a, quote, close to perfect report. Its profit beat
expectations and the company lifted its forecast for the year. Sales fell
but investors didn`t care.

Boeing (NYSE:BA) turned out a lot of cash from its 787 Dreamliner jet
program and returned billions back to shareholders. Investors cheered,
sending the stock to a record. Boeing (NYSE:BA) today surpass Goldman
Sachs (NYSE:GS) to be the priciest stock in the Dow. The world`s largest
aerospace company is the best performing Dow stock this year, up nearly 50
percent.

Phil LeBeau has more on what`s working for Boeing (NYSE:BA).

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Pardon
the pun, but Boeing (NYSE:BA) is soaring to new heights, thanks largely to
its commercial airplane business lifting profits through greater
productivity and efficiency. How much greater?

Last quarter, Boeing`s operating cash flow was almost double what Wall
Street was expecting and CEO Dennis Muilenburg says the company`s cash flow
is not slowing down.

DENNIS MUILENBURG, BOEING, CHAIRMAN & CEO: We still expect year-over-year
cash growth throughout the end of the decade.

LEBEAU: Boeing`s booming bottom line comes as the company continues to cut
jobs, many of them on its assembly lines, which have become more
productive, thanks in part to increased automation and a relentless focus
on improving efficiency.

KEN HERBERT, CANACCORD GENUITY: The company clearly has surprised myself
and a lot of people on their ability to take cost out and drive more
efficiency through the factory.

LEBEAU: The factory that builds Boeing`s 737 MAX will soon be running at
its highest level ever, cranking out almost of the new planes every month.
But with its longtime rival Airbus aggressively pricing planes and
newcomers like Commack in China expected to do the same, Boeing`s long-term
profitability still faces plenty of challenges.

(on camera): But the good news for Boeing (NYSE:BA) is so many airlines
have placed orders for new planes that the backlog now totals almost a half
trillion dollars. Meanwhile, Boeing (NYSE:BA) finds itself in a profitable
position, driving down costs while increasing production with every new
plane that it builds.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

MATHISEN: The fellow Dow component Coke reported better than expected
profit and revenue, and issued an upbeat earnings forecast for the full
year. But it wasn`t because of strong sales of its namesake beverage, but
rather because of strong demand for juices and low sugar sodas. This was
the first report under new CEO James Quincey and he made a big move. He
announced plans to make over Coke Zero in the U.S. Shares rose about one
percent on the day.

HERERA: Facebook (NASDAQ:FB) crushed its profit and revenue estimates. A
push into video ads helped bolster its mobile ad business. In its earnings
report late today, the social media company said about 2 billion people
were using its service monthly, up 17 percent from a year earlier.

Facebook (NASDAQ:FB) blew past its earnings estimates, earning $1.32 a
share, compared to the estimate of $1.13. Revenue soared 45 percent from a
year earlier to more than $9 billion. The stock dipped and then rose in
after-hours trading.

Julia Boorstin has more on Facebook`s quarter.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Facebook
(NASDAQ:FB) continues its tear, outperforming expectations across the board
with both revenue and monthly active user growth outpacing estimates.

Facebook (NASDAQ:FB) COO Sheryl Sandberg telling me that the company is
benefiting from businesses looking to build their mobile presence not just
on Facebook (NASDAQ:FB) but also on Instagram.

SHERYL SANDBERG, COO, FACEBOOK: People are using our products and services
to share and connect and build community on their mobile phones. We`re
also really excited to announce today that we now have over 15 million
businesses using business profiles on Instagram, and that joins our 70
million business pages on Facebook (NASDAQ:FB).

So, these are — Facebook (NASDAQ:FB) and Instagram are places where people
are connecting with each other but businesses are connecting with their
consumer.

BOORSTIN: Sandberg wouldn`t break out Instagram`s revenue, but she said
that they`re very pleased with its success.

As for concerns that Facebook (NASDAQ:FB) won`t be able to rely on upping
its ad load to drive revenue growth, Sandberg says they just want higher
quality ads to be a win-win for users and brands.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.

(END VIDEOTAPE)

MATHISEN: One of the world`s largest electronics manufacturers will build
a new $10 billion factory in Wisconsin which means jobs, potentially a lot
of them. Foxconn, a major Apple (NASDAQ:AAPL) supplier based in Taiwan
will make flat screen displays used in TVs and other products.

