Transcript: Nightly Business Report – November 1, 2017

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Going global. The bulls seem
to be in control across the globe, as indexes far and wide hit new highs.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Rushing to showrooms. Why
are more Americans deciding to drive off with new cars?

HERERA: When the unexpected happens. A life-changing event strikes
suddenly. It happened to our Sharon Epperson, and tonight, she shares her
story to help you avert a financial catastrophe.

Those stories and more on NIGHTLY BUSINESS REPORT for Wednesday, November
1st.

MATHISEN: Good evening, everyone, and welcome.

It feels like the entire world is in rally mode. At one point today all
three of the major U.S. indexes were at record levels. A pretty good way
to start the month of November and continues a trend we`ve seen, virtually,
all year. Earnings still in focus, so is the Fed. The economy is solid.
And yes, details of changes to the tax code are finally scheduled to be
released tomorrow.

When mixed together, this is how we started the new month. The Dow Jones
Industrial Average gained 57 points to 23,435. Nasdaq came off record
levels to close down 11. But the S&P 500 added four.

And as Bob Pisani reports, investors are putting their money into stock
markets all across the globe.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Global markets kicked
off November with a bang. We`ve already seen big inflows and record highs.
Several key factors are driving the strong inflows, I mean good volumes.

First and most importantly, global economic expansion and improved global
earnings. Along with it are the primary drivers for stocks. There`s pro-
growth government in Japan and India as well. And in the U.S., investors
have high hopes for moderate leadership from the Federal Reserve and the
arrival of a tax bill, finally.

In Asia, the Japanese Nikkei closed at the highest level in 21 years.
India and South Korea hit historic highs. Hong Kong`s Hang Seng hit a
nine-year high.

The rally continued in Europe, where Germany, Norway, and Sweden also rose
to historic highs. Belgium, the Netherlands, and France are at a ten-year
high. There`s a clear global growth story going on.

Here in the U.S., stocks also had historic highs today. It helps that tech
had a monstrous month in October. The S&P was up 2 percent, but it`s a
lopsided gain. It`s all about technology, which was up nearly 8 percent.

What`s worse than that is the fact that five stocks were responsible for
most of the gains. Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), Apple
(NASDAQ:AAPL), Google (NASDAQ:GOOG), and Microsoft (NASDAQ:MSFT) accounted
for half of that 2 percent gain. Without them, the S&P would only be up
about 1 percent.

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

(END VIDEOTAPE)

HERERA: So, let`s turn now to David Lebovitz for more on this global
market rally and what it means for stocks here in the U.S. He is the
global market strategist at JPMorgan (NYSE:JPM) Asset Management.

Good to see you again, David. Welcome back.

DAVID LEBOVITZ, GLOBAL MARKET STRATEGIST, J.P. MORGAN ASSET MANAGEMENT:
Thanks for having me.

HERERA: Let`s start first of all where Bob Pisani kind of left off. He
gave us the litany of markets that are either at record highs, near record
highs, performing extremely well. Does that mean that globally assets are
overvalued, or is there still some value to be found?

LEBOVITZ: So, you know, I think in general today relative to coming out of
the financial crisis, it`s important to recognize that assets do in fact
look more expensive. However, you know, we do see upside in global equity
markets at the current juncture. We think that fixed income, high quality
fixed income in particularly does look a bit pricey.

But on a relative basis, equities are looking cheaper. And I think an
important point that Bob made in his comments is the fact that earnings
growth looks fairly robust. So, when you`re buying that share of stock,
what you`re paying for are a share of those future cash flows. And the
good news is those cash flows are present today, whereas a couple of years
ago that wasn`t necessarily the case.

MATHISEN: David, how did this happen? How did it happen that all of the
markets around the globe and most of the economies around the globe are in
growth mode?

LEBOVITZ: So, the U.S. has been in a slow but steady growth mode for the
better part of this expansion. I think quantitative easing, coupled with
negative deposit rates in Europe, has helped pull that economy up into
territory.

Thinking about the emerging markets, from about mid-2014 until the middle
of 2016, the world was in this manufacturing recession. The dollar was
incredibly strong. Goods producers are struggling. But we seem to have
turned the corner on that.

So, you`re seen continued moderate growth in the U.S., accelerating growth
across the eurozone, and you`re seeing emerging markets come back online as
the dollar has depreciated and commodity prices have stabilized. So, it is
a bit of a goldilocks scenario, almost a perfect storm of good news for the
global economy right now.

HERERA: Now, the U.S. Fed is expected, they left interest rates unchanged
today, but they are expected to raise rates in December. Does that
negatively or positively affect your outlook for the markets?

LEBOVITZ: Yes, I think a December rate hike at this point has been priced
to both equity and fixed income markets. So, it doesn`t materially affect
our view over the next three to six months.

But thinking longer term, you know, we do have the new, the prospect of a
new Fed chair early next year. I think that could lead to a different
trajectory for interest rates going forward. The real risk for investors
is that interest rates begin to rise very quickly or very suddenly. It`s
really the magnitude and the trajectory of rate increases that people need
to be focused on.

But as long as the Fed keeps tell graphing what they`re thinking and
sending a relatively clear message to investors, I don`t think that higher
interest rates will impede this rally and risk assets.

HERERA: On that note, David, thank you. Appreciate it.

LEBOVITZ: Thanks for having me.

HERERA: David Lebovitz with J.P. Morgan Asset Management.

MATHISEN: A closely watched gauge of manufacturing activity remains near
at a 13-year high despite falling back slightly in October. Despite the
decline, economists say global demand is strong, the dollar is competitive
and domestic spending on capital equipment is rising. Those are all
positives for the manufacturing sector.

HERERA: And one reason for the pickup in manufacturing activity is auto
production, and an increase in vehicle sales. That trend continued last
month, thanks in part to a rebound in business after Hurricanes Harvey and
Irma. But it was also the strength of the economy that pushed more people
into showrooms.

Phil LeBeau goes behind the wheel.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Fall is turning out to
be a busier than expected season for many auto dealers. For the second
straight month, sales were stronger than many anticipated. Among the
industry leaders, Nissan had its best October ever, while Ford beat sales
estimates, thanks to heavy demand for its F-Series pickup trucks.

Sales of the country`s bestselling model surged almost 16 percent. Some of
that is due to a rebound in business after Hurricane Harvey destroyed more
than a half million vehicles, many of them pickup trucks. But the overall
strength of sales, especially for higher priced SUVs and crossover utility
vehicles, is also due to the health of the economy, primarily low
unemployment and high consumer confidence.

And incentives remain near all-time highs, with automakers taking off an
average of almost $3,500 per vehicle.

While the auto industry is not running at the record sales rate we saw last
year, the surprisingly strong numbers in October means 2017 is on pace to
be one of the top five best years ever for auto sales in the U.S.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

MATHISEN: Well, private companies added the most workers to their payrolls
in seven months. ADP`s national employment report showed an increase of
235,000 jobs last month, exceeding forecasts. The number of construction
jobs rose following Hurricanes Harvey and Irma. The manufacturing industry
also added positions. The government employment report is due out Friday.
Expectations on that one are that the economy added more than 300,000 jobs
in October.

HERERA: As we mentioned earlier, the Federal Reserve did not raise
interest rates today but left the door open for one in December.
Policymakers said the economy continued to expand at a solid pace despite
disruptions caused by those recent hurricanes. It also cited two key
components of economic activity, household spending and business
investment, saying both are expanding at a moderate rate.

MATHISEN: The president tomorrow is expected to announce his pick for the
top job at the Federal Reserve. There are reports tonight that Federal
Reserve Governor Jerome Powell will be nominated to the top spot.
According to “The Wall Street Journal,” the president spoke to him today
and notified him. If confirmed by the Senate, Powell would succeed Janet
Yellen whose four-year term as Fed chief expires early next year.

HERERA: The tax bill was not released today. House Republicans in
consultation with the president postponed the rollout by one day to add
finishing touches to some of the details.

Ylan Mui tells us where things stand.

(BEGIN VIDEOTAPE)

YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Republicans, forced to
delay the release of their tax plan until tomorrow, after failing to reach
agreement on the details. The big holdup, how to handle the state and
local tax deduction. House Republicans who come from high tax states don`t
want to get rid of it.

And Congressman Pete King of New York says he`ll vote against the tax bill
to protect this provision.

REP. PETER KING (R), NEW YORK: While I certainly favor a tax cut, I don`t
want the rest of the country to get a tax cut at the expense of my
constituents on Long Island.

MUI: Negotiations over this bill are still under way. But here`s what
we`ve learned so far. The corporate rate will go down to 20 percent
immediately. It won`t be phased in.

The top individual rate is expected to stay at 39.6 percent. But we don`t
know what income level that will affect.

And we`re hearing the estate tax will be gradually phased out.

Now, King and other Republicans were upset that they were not briefed on
those details even though a vote is planned within a matter of weeks.
Representative Patrick McHenry, a member of the tax-writing committee in
the House, says Republicans have been talking about tax reform for years.

