TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Up, up, and away. The Dow
closes above 23,000 for the first time ever. And it is led by an unlikely
stock — IBM.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Stepping down. Long time
American Express (NYSE:EXPR) (NYSE:AXP) CEO plans to retire early next
year. And the stock initially falls.
MATHISEN: Housing headache. There aren`t enough houses. There aren`t
enough workers to build them. And the problem appears to be getting worse.
Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
HERERA: Good evening, everyone, and welcome.
The Wall Street bull pushed its way through a big round number. For the
first time ever, the Dow closed above 23,000 after one day after briefly
touching that level. And it did so with confidence, surging triple digits.
This is the blue chip index`s 4,000-point milestone this year.
IBM played a big role in today`s advance. Shares of Big Blue soared nearly
9 percent, its best day since 2009, on the back of its quarterly results
that we told you about last night.
Solid earnings and improving global growth have also contributed to the
market`s seemingly uninterrupted rally. When all was said and done, the
Dow Jones Industrial Average gained 160 points to 23157, the Nasdaq rose
just fractionally, and the S&P 500 was up nearly two.
Bob Pisani takes a look at why nothing seems to scare the Dow.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Stocks seemed to be
racking up record highs by the day. Here`s an amazing stat. The Dow grew
5,000 points in 18 months. That means the Dow has advanced 1,000 points on
average every 3.6 months.
At this rate, we`ll hit Dow 24,000 at the end of January and we`ll be
celebrating 25,000 in the middle of May. Sell in May and go away. You
didn`t hear? That doesn`t work anymore.
The markets keep rallying because everyone has come to believe that all the
problems of the market will resolve itself. Why? Because it`s worked so
Under this logic, the market believes there`s not going to be any real
conflict with North Korea because everyone believes the Chinese will work
with the U.S. The market believes tax cuts will pass because everyone
believes the market impasse will somehow be resolved. The market believes
the record earnings will continue because the global economy will keep
expanding and tax cuts will add another 2 or 3 or 4 percent, pick one, to
earnings next year.
And finally and most importantly, the market believes the Fed will not make
any policy error because everyone believes the Fed will remain just dovish
enough not to rattle the market.
Call it stoner logic. That`s what I call it. Dude, chill out, it`s all
going to work out. And maybe it will.
But my bet is the biggest risk to the market is the last one, the Fed
overshoots its target. Normal market cycles have been disrupted by the
great ocean of liquidity that the global central banks have provided. And
who knows what will happen when that starts to recede?
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
MATHISEN: As we told you earlier, IBM`s stock soared nearly 9 percent
today despite being down about 4 percent for the year. Some investors are
betting that the worst is behind it. But is this really a turning point
David Holt is an equity analyst at CFRA Research and he joins us now to
David, welcome. Good to have you with us.
IBM has been a wounded duck for a long time. Is it now a swan?
DAVID HOLT, CFRA RESEARCH EQUITY ANALYST: You know, really after looking
at Q3 results and digesting those, you know, it`s really a step in the
right direction. You know, we saw some positive momentum and recovery from
key segments that have been lagging in the past. But really it comes down
to, you know, if that momentum carries through to Q4, you know, that could
set the stage nicely for 2018.
HERERA: And you think that some of this has been overlooked by others in
the market, correct?
HOLT: Yes, absolutely. You know, I think the overall theme has been
overlooked by many investors. But really, when you`ve had a look at it,
you know, this actually led to our upgrade in July 2017 from a hold to a
buy. You know, we saw signs of that civilization from those lagging
segments, solid growth from strategic imperatives which, you know,
definitely delivered in Q3.
You know, again, questions do remain, if that can carry through. But, you
know, we are believers at this time.
MATHISEN: You`ve got a buy on it, you`ve got $175 price target on it.
What takes it there?
HOLT: What takes it there is, you know, consistent execution. Strategic
impervious, delivering at least high single digit, you know, growth, as
well as that recovery again, you know, from those key segments, whether it
be consulting or technology solutions.
HERERA: You say that cloud, I`m looking at my notes, you saw cloud growth
rise 20 percent in Q3. Do you think it will carry over into the next
HOLT: You know, you hope so. Really, whether you look at it kind of to
the back half of 2017 and definitely into `18, just that normalized level
of at least high double digits, you know, mid-double digit growth, as long
as that`s intact, you know, I think you could definitely see some positive
progress for the company.
MATHISEN: I`m going to put you on the spot, David. In your coverage
universe, I have no idea how many stocks you follow. Is IBM in the top
quartile right now of your choices? Is it one of your favorites?
HOLT: Yes, I would definitely say it`s compelling. Look, you have rock
bottom valuation, trading at about 11 times, 17 or 18 earnings, you know,
and a pretty lofty market, yielding about 3.5 percent, definitely a
defensive play. If you, you know, catch the market volatility into `18.
MATHISEN: All right. David, thanks. Thanks very much. David Holt with
HOLT: Thanks for having me.
MATHISEN: You bet, thank you.
HERERA: The CEO of American Express (NYSE:EXPR) (NYSE:AXP) will step down
early next year. Ken Chenault has served as chairman and CEO since 2001
and is one of the country`s most prominent African-American corporate
leaders. He will be succeeded by Stephen Squeri, an American Express
(NYSE:EXPR) (NYSE:AXP) veteran who was in charge of corporate cards. The
move follows a difficult period for the company, which saw the lost of its
Costco (NASDAQ:COST) partnership and increased competition from JPMorgan`s
Sapphire Reserve Card.
Late today, the company reported a rise in quarterly profit as lone growth
help to offset a rise in costs.
Now, if you look at the chart, you can see the immediate rise in the stock
when the earnings were released and then the initial decline in the stock
when the CEO announcement was made.
MATHISEN: Investors attention today also turned overseas where China`s
president spoke about the world`s second largest economy, at the country`s
key meeting of the Communist Party Congress.
Eunice Yoon reports from Beijing.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: President Xi is
ushering in a new era for China, mentioning the phrase “new era” 36 times
today in his 3-1/2 hour-long speech, the longest for any Chinese president
at one of these congresses, President Xi praised the party`s achievement
over the past five years and outlined his vision for the next five years in
his second term.
In his work report, he said he sees China`s future as socialism with
Chinese characteristics. He signaled there would be no political reforms,
that the party would continue to fight against corruption, and that China
would reemerge as a mighty force on the world stage, politically,
economically, and militarily.
XI JINPING, CHINESE PRESIDENT (through translator): Today, compared to any
time in our history, we have never been this close to or confident and
capable of realizing our grand mission of revitalizing our country and
YOON: On the economy, President Xi continued to present himself as a
defender of globalization, saying China would become more and more open.
For foreign investors, he promised greater market access, faster opening
and services in the financial sector, and pledged to protect their rights
and interest in China. Despite those pledges, many China watchers believe
President Xi still favors a state-led approach to the economy.
In his work report, President Xi promised to reform the state`s sector by
making them stronger, better, and bigger. It`s that last word, “bigger,”
that raised flags among foreign investors who had been hoping to see the
state sector drop from the economy here.
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.
HERERA: Economic activity here in the U.S. is growing despite the impact
of the hurricanes. The Federal Reserve describes growth as somewhere
between modest and moderate in its latest snapshot of the economy, which is
known as the Beige Book. The report did show little evidence of inflation
despite a tightest labor market in years.
MATHISEN: And that tight labor market is a problem now for housing. Starts
dropped more than expected in September. While some of that can be
attributed to the hurricanes down South, the real problem nationally is an
acute labor shortage. And that`s only getting worse because of those
Diana Olick explains.
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): The
number of Houston homes destroyed by Hurricane Harvey surpassed the number
expected to be built in the city in all of 2017.
And in California, the damage isn`t done yet. If the labor shortage in
this country was bad before, it is now acute.
NELA RICHARDSON, CHIEF ECONOMIST, REDFIN: All the resources are being
drained to the rebuilding effort. That`s going to increase the cost of
housing and renovation across the nation.
OLICK: Just after Hurricane Harvey, the chairman of the National
Association of Homebuilders implored the Trump administration to ease up on
immigration, saying a successful guest worker program will help alleviate
the current labor shortage in the residential construction sector, quicken
the rebuilding efforts in Texas, and support the overall economic growth of
So far, no answer.
RICHARDSON: The housing market can`t take the shock of a natural event.
It can`t take any shock. It`s because we are so tightly wound with
inventory, any change is a big change.
OLICK (on camera): The number of existing homes for sale nationally is at
a record low, and single family housing starts like this one are still 19
percent below their historical average. Curiously, homebuilder sentiment
jumped this month despite drops in both new home sales and starts.
(voice-over): In that release, even the NAHB`s chairman warned his own
constituency there would be more difficulties ahead.
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.
MATHISEN: Well, to read more about the labor shortage in construction,
head to our Website, NBR.com.
HERERA: Still ahead, on the eve of the 30th anniversary of Black Monday,
investors are wondering whether a crash like that could happen again.
HERERA: House Speaker Paul Ryan opposes a short term fix to shore up the
health exchanges under the Affordable Care Act. A spokesman for the
speaker said he believes the Senate should keep its focus on repealing and
replacing the law. As for the president, he initially signaled support for
the bipartisan deal but appears to have reversed course over concerns that
the agreement might benefit insurance companies too much.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We`ll see the bipartisan.
We`re going to see the bipartisan. And Lamar Alexander`s (NYSE:ALX)
working on it very hard from our side.
And if something can happen, that`s fine. But I won`t do anything to
enrich the insurance companies because right now, the insurance companies
are being enriched. They`ve been enriched by Obamacare like nothing
anybody`s ever seen before. I am not going to do anything to enrich the
(END VIDEO CLIP)
HERERA: Separately, 19 state attorneys general are asking a federal judge
to force the White House to make the health care subsidy payments that the
president abruptly halted last week.
MATHISEN: President Trump`s recent executive order could usher in health
care changes. The most significant might involve more short term insurance
plans that offer fewer benefits than were required under the Affordable
One broker, for instance, is already offering new choices for consumers,
looking for cheaper options.
But as Bertha Coombs reports, the plans are not without risks and gaps.
BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): John
Conley has friends who benefitted from Affordable Care Act plans. But the
45-year-old Bentonville contractor says he earns too much to get a subsidy
and not enough to pay for premiums which have tripled from $190 to $670 a
JOHN CONLEY, BENTONVILLE CONTRACTOR: It became too expensive for me to
afford and it made us have to get creative in the way we approached buying
COOMBS: Online broker e-health says it`s a problem for many of their off-
exchange customers. So, next month, it`s launching limited coverage plans
in partnership with two private insurers, targeted at consumers looking for
SCOTT FLANDERS, CEO, EHEALTH: It`s a combination of short term insurance,
gap insurance, fixed indemnity.
COOMBS: E-health will streamline the billing and filing of claims.
FLANDERS: One place to manage all their benefits. We`re trying to do the
work for our customer.
COOMBS: President Trump`s executive order this month could pave the way
for more of these short term limited coverage plans in the off-exchange
(on camera): Under the ACA, they`re intended for people to use between
jobs or outside of open enrollment. This year, they were limited to just
three-month contracts. Still, some consumers are finding ways to use these
plans as their full-time health insurance.
CONLEY: It`s a temporary plan. I think it renews every three months. And
the health insurance plan, it`s a pretty standard 80/20 plan with a 20
percent co-insurance, $1,000 deductible. I added dental and vision to it
and it costs me about $150 a month.
COOMBS: The plan has a lifetime cap of about $1 million. Health care
advocates caution that type of coverage can leave consumers underinsured in
the event of a major illness like cancer or a major heart attack. And it
does not include Obamacare protections for preexisting conditions.
FLANDERS: For individuals that can afford an Obamacare plan, that`s what
they should buy. That`s a major medical, it`s guaranteed issue, it covers
everything from maternity care to mental health. Our plans cover less, but
they`re also at about half the price.
COOMBS: Because the plans are noncompliant, enrollees could be on the hook
for the Obamacare penalty for not being covered at tax time — a risk John
Conley is willing to take.
CONLEY: I would rather stay out of the government insurance. And I can
keep that money in my pocket through the year and use it for myself.
COOMBS: For NIGHLTLY BUSINESS REPORT, I`m Bertha Coombs.
HERERA: Wholesale revenue jumps at Supervalu. And that`s where we begin
tonight`s “Market Focus”.
The supermarket operator posted a loss. But adjusted earnings beat
estimates by a dime. Supervalu said its recent acquisition of Unified
Grocers contributed a big chunk of that revenue gain.
But Supervalu said it isn`t done, saying it is buying Associated Grocers of
Florida, which is a retail food distributor. Still shares lost 11 percent,
closing the day at $17.09.
Profit and revenue grew at Abbott Labs as rising sales in the company`s
medical devices and generics business helped its results. The company also
lifted the top end of its full year earnings outlook range. Shares of
Abbott Lab were up 1 percent to $55.77.
And Spectrum Pharmaceuticals (NASDAQ:SPPI) reported encouraging preliminary
results from a study of its lung cancer drug. The biotech company said all
the patients who were given that treatment saw some degree of tumor
shrinkage. Spectrum shares rocketed higher by 36 percent, to finish the
day at $19.67.
MATHISEN: The insurance company Assurance said it is buying the protection
plan provider the warranty group for $2.5 billion including debt.
Assurance said the deal will grow its global footprint, add to its existing
services. Assurance shares up 6 percent to $101.80.
After the bell, United Continental reported stronger than expected profits
and revenue despite business disruptions from those storms. Shares of the
airline initially rose in the extended session, but then fell. They ended
the regular day up fractionally at $66.99.
And eBay (NASDAQ:EBAY) was also out with results after the bell. Sales at
the online marketplace grew in the latest quarters. The company attracted
more active buyers to its platform. Those results beat estimates while
earnings fell in line. Shares were initially lower, as you see there, in
afterhours but finished the regular day up more than 1 percent at $37.97.
HERERA: Well, the Dow`s first close about 23,000 comes nearly 30 years to
the day since Black Monday. The blue chip index drop of roughly 23 percent
remains the biggest ever. And many investors are wondering if it could
Dominic Chu takes a look.
DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: The investing world
today is a lot different than it was back in 1987.
UNIDENTIFIED MALE: The Dow off more than 500 points. Paper losses more
than $500 billion.
CHU: But that hasn`t dampened the debate over whether another market crash
like Black Monday could happen again.
BURNS MCKINNEY, ALLIANZ GLOBAL INVESTORS: With respect to the massive drop
seen on Black Monday, it is obviously of a very low likelihood. But we
would never say that it couldn`t happen in today`s markets. In fact, there
are a lot of factors in place that, if anything, make it potentially more
likely than it would have been back then.
CHU: Among the factors that could make a big market crash more likely, the
rise in electronic computer-based trading that has accelerated the pace of
market action, as well as that move towards index investing and exchange
traded funds or ETFs. If everyone is in the same investments, what happens
if everyone wants to sell at the same time? But there are also a lot of
reasons why we won`t see a big market crash anytime soon.
GEORGE MARIS, JANUS HUNDERSON INVESTORS: The first is that there`s still
massive liquidity in the system. Even though the Fed looks to be
potentially raising rates in December, the U.S. is still supplying
liquidity at a massive pace. Same thing for Europe, same thing for Japan,
same thing for China.
The second thing is the aggregate global economic picture is strong and
CHU: Trading systems and safeguards are much efficient and robust today
than they were back in 1987. And the recent trend has been for investors
to continue to buy even relatively small market drops.
So, could another Black Monday happen? Of course, anything is possible.
But most on Wall Street don`t think it`s a likely scenario.
For NIGHTLY BUSINESS REPORT, I`m Dominic Chu.
MATHISEN: Coming up, falling in love or falling for a scam? Now, that`s a
HERERA: And here`s a look at what to watch for tomorrow. Weekly jobs
claims will be out. They give us an ongoing look at the health of the
labor market. We`ll also find out how manufacturers are feeling about
business activity. And more big name earnings are due out with Dow
components Verizon (NYSE:VZ) and Travelers reporting.
And there you have it. There`s what to watch for on Thursday.
MATHISEN: And Ford will recall more than 1 million trucks in North America
to fix a door latch. That fix is going to cost the automaker more than
$260 million. It will be reflected in fourth quarter results. The door
latch issue is on some F-150 and F-250 trucks.
HERERA: Not even billionaires are safe from scammers. Sir Richard
Branson, founder of the Virgin Group, was the target of a fraudster posing
as Britain`s Defense Minister Michael Fallon, who tried to get him to
contribute millions to a supposed secret ransom payment.
Branson was told that a British diplomat had been kidnapped and was being
held for ransom by terrorists.
(BEGIN VIDEO CLIP)
RICHARD BRANSON, VIRGIN GROUP FOUNDER: The government weren`t allowed him
to put up money for blackmail, you know, for extortion. He was coming to a
number of businessmen to put up $5 million each to get the person back out
again. And, fortunately, I mean, it was very real. I mean, I double-
checked and found that Sir Michael Fallon hadn`t phoned me.
(END VIDEO CLIP)
HERERA: Sir Richard Branson suspects the later person impersonated him to
steal $2 million from a friend of his by pretending to raise fund for
MATHISEN: Another well-known scheme is one that involves a Nigerian
prince. It`s been going on since before the Internet was a thing. But now
the game has changed. Cyber criminals are hooking in victims and stealing
their cash using far more sophisticated methods and raking in billions.
Andrea Day looks at why investigators have their eyes on West Africa and
why you should, too.
ANNETTE WILLIAMS, ASSISTANT U.S. ATTORNEY, SOUTHERN DISTRICT OF MS: The
same language was used with one person after another.
ANDREA DAY, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Just take
a look. According to investigators, these are the scripts con men use to
reel in lonely victims.
WILLIAMS: It didn`t matter if it was male or female.
DAY: The script blasted out at dating sites, strategically designed to
start relationships and keep them hooked.
I`m totally new to this dating stuff, I feel like you`re right here beside
WILLIAMS: There are hundreds of thousands of people out there who have
DAY: N.J. fell hard for a man who called himself Sam West.
N.J., FRAUD VICTIM: It was like we knew each other.
DAY: He said he was living overseas for work. But West was not who he
said he was.
N.J.: I felt really embarrassed.
DAY: We found the real Sam West, a former government agent whose name and
locations were used in the scheme. We`re keeping his identity secret.
UNIDENTIFIED MALE: It still impacts my life years later.
DAY: N.J. and West both victim to a multimillion dollar Nigerian crime
ring, according to prosecutors, they have operated in the U.S. for years.
WILLIAMS: Nothing would have happened to them in Nigeria because it was
Americans who were their targets.
DAY: The scheme uncovered all the way here in Gulfport, Mississippi, after
N.J.`s online boyfriend sent her a box filled with cellphones and told her
to ship it to Africa. That`s when she called police.
CONOR MULROE, DEPARTMENT OF JUSTICE ATTORNEY: That one phone call took
down a massive fraud network.
DAY: Department of Justice attorney, Conor Mulroe, and Mississippi
southern district AUSA, Annette Williams.
WILLIAMS: We`re a small branch office in Mississippi. Everybody is like,
what the heck are you doing in Mississippi with this stuff?
DAY: What the team discovered, loads of other victims across the country,
all conned into working for fake boyfriends and girlfriends.
WILLIAMS: Three hundred and sixty e-mail accounts, a million e-mails.
DAY: A virtual network of American e-mules as investigators describe them,
trapped by this romance scam and other methods. And she says those mules
were then shared by the entire Nigerian organization.
WILLIAMS: Do you have somebody that can move this money for me or mail
this package for me? And they`d say, sure.
DAY: Investigators say the victims unwittingly helped carry out a bunch of
money-making schemes like cashing fake checks and shipping goods bought
with stolen credit cards. And ultimately, wiring the laundered money back
WILLIAMS: It probably moved through four different hands before something
DAY: And the Nigerian criminals? Investigators say living large by local
standards. Homeland security investigations agent Todd Williams.
TODD WILLIAMS, HOMELAND SECURITY INVESTIGATIONS AGENT: Bragging about the
money that they were stealing from Americans.
DAY: Investigators spent years tracking down the criminals behind the con.
And that`s when they found the real Sam West, unknowingly mixed up in the
UNIDENTIFIED MALE: I was oversees, on a government assignment, I got a
call from my wife that someone had come on to our property looking for me.
DAY: And she wasn`t alone. Other victims sent letters, all in love with a
man they never met.
UNIDENTIFIED MALE: They were asking, why aren`t I hearing from you? What
do you want me to do with the clothes, with the laptop?
DAY: That Nigerian organization was recently taken down, with 12 pleading
guilty and three others found guilty at trial. Four are still at large.
But experts say the con game is far from over.
(on camera): That`s just the tip of the iceberg?
MARK NUNNIKHOVEN, TREND MICRO VP CLOUD RESEARCH: It is.
DAY (voice-over): West Africa, according to the security expert, Mark
Nunnikhoven, a growing hotbed of fraudulent activity.
NUNNIKHOVEN: It seems far more collaborative. Cyber crime is a team sport
DAY: A group effort he says like no other in the world.
NUNNIKHOVEN: We`ve seen about $2 billion in the last year. And that`s
just in cash.
DAY: And don`t think it`s the same old Nigerian prince scheme.
NUNNIKHOVEN: Really what these are really finely tuned, sophisticated
schemes that are targeted to separate you from your money.
DAY: He says the West African attack is all about mind games.
NUNNIKHOVEN: This region is far more focused on that social con, on that
DAY (on camera): And he says those mind games are used by the area more
than countries like Russia or China who have more of a technical or
scientific approach. It`s all about hooking you in with tidbits they find
on social media and playing with your mind to send money versus sending out
just a faceless malware attack.
For NIGHTLY BUSINESS REPORT, I`m Andrea Day.
MATHISEN: And you can head to our Website, NBR.com, to read more about
scams such as this one.
HERERA: That`s scary.
That does it for us tonight on NIGHTLY BUSINESS REPORT. I`m Sue Herera.
Thanks for joining us.
MATHISEN: I`m Tyler Mathisen. Thanks from me as well. Have a great
evening, everybody. We`ll see you back here tomorrow night.
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.