The announcement was made this evening at a ceremony at the White House and
marks the first major U.S. investment for Foxconn. The decision to build a
new plant in the U.S. is considered a big win for the president in his push
to create U.S. manufacturing jobs.

Scott Cohn is reporting the story for us tonight fresh off his reporting on
best states for business.

Why Wisconsin and where roughly in Wisconsin?

SCOTT COHN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, we think it`s
going to be the southeast part of the state which happens to be in House
Speaker Paul Ryan`s district, not far from the home of White House Chief of
Staff Reince Priebus, but that`s not why. This is a very heavily traveled,
very busy booming corridor between Chicago and Milwaukee on Interstate 94.

And Wisconsin Governor Scott Walker just said at this announcement that
they`re calling it Wisconn Valley, Wisconsin and Foxconn, with the idea
that this is going to be now a site for advanced manufacturing. That`s
what they`re hoping.

Wisconsin does do well in our studies for things like technology and
innovation and education, not so well for workforce, and they`re going to
need a lot of workers for this, partly because unemployment in the state is
so low, just about 3 percent. So, they`ll draw workers from around the
area. One local official told me, if you build it they will come, a lot of
them may come from Illinois, may commute from Illinois because it`s just a
hop skip and a jump.

HERERA: Yesterday, the president told “The Wall Street Journal” that he
had talked to Apple (NASDAQ:AAPL) CEO Tim Cook, and that Mr. Cook had
promised to build a number of manufacturing facilities in the U.S., which
is leading people to speculate that perhaps today`s announcement was what
the president was referring to. But do we know that —

COHN: No, it is not what he was referring to. First of all, we are
understand — while Foxconn is a big supplier to Apple (NASDAQ:AAPL) on its
the where Apple (NASDAQ:AAPL) assembles the iPhone basically, this is LCD
displays used for, as we said, flat panel TVs, and other things and Apple
(NASDAQ:AAPL) is not saying anything about its plans, not confirming what
the president talked about in his interview with “The Wall Street Journal”.

It — by all indications this is something completely different. It is
Foxconn. Apple (NASDAQ:AAPL) is not involved.

MATHISEN: What incentives? These things usually come with some sort of
incentives. What sort of incentives did the state of Wisconsin or the
federal government — what did they provide to Foxconn and why would
Wisconsin pay to bring a factory in a state which is you point out has
extremely low unemployment to begin with?

COHN: Right. They don`t exactly need the jobs, but they need these kinds
of jobs. This is what`s prized. This is advanced manufacturing.

The numbers being talked about are in the billions of dollars and already,
some of the watchdog groups that follow this are calling that somewhat
troubling, presumably the state legislature is going to have to work
through some of this. We understand there`s going to be state money
federal money and local money but we also understand that there are no new
federal incentive programs are going to be drawing on existing programs.

Still, a lot to sort out, a lot of money but the thinking is these are
valuable jobs and it`s an important —

MATHISEN: Sort of next generation investment.

HERERA: Right.

MATHISEN: Scott Cohn, good to have you in the house.

COHN: Sure.

HERERA: It sure is.

Meantime, Amazon (NASDAQ:AMZN) is going on a hiring spree. The online
retailer is looking to fill more than 50,000 positions across the country.
The majority of jobs will be full-time, though some part-time jobs will
also be available at sorting centers.

In January, Amazon (NASDAQ:AMZN) said it wanted to hire 100,000 full-time
workers over the next year and a half. Amazon (NASDAQ:AMZN) will host what
it calls the nation`s largest job fair next week at 10 of its warehouses.

MATHISEN: And still ahead, who are better investors, women or men?

(MUSIC)

HERERA: New security measures are landing at the nation`s airports. The
Transportation Security Administration instituted new rules for screening
large electronic devices. Travelers and standard security lanes will now
be required to place all electronics larger than a cell phone in bins for
X-ray screening at all airports. There were no changes however to what
people can bring through those lanes.

MATHISEN: Also in Washington. the Senate today rejected a Republican
effort to repeal the Affordable Care Act with a two-year delay. Late
yesterday, a separate measure that would have repealed major parts of the
law came up short as well, and this morning, Senate Majority Leader Mitch
McConnell urged lawmakers to get it done.

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL (R-KY), MAJORITY LEADER: This certainly won`t be
easy, hardly anything in this process has been. But we know that moving
beyond the failures of Obamacare is the right thing to do. We put a lot of
hard work already into this. We`ve had important successes like we saw
with the vote to proceed yesterday. We have to keep up the work now, so we
can get this done.

(END VIDEO CLIP)

MATHISEN: Republicans may now weigh a measure to repeal only part of
Obamacare. That`s the so called skinny repeal that would leave most of the
Affordable Care Act in place for now.

HERERA: Sales of newly built homes increased in June, even as the ongoing
inventory shortage continued to eat into overall activity. The Commerce
Department said that new home sales edged up 0.8 percent from the previous
month. The biggest gains were found in the West and the Midwest which both
saw double-digit increases. Builders are struggling to keep up with demand
because of rising lumber costs and a shortage of both labor and land.

MATHISEN: Housing is, of course, one part of the economy the Fed tracks
very closely. And today, the Central Bank policymakers unanimously decided
not to raise interest rates but the Fed did lay the groundwork for another
potentially big move and investors are paying attention.

Steve Liesman explains.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Federal Reserve
kept interest rates unchanged at this July meeting, maintaining the range
of one to one and a quarter percent, but it`s signaled that will likely
begin reducing its $4.5 trillion balance sheet as soon as its next meeting
in September.

The Fed said that its previously announced plan to gradually sell
securities, unwinding its massive stimulus program from the financial
crisis will begin, quote, relatively soon and that maintaining the current
level is only, quote, for the time being. The Fed bought securities during
and after the crisis giant, drive down interest rates further once it
lowered its benchmark rate to near zero and wouldn`t go any further into
negative territory.

The Fed statement was generally positive on the economy, saying job gains
have been solid and economic activity has been rising moderately. But it
noted that inflation is running below its 2 percent goal, that it
previously said it was running just somewhat below, took out the word
somewhat, so that was seen by some observers as a relatively dovish part of
the statement.

The Fed said it expects to raise rates gradually but markets doubt the
chance of a December rate hike right now, and the Fed back that doubt up
with its concern over inflation. The Fed did say it expects inflation to
begin moving back towards that 2 percent goal, and that could lay the
foundation for the next rate hike later this year.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman in Washington.

(END VIDEOTAPE)

HERERA: Ford tops Wall Street expectations. That`s where we begin
tonight`s “Market Focus”.

The automaker reported second quarter earnings that beat analysts`
estimates due to strong pricing on its F-series trucks and a solid
performance from its credit union. But the company acknowledged that much
of his quarterly performance was thanks to a lower corporate tax rate which
will rise slightly. Ford did raise its full-year earnings forecast but
analysts pointed out that tax rate will likely lead to lower net income
than previously expected. And on that, shares of Ford fell 2 percent to
$11.06.

And Tupperware (NYSE:TUP) beat its profit expectations but sales missed the
mark. The home products maker also said it would wind down its cosmetics
business after failing to find a buyer. Shares of Tupperware (NYSE:TUP)
were down 8 percent to $63.91.

Anthem says it could pull out of more Obamacare markets if the government
cuts subsidies to the insurers. The health insurance plan provider also
reported earnings that beat expectations but missed on revenue. Anthem
said it expects enrollment to grow by 300,000 to 500,000 members in 2017.
Anthem fell 3 percent to $184.99.

Hershey`s second quarter beat — second quarter earnings I should say —
beat estimates, citing strong sales for Easter candy. The chocolate
manufacturer also raised its quarterly dividend 6 percent. Hershey shares
were off more than 1 percent to $106 even.

MATHISEN: Rainy weather on the East Coast and down in Texas hurt
attendance at Six Flags, and as result, the theme park operator posted
earnings and revenue that missed estimates. Still, shares rose 6 percent
today to $59.23, as some underlying metrics shows signs of growth.

The nation`s largest home builder, D.R. Horton (NYSE:DHI), said solid
market conditions helped it beat sales in profit forecasts, but the
company`s ordered growth was the slowest in three quarters. Shares of D.R.
fell about 2 percent to $36.29.

Northrop Grumman`s quarterly report came in better than expected. The
company citing strong performance in all three of its businesses,
particularly an increase in sales of its aerospace systems. Northrop
nevertheless off a fraction at $263.86.

After the bell, Gilead Sciences (NASDAQ:GILD) results topped Wall Street
estimates, despite a drop in sales of its flagship hepatitis C drugs. The
company had warned earlier this year that sales of the high-priced drugs
would fall because fewer people were eligible for treatment, as well as
more competition from rival drug makers. Gilead shares initially rose
following that news.

HERERA: Exchange-traded funds or ETFs have become very popular with
investors. Fifteen years ago today, the first bond ETF was offered. So,
Bob Pisani takes a look now at how far they`ve come and how far they still
may go.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Fifteen years ago,
Barclays began offering a new way to invest in bonds to a new division
called iShares which Blackrock now owns. They called it an exchange-traded
fund or an ETF, and even though only four funds were launched that day,
it`s changed the way bonds are traded.

Fifteen years later, there`s nearly a thousand bond ETFs worldwide. The
assets: over $700 billion and most of its here in the United States.
That`s the success by any measure, and the business is only going to get
bigger.

People have come to understand the merits of index investing in ETFs. You
keep more of what you earn, lower fees.

Despite complaints that the ETF business has grown too fast, ETFs are a
really small part of the U.S. equity and bond business. It`s only about 1
percent of a whole bond market and it`s about 8 percent of the stock
market, still small. That we`ll be changing.

Martin Small, the head of iShares U.S. says that the ETF business could
eventually get to 50 percent of the U.S. stock market, though that will
take many years, and the bond business could double in the next five years.
So, despite the attention ETFs have attracted from retail investors,
there`s an even larger audience that the biggest ETF providers have set
their sights on. That`s the institutional investors like professional
asset managers.

It`s a big opportunity for the ETF business. More pros will be putting
more money into bond ETFs in the future as the whole bond business moves
toward electronic trading.

And it`s not just because investors are shifting money into ETFs. Change
is being forced on the industry by regulation, so new rule was coming out
in 2018 will require the disclosure of bond markups, which will make those
markups and sometimes 1 percent or more, more difficult to justify. People
who are charging a 1 percent commission are going to have to explain why
that is a better deal than owning a much lower cost bond ETF.

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

(END VIDEOTAPE)

MATHISEN: And now to a topic that we hope won`t lead to the tossing of
Kaiser rolls at your dinner table. Why women are better investors than
men are? This is what a new Wells Fargo (NYSE:WFC) report found when it
analyzed more than 900,000 investment accounts between December 2010 and
December 2015.

Tracie McMillion is co-author of the study and the head of global asset
allocation at Wells Fargo (NYSE:WFC) Investment Institute.

Tracie, welcome. Good to have you with us.

I really do feel that I should just sit here very quietly and let you and
Sue talk about this. Nevertheless, they`re letting me leave this segment.

So, what did the study find? How much better as investors are women than
men and why?

TRACIE MCMILLION, HEAD OF GLOBAL ASSET ALLOCATION, WELLS FARGO INVESTMENT
INSTITUTE : So, what we found was an interesting dichotomy between what
women say about their investing ability and the actual performance results
what women tend to say is that they have less confidence in their ability
as investors. They also say that they expect lower returns on average than
men do, and they also tend to — tend to look towards toward —

HERERA: Advice?

MCMILLION: — looks toward — yes, the advice exactly. Yes, they want
more advice from their advisors.

And so, what we found was that women on average outperformed men and they
also took less risk while they were doing that.

HERERA: And you found —

MCMILLION: And we found that they take about —

HERERA: You found three things.

MCMILLION: Pardon me?

HERERA: You found three things, that basically women do differently than
men and that gives them the edge.

MCMILLION: We did.

HERERA: Patience, discipline and the willingness to learn. And they trade
less frequently.

MCMILLION: That`s right. That is right, yes, exactly. And we found that

MATHISEN: What was the difference in — what was the difference in return,
Tracie? In other words, was it, they earned twice as much with X percent
less risk? Did they earn just a smidge more? I need to salvage something
here for my gender.

MCMILLION: It was actually just a little bit more than women on an
absolute return basis.

MATHISEN: Oh good.

MCMILLION: But when we adjusted for risk, the return was actually a little
bit higher.

HERERA: And the one thing that you found that you mentioned earlier is
that women lack confidence. How can they basically not fix but get that
confidence back? Because they do have a slight edge on performance. They
are doing those three things very well. How do you boost the confidence
aspect?

MCMILLION: Well, that`s exactly right. Women are good investors, and I
think that that`s the message we really want to get out, and we want people
to know that, and do a few things. We think that one is you can learn more
about investing by watching shows like this and by going to investment
Internet sites. You can also talk with your advisor about investing to
gain more confidence.

And the other thing that we would suggest that women do is to know what`s
available to them, know what`s available for your work —

MATHISEN: Right.

MCMILLION: — how you can invest in 401k plans and things like that.

MATHISEN: Tracie, thanks very much. Appreciate it. Tracie McMillion with
Wells Fargo (NYSE:WFC) —

MCMILLION: My pleasure. Thank you.

MATHISEN: — Investment Institute. You bet.

HERERA: Coming up: corporate America faces some big cyber threats, but are
they doing enough to prevent them?

(MUSIC)

MATHISEN: Great Britain will ban the sale of new gas and diesel cars by
the year 2040. Britain`s plan matches a similar pledge made recently by
France. It`s part of a broader push to curb emissions by promoting
electric cars. Volvo recently said it would phase out internal combustion
engines in the coming years.

HERERA: Corporate America has its guard up against hackers, because the
threat is growing. Today, executives, security experts and hackers are
gathering at the Black Hat Conference in Las Vegas, one of the biggest
cybersecurity events in the world.

And Aditi Roy is there.

(BEGIN VIDEOTAPE)

ADITI ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): This may
look like a scene from a movie, but it`s real life. The room is the
network operations center for the Black Hat Cyber Security Conference in
Las Vegas, and the engineering pros here are trying to ward off would-be
hackers, because most of the 15,000 people attending the conference don`t
feel safe from hackers.

HAIYAN SONG, SPLUNK SENIOR VICE PRESIDEN: It`s not whether you`ll be
breached or attacked. It`s a matter of when.

ROY: Many leaders at the conference share that bleak view of the state of
information security. One recent study shows the number of U.S. data
breaches so far this year is on a record pace, almost 30 percent higher
from this time last year.

Another survey found 60 percent of the top experts here at the conference
believe a successful cyber attack on U.S. critical infrastructure will
likely occur in the next two years. That includes anything from disrupting
a power grid to manipulating traffic signals, a dam, or even a nuclear
plant.

Nearly three out of four said recent examples of state-sponsored cyber
attacks like allegations of Russian election hacking to North Korea`s
possible involvement in the Wannacry attack have eroded their confidence in
the security of critical infrastructure.

The experts behind the study say part of the reason for that pessimism is
that hackers are getting more potent.

STEVE WYLIE, BLACK HAT GENERAL MANAGER: Cyberattacks are most definitely
increasing I think because they`re becoming effective, and I don`t think
the enterprises have the tools necessary necessarily to handle them.

ROY: But companies are fighting back, elevating their top I.T. pros to the
executive ranks. Most Fortune 500 firms now have chief information
security officers or CISOs. They report to the CEO, regularly attend board
meetings, and translate I.T. needs into strategic goals.

MICHAEL CHERTOFF, FORMER HOMELAND SECURITY SECRETARY: As we`ve seen the
elevation of some of these attacks and some serious impacts on businesses,
there`s an understandable desire for the board of directors and the CEO to
have somebody who owns the responsibility for security.

ROY (on camera): But some warn that companies need to go further to
protect themselves by doing more checks of their network and by arming
those chief information security officers with large enough teams to battle
those digital predators.

For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, Las Vegas, Nevada.

(END VIDEOTAPE)

MATHISEN: Last night, we brought you a story about a Wisconsin company
offering to implant its employees with a chip right here in between the
thumb and forefinger. We asked you what you thought of the idea. And in
our poll, most of you thought it was a bad idea. Just 5 percent of you
said you would let the chips fall where it may.

HERERA: Oh there you go.

MATHISEN: There you go.

HERERA: We didn`t vote.

(CROSSTALK)

MATHISEN: I would have voted it was a bad idea.

HERERA: All right. That`s it for us tonight. I`m Sue Herera. Thanks for
joining us.

MATHISEN: And I`m Tyler Mathisen. Have a great evening, everybody. We`ll
see you back here tomorrow night.

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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