REP. PATRICK MCHENRY (R), NORTH CAROLINA: The Ways and Means Committee
members that I serve with have been working on this in detail for the last
3 1/2 years, and have put really blood, sweat, and tears into this over the
last 10 months, getting the details right.

MUI: Every day that Republicans delay gives Democrats more time to mount
their opposition. Democratic leadership along with the progressive group
Not One Penny held a rally against the tax plan today. And the ranking
Democrat on the Ways and Means Committee, Richard Neal, he told us that the
partisan bill is a missed opportunity.

REP. RICHARD NEAL (D), HOUSE WAYS AND MEANS RANKING MEMBER: There should
be an opportunity here for bipartisan cooperation. There is full
acknowledgement across the Congress that the current system is broken. And
I think that the best lesson here would be for both parties to sit down and
negotiate their way to creating a more efficient tax system for the
American people.

MUI: Republicans now plan to deliver their tax bill on Thursday. And they
say they`re still on track to take it up in committee next week.

For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington.

(END VIDEOTAPE)

HERERA: Still ahead, is anything more important than profit to a CEO of a
publicly traded company? Well, one says yes.

(MUSIC)

MATHISEN: Shares of movie theater chains moved lower today in part because
of a “Wall Street Journal” report that said Disney (NYSE:DIS) wants new
distribution terms for its movies, specifically the next installment of the
“Star Wars” franchise, “The Last Jedi.” According to the report, Disney
(NYSE:DIS) looks to get 65 percent of ticket sales and mandate a minimum
four-week run for the movie in the theater`s biggest auditorium or the
theaters will be penalized.

Here`s how shares of movie theater chains finished the day.

HERERA: In Washington, senators were frustrated by testimony from social
media executives on their response to questions about Russian interference
in last year`s presidential election, using platforms like Facebook
(NASDAQ:FB), Google (NASDAQ:GOOG), and Twitter. The CEOs did not testify,
but Facebook (NASDAQ:FB), Google (NASDAQ:GOOG) and Twitter`s general
counsels did. The chair and the vice chair of the committee both charged
the sites to do more in finding out how foreign actors are able to use
targeted ads and manipulate messaging.

(BEGIN VIDEO CLIP)

SEN. RICHARD BURR (R), NORTH CAROLINA: Very clearly, this kind of national
security vulnerability represents an unacceptable risk. And your companies
have a responsibility to reduce that vulnerability. This isn`t about who
won or who lost. This is about national security. This is about corporate
responsibility. And this is about the deliberative and multifaceted
manipulation of the American people by agents of a hostile foreign power.

(END VIDEO CLIP)

HERERA: California Senator Dianne Feinstein, who represents Silicon
Valley, went as far as to call it the start of cyber warfare, and that if
the companies don`t do more, Washington will.

(BEGIN VIDEO CLIP)

SEN. DIANNE FEINSTEIN (D), CALIFORNIA: We are not going to go away,
gentlemen. And this is a very big deal. I went home last night with
profound disappointment. I had specific questions. I got vague answers.
And that just won`t do.

(END VIDEO CLIP)

HERERA: Many senators say a lot more work needs to be done. The companies
faced questions yesterday from the Senate Judiciary Committee.

MATHISEN: Well, even though Facebook (NASDAQ:FB) is at the center of a
political firestorm, the company reported earnings that trounced estimates.
Facebook (NASDAQ:FB) saw its ad sales rise as it`s pushed further into
video advertising. The company pulled down $1.59 a share. Analysts
expected just a buck 28. Revenue increased by 47 percent to more than $10
billion. That also beat estimates.

The stock rose in initial hours trading and then started to drift a little
bit lower. With the backlash from lawmakers, CEO Mark Zuckerberg says he`s
focused on preventing abuse even at the expense of profits.

Julia Boorstin has details.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Facebook
(NASDAQ:FB) exceeding all expectations, blowing past projections on the top
and bottom line, as well as on user growth. But the biggest headline, CEO
Mark Zuckerberg saying the financial success don`t matter if, quote, our
services are used in ways that don`t bring people closer together.

Zuckerberg saying that the company is serious about preventing abuse on its
platforms, warning that, quote, we`re investing so much in security that it
will impact our profitability, saying protecting our community is more
important than maximizing our profits. Zuckerberg`s comments addressing
growing concerns about Russians purchase ads on the platform and they come
on the heels of the company`s testimony on Capitol Hill today.

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

(END VIDEOTAPE)

HERERA: Estee Lauder forecasts a rosy holiday season. And that`s where we
begin tonight`s “Market Focus”.

The cosmetics maker says its efforts to appeal to the millennial
demographic are paying off. The company, which was acquired brands popular
with that generation, reported a better than expected rise in sales and
profits. The company also saw solid demand in its international markets
and raised its sales guidance for the quarter. Shares of Estee Lauder
popped 9 percent to $122.12.

“The New York Times (NYSE:NYT)” said a rise in digital subscribers helped
it top profit expectations, but revenue in the latest quarter suffered as
print ad sales fell. And the company said pressure in the ad space would
hurt holiday advertising sales. Shares as a result were off almost 6
percent to $18 even.

Garmin (NASDAQ:GRMN) raised its full year outlook after reporting results
that topped expectations. The technology device maker said strong demand
in its aviation and marine units helped to offset lower sales in its
fitness and auto businesses. Shares of Garmin (NASDAQ:GRMN) up more than
5-1/2 percent to $59.80.

MATHISEN: Southern (NYSE:SO) Company reported stronger than expected
profits but saw sales come up short. The power supplier said poor weather
conditions contributed to the decline.

(BEGIN VIDEO CLIP)

TOM FANNING, SOUTHERN COMPANY CEO: We had an exceedingly mild weather for
the whole year, really. For the quarter, it was 10 cents mild. What we`ve
done is make that up on really kind of expense management, but not just
cutting costs, modernizing the company, actually improving efficiency and
reliability and customer service through investments largely in technology.

(END VIDEO CLIP)

MATHISEN: Shares of Southern (NYSE:SO) fell 1 percent on the session to
$52.08.

After the bell, Shake Shack recorded a rise in overall revenue and profit,
and they both beat estimates. The burger chainsaw did see a drop in same
store sales but it wasn`t as bad as the street figured on. The company
also announced plans to open new company operated and licensed stores next
year. Shares initially higher after the bell, but ended the regular
session down 2 percent at $37.15.

Also out after the bell, Cheesecake Factory, it reported disappointing
profit and revenue. The restaurant chain saw same store sales fall and
said part of the decline was due to the hurricanes. Shares of Cheesecake
Factory initially fell in the extended session but they closed the day up a
fraction to $45.

HERERA: Fast casual chains like Cheesecake Factory are competing for the
same dollars as the fast food restaurants. These days, consumers are
making a clear choice. And shareholders are paying attention.

Kate Rogers (NYSE:ROG) tells us what`s on the menu for investors.

(BEGIN VIDEOTAPE)

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: While fast food names
like McDonald`s (NYSE:MCD) and Burger King are seeing big gains, casual
dining has continued its slide. A few major trends are happening.

First off, there are too many casual dining restaurants. Moody`s
(NYSE:MCO) highlighted this in a recent note, saying despite softness in
traffic, restaurants continue to open new locations while foot traffic
across the sector has been flat. For example, since 2012, Brinkers added
about 100 locations for Chili`s and Maggiano`s. Cheesecake Factory has
also added about 30 restaurants in the same time.

Consumers are also flocking to cheaper food items that fast food
restaurants serve since wages are low and housing and health care costs are
high. At the same time, casual dining chains have raised prices and
shifted menus around but they`re not necessarily increasing quality.

STEPHEN ANDERSON, MAXIM GROUP SR. ANALYST: There`s certainly been an
improved product quality among some of these limited service chains. It`s
not just fast food names like McDonald`s (NYSE:MCD), but you`re also
talking about things like Panera and Chipotle that have really upped their
game in terms of ingredient quality and convenience. That over the past
decade has really been hurting casual dining traffic.

ROGERS: Another reason, it`s continually cheaper to shop at the grocery
store than it is to actually go out to eat.

And a final important factory: teen spending. Piper Jaffray recently
reported foods and restaurants are focal points for teens who tend to
migrate more to places that serve food fast. Casual names like Brinker are
taking note, reducing their menu at Chili`s to focus on burgers, ribs, and
fajitas while also working on speed.

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

(END VIDEOTAPE)

MATHISEN: Coming up, a life emergency can quickly turn into a financial
one when the unexpected happens.

Sharon Epperson is back tonight and he shares her own story.

(MUSIC)

HERERA: Here`s a look at what to watch for tomorrow. Dow components Apple
(NASDAQ:AAPL) and Dow DuPont will report their financial results. We`ll
check in on the labor market with the weekly jobless claims. And the
highly anticipated tax bill could be released tomorrow by House
Republicans. That`s what to watch for on Thursday.

MATHISEN: Now to an inspiring story with an important lesson for all of
us. Nobody likes thinking about the unexpected, when your life and
finances could change in an instant.

Our friend and colleague Sharon Epperson was faced with exactly that
situation a year ago. Fortunately, she did plan ahead. This is her
incredible story.

(BEGIN VIDEOTAPE)

SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Reporting on how
to manage, grow, and protect your money is what I do.

The bottom line is you probably need to be saving more than you`re saving
right now.

Planning for the unexpected is critical. That I know — because it
happened to me.

The day started like many others. Making sure my son and daughter got off
to school, and coordinating schedules with my husband.

Then I went to exercise before heading to the studio. I lifted some
weights, started stretching. Suddenly, I felt incredible pain, the worst
headache of my life. The rest of the day became a blur of doctors,
hospitals, emergency rooms.

Scans and images revealed bleeding in my brain. A bulge in the wall of a
main artery there had burst. It was a ruptured brain aneurysm.

CHRIS FARLEY, HUSBAND: The doctors have told us she could lose her life or
the things that make life worth living. And of those two, I don`t know
really which is worse.

EPPERSON: Surgery was just the beginning. I spent two weeks in intensive
care followed by long days of rehabilitation.

And ready for my recovery!

Relearning how to keep my balance and walk up stairs. From caregiver to
being cared for, my recovery was more demanding than we ever expected.

FARLEY: Suddenly, you`re immersed in this medical frenzy, making choices
that could define your life and your family and your future.

EPPERSON: And getting back up to speed on running my family`s finances
took time. Thankfully, I had planned ahead.

Something financial adviser Stacy Francis says many fail to do.

STACY FRANCIS, FRANCIS FINANCIAL PRESIDENT & CEO: The number one reason
for bankruptcy is actually medically related. So, if you`re not preparing,
you could be putting yourself in a disastrous situation of having to use
credit card debt, even going into your retirement plan.

EPPERSON: Ample emergency savings and disability insurance helped pay the
bills while I was out of work. And it`s why preparing for the unexpected
is something all of us need to do.

FRANCIS: Make sure that you have at least three to six months of your
living expenses. The next thing, look at your disability insurance. Does
that pay you enough that your financial situation would still be
comfortable and secure?

And finally, make sure that your estate planning is updated.

EPPERSON: The steps I took before my brain injury allowed me to spend time
with loved ones instead of worrying about money. My family and friends
helped me get stronger, encouraged me to walk farther, and cheered me on as
I reached another milestone in my recovery — finishing my first ever 5k
race.

FARLEY: This was the first race she had ever done. The fact that she
prepared for it through illness, that was sort of an amazing moment.

(END VIDEOTAPE)

MATHISEN: We`re glad to have you back.

EPPERSON: I`m glad to be here.

MATHISEN: We missed you. What was it like finishing that race?

EPPERSON: That race was incredible, because my husband was there, my kids
were there with me, some of my dearest friends. And we were all running to
support the brain aneurysm foundation and running to show that I was
celebrating life and celebrating life with my loved ones.

HERERA: Exactly. But your experience is so incredible. We`ve missed you
so much, Sharon. I`ll try not to cry.

But you really showed us how you have to plan. But it`s difficult to know
how much you need, the guidelines of how you go into long term disability
insurance and all of the other things that you had managed to plan for.

EPPERSON: Disability insurance is critical, was critical for me. You can
get it through your job, usually 40 to 60 percent of your salary will be
covered by disability payments. And that`s great, that helps. But you may
even want to buy a private disability insurance policy to cover even more.
It will never get to 100 percent, but it really will help when you`re
unable to work and get those paychecks.

MATHISEN: I`ve always heard those statistics that at any given age you`re
far more likely to have a disabling event, as I did earlier this year when
I had nose surgery, as you did, then to die.

EPPERSON: Exactly. We`ve said that so many times to our audience. And
now it happened to me. It`s so true.

MATHISEN: And yet people dismiss disability. So, how did your estate plan
help in all of this?

EPPERSON: So I was unconscious at the beginning. I could not make the
medical decisions that were necessary for the emergency care. My health
care proxy did that. I was not able to make financial decisions. My
health care proxy did that.

My husband is my health care proxy, the successor is my sister, and they
worked together to make those decisions when I couldn`t do it.

HERERA: Well, you are an inspiration on so many different levels.

EPPERSON: I`ve been inspired by so many along this journey.

HERERA: And thank you for sharing that with us.

EPPERSON: Thank you. Thank you.

MATHISEN: All right. To read more about Sharon`s story, head over to our
Website, NBR.com. Great to have you back.

EPPERSON: Thank you.

HERERA: And before we go, here`s another look at how the markets started
November. The Dow gained 57 points. The Nasdaq came off record levels to
close down 11. And the S&P 500 added four.

And that`s NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. Thanks
for watching.

MATHISEN: And thanks from me as well. I`m Tyler Mathisen. We`ll see you
back here tomorrow night.

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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