Transcript: Nightly Business Report – November 16, 2017

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Market rebound. Stocks took
off and never really looked back, logging their biggest gain since
September.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Closing the gap. Did
Walmart just prove it can match Amazon`s retail muscle?

HERERA: Pushing ahead. The House takes a first step towards an historic
tax code overhaul. But the hard part may be yet to come.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
November 16th.

MATHISEN: Good evening, everyone, and welcome.

The mood was upbeat, the buying was heavy, and the bulls were firmly in
control. Stocks regained the ground that was recently lost. They did so
on the back of improving profits at some of the country`s biggest companies
and movement on tax reform — two of the issues that have powered so much
of this year`s rally.

Today, the Dow Jones Industrial Average advanced 187 points to 23458.
Nasdaq up 87 points to close at a record, and the S&P 500 added 21.

Our Bob Pisani has more on what took stocks higher.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Stocks rallied big time
today, reversing six straight openings. We opened at the bang and kept up
the momentum throughout the day. Four stocks advanced where everyone
declining.

What happened? Well, first, Washington did something. The House passed
its version of a tax reform bill. Never mind the Senate has to act. Any
progress on tax reform is causing up to celebrate.

There`s also a couple of other factors. Three big names had big moves.
Walmart and Cisco had big earnings beats. Procter & Gamble moved up
because activist investor Nelson Peltz finally appears to have won a seat
on the board.

Finally, high yield bonds turned around. The high yields markets often
considered a proxy for investor willingness to take risks. That market has
been weak for a couple of weeks now. But much of the weakness has been in
telecom companies which have faced difficult times. And once they stopped
dropping, the high yield markets started to stabilize.

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

(END VIDEOTAPE)

HERERA: As Bob just mentioned, Walmart reported a strong quarterly result
and raised its profit outlook. The shares hit a record, gaining more than
10 percent today. That added $27 billion in market cap. The results were
helped by strong online sales.

And as Courtney Reagan reports, some say that is giving Amazon a run for
its money.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Walmart may be
solidifying its position as the world`s largest retailer, a key sales
measure for Walmart as it saw its biggest increase in eight years, marking
13 straight quarters of growth. The retailer says there is some sales
benefit from consumers buying in advance of the hurricanes and to replenish
or rebuild afterwards. But even without it, those sales would still be the
strongest in years.

ED YRUMA, KEYBANC CAPITAL MARKETS: These are great numbers. This
validates I think what Walmart has been doing. Clearly, investment in e-
commerce but more importantly, the stores look better. Better merchandise,
cleaner stores, higher level of service. And I think that`s all working
for that Walmart consumer.

REAGAN: Analysts largely agree Walmart`s commitment to better pay and
training for store employees has translated into a better shopping
experience for consumers.

KAREN SHORT, BARCLAY`S: Happy employees equal happy customers. That was
the biggest problem. You know, you can see the cultural shift in the
stores. You can see it within a year, employees actually care.

REAGAN: Walmart may also be closing the gap on Amazon. Amazon-owned Whole
Foods has been lowering prices on certain items.

But Walmart just posted its strongest grocery sales in six years.

SHORT: What I think is so critical about what Walmart is doing is that on
June 16th, when Amazon bought Whole Foods, the world changed. And you are
either on the right side of the wall or the wrong side of the wall. And
Walmart was clearly on the right side of the wall.

REAGAN: Walmart acknowledges some of the grocery sales bump was hurricane-
related food spending. But also says a combination of lower prices,
improved quality and options like order online pick up in store have been
steadily improving its food performance for a couple of years.

Grocery is Walmart`s most critical category. It`s more than half of total
sales and it`s a repeat trip driver.

YRUMA: You can go online, have them pull all your stuff for you and throw
it in your car, right? That`s fast. So, that person maybe didn`t want to
go back every week. They`re more interested in coming back.

REAGAN: The retailer`s U.S. e-commerce business has been a major area of
investment and it`s paying off. U.S. online sales grew 50 percent year
over year. Solid growth, but a still relatively small base. E-marketer
estimates e-commerce makes up just over 3 percent of Walmart`s total sales.

All the parts together are working to push Walmart`s growth just in time
for the holidays.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan.

(END VIDEOTAPE)

MATHISEN: John Brick joins us now to talk more about Walmart`s earnings,
his take on Amazon, and what he sees ahead for the big retailer. He is
retail equity analyst at Morningstar.

Welcome, good to have you with us, John.

You know, it was a lovely report from Walmart today. Did the market,
though, overreact? Is it as good as that stock reaction suggests?

JOHN BRICK, MORNINGSTAR RETAIL EQUITY ANALYST: Yes, thanks for having me.

Well, first, I do think the stock is a little bit overreacted. I mean, I
think you guys prefaced it before, that the tax budget and a lot of things
in the market up a lot really helped the stock. And more importantly, I
think you can point to the headlines that really helped Walmart stock
today, the faster sales growth, but more importantly, the 50 percent e-
commerce growth is getting the stock working higher, not necessarily the
long term competitive position, we think.

HERERA: You know, they also managed to come in with this report by
discounting as well, which a lot of retailers have not been able to do.
The talk on the street is maybe they are going to be the successful company
to challenge Amazon. Do you think that`s the case or not?

BRICK: Well, obviously, they`re challenging Amazon. And they`re the clear
number two player in the space. Amazon number one, Walmart, two, and you
have Target number three. So, they are challenging them.

But again, they`re challenging them on an e-commerce front. As you guys
said, that`s 3 percent part of their business. More importantly, they
still have around 60 percent of their sales in grocery. And when you think
about the grocery space, you have big players like Kroger still, and you
have Aldi and Lidl expanding. And, yesterday, you just heard Walmart
lowering prices.

So, that is not going to get any less competitive. And so, overtime, we
think that Walmart still is going to face a tough hurdle in the consumer
space.

MATHISEN: So, it`s nowhere near as big, but obviously, Amazon just bought
a fairly significant grocer itself not all that long ago.

Let`s play a game of would-you-rather, John. As a stock investor, would
you rather Amazon or would you rather Walmart?

BRICK: Yes, listen, Walmart`s up 40 percent this year, I mean, four zero,
that`s a big number for the largest retailer in the world. I would not
want to own Walmart here.

I would look to Amazon. They have a lot of things going. They`re
obviously dominant on online/e-commerce front. They have a lot of other
areas online, web services, and A.I., and potentially a pharmacy down the
road.

So, I would stick with Amazon over Walmart here.

HERERA: What would convince you or change your mind and get you to choose
Walmart?

BRICK: Quite honestly, it`s probably more of a valuation play. So,
Walmart started the year at 70 bucks a share and it`s now at a hundred. If
we can pick up Walmart back in the 80s, maybe that would get me more
inclined, because Amazon is an expensive stock, for good reason.

But I would start with the valuation. If we can get Walmart back in the
80s, I would be more of a buyer of Walmart there than I would Amazon.

MATHISEN: All right, John. Thank you very much, we appreciate it.

BRICK: Thanks, guys.

MATHISEN: John Brick with Morningstar.

Meantime, the House today passed a monumental bill to overhaul the tax
system for both businesses and individuals. While Republicans in the House
were celebrating today, the outcome is less certain in the Senate.

Ylan Mui is in Washington tonight.

(BEGIN VIDEOTAPE)

YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Republicans scoring a
major victory today as the House passed its version of a tax reform bill.
The final tally, 227-205, a comfortable margin of victory for the GOP.
They had said they would get this done before Thanksgiving. There was a
lot of skepticism over that timeline, but they were able to pull it off and
Speaker Ryan said a lot of the credit goes to President Trump.

REP. PAUL RYAN (R-WI), SPEAKER OF THE HOUSE: From the very start, we said
that failure is not an option and the president and his team worked so
constructively every step of the way with us. He`s been a tremendous
partner on this issue.

MUI: There were a few holdouts, though. Thirteen Republicans voted
against this bill, many of them were concerned about the limits to the
popular state and local tax deduction. No Democrats voted for the bill
either. The ranking member of the House Ways and Means Committee, Democrat
Representative Richard Neal, said that this is a tax bill that would hurt
middle class Americans.

REP. RICHARD NEAL (D), MASSACHUSETTS: State and local property taxes?
They`re going to take them away, the deduction. They`re going they`re
going to pare back the mortgage interest deduction. All of this advertised
on the basis of a middle class tax cut? People at the bottom end are not
going to get much from this tax cut.

MUI: Republicans also acknowledged there is more work to do. Attention
now turns to the Senate, where Majority Leader Mitch McConnell says his
chamber is making real progress on its own version of a tax plan. The
Senate Finance Committee is expected to vote on that plan tomorrow, and
then it`s expected to take it to the floor the week after Thanksgiving.

Now, there are some senators who are worried about linking the repeal of
the individual mandate to tax reform. There`s also some concern about the
expiration of the individual tax cut.

So, still some tough negotiations ahead, but Republicans are counting today
as a success and they`re thankful they can go home for the holiday with a
big win.

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

(END VIDEOTAPE)

MATHISEN: Still ahead, it is all hands on deck.

(BEGIN VIDEO CLIP)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: I`m Morgan Brennan
in Marinette, Wisconsin, America`s heartland, where shipbuilding is a big
business, literally.

Coming up, we`re going to take you inside an active navy warship on NIGHTLY
BUSINESS REPORT.

(END VIDEO CLIP)

(MUSIC)

MATHISEN: Merger talk has helped power the market recently. And late
today, there were reports of even more. Comcast has reportedly approached
21st Century Fox to express interest in its entertainment assets, including
its movie studio, TV production, and its international operations. There
are also reports tonight that Verizon is exploring acquiring parts of Fox.
But that`s in the very early stages. We recently reported that Fox had
held talks with Disney about selling some of those assets. Shares of 21st
Century Fox rose initially in after hours trading on that report.

Comcast is the parent company of CNBC which produces this program.

HERERA: Meantime, the Federal Communications Commission voted to loosen
media ownership rules, marking the most significant changes to media
ownership rules in a generation. That rollback could lead to further
consolidation as traditional media looks to better compete with digital
companies. The changes are taking place as the FCC considers whether to
allow Sinclair to merge with Tribune Media. It would create a company that
reaches 72 percent of the company. Shares of both companies rose today.

MATHISEN: And the FCC also voted to let phone service providers
proactively block robocalls. Commissioners from both sides of the aisle
hailed the move as a necessary step to protect consumers. The FCC receives
200,000 complaints every y about unwanted calls.

HERERA: And Congress, as we`ve been reporting, is expected to increase the
defense budget. That could mean more money for navy ships, even
controversial ones.

Morgan Brennan was given rare access to a newly active warship in
Marinette, Wisconsin.

(BEGIN VIDEOTAPE)

BRENNAN: The ringing of the bells is an historic tradition, still being
carried out today on board navy vessels including this one. One of the
fleet`s newest and most advanced. A Lockheed Martin littoral combat ship
which will soon be commissioned as the USS Little Rock.

Commander Leonard Mitchell is the warship`s executive officer.

COMMANDER LENARD MITCHELL, UNITED STATES NAVY: This is where we fight the
ship.

BRENNAN: Where the action happens?

MITCHELL: It is.

BRENNAN: His crew of 50 have been conducting tests on Lake Michigan for
six months.

MITCHELL: With the gun mount and with our airborne mission zone, the
aircraft capability that we bring to the fight, again, navigationally and
war fighting, LCS brings a lot of assets to the combatant commander, those
unique capabilities and the fact that we can get it done with less
personnel makes us a huge component of the future of our navy.

BRENNAN: These smaller ships operate close to shore in just 14 feet of
water. They have the latest navy technology and can swap out the types of
weapons systems on board.

The cost overruns have doubled the price to over $500 million. Schedule
delays means the littoral combat ships have no shortage of critics,
including Senate Armed Services Chairman John McCain. But the Trump
administration wants a much bigger navy and it needs ships like this to do
it.

MICHELE EVANS, LOCKHEED MARTIN VICE PRESIDENT: This is a warship. It`s
American sealed, built with American workers. And it really looks to bring
vertical launching systems, take advantage of a lot of what we develop.

BRENNAN: Seven ships are being built at the Marinette marine shipyard
which is owned by a Lockheed`s program partner. The companies say
production is running full steam ahead, with construction down to three
years from five. Price varies and ships are becoming more lethal thanks to
new weapons like vertically launched hell fire missiles.

But even with costs doubling from the initial target set in the early 2000,
an LCS is still a fraction of the price of a destroyer or a cruiser.
Twenty-nine ships have been purchased. Lockheed has 14 and Austal in
Alabama has the rest. A new 2018 budget would add three more.

It isn`t just about building up the military. More orders ensure that
2,000 workers of this shipyard of a community of 20,000 people keep
working. Manufacturing jobs in a state that helped President Trump win
last year`s election.

Workers like engineer Eric Nicholson say there`s not a part of the
community that shipyard doesn`t affect.

ERIC NICHOLSON, MARINETTE MARINE ENGINEER: It`s a well-forgotten
historical fact of record that American shipbuilding saved the world, maybe
twice, certainly once during World War II. So, it`s a real, real privilege
to be a part of the industry that does that.

BRENNAN: For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan, in Marinette,
Wisconsin.

(END VIDEOTAPE)

MATHISEN: Emerson Electric makes a third bid for Rockwell Automation, and
that is where we begin tonight`s “Market Focus”.

After failing to convince Rockwell to engage in merger talks twice before,
Emerson now upping the ante, raising its offer to $29 billion. Emerson
said it hopes Rockwell will consider the number of strategic operational
and financial benefits it says a merger would offer. Emerson shares fell
fractionally to $59.02. Rockwell Automation up more than 2 percent at
$193.61.

Time Inc. reportedly in talks again to sell to publisher Meredith
Corporation. The potential deal is drawing support from the billionaire
Koch Brothers who have tentatively agreed to back Meredith`s offer with
$500 million. The deal between Time and Meredith could help the company
bolster ad sales. Shares of Time up 28 percent to $16.20.

And “The Wall Street Journal” says an activist investor of Barnes & Noble
wanted to take the bookstore chain private with the help of current
shareholders and debt financing. Barnes & Noble responded to the deal —
to the proposal that values the company at about $650 million. It said a
deal is not feasible. Barnes & Noble shares, though, rose more than 7
percent to $7.10.

And competitive pressures caused Best Buy to slash prices and that caused
total sales to miss the mark. The electronics chain also under-delivered
on earnings and gave a weaker than expected outlook for the holiday period.
Best Buy shares off more than 3 percent on the session at $55.25.

HERERA: J.M. Smucker`s reported stronger than expected earnings as the
maker of Folgers raised prices to offset higher cost of coffee beans,
although those cost should improve next year. The company also said a rise
in sales in its pet food business helped its results. Shares jumped 9.5
percent to $116.65.

Viacom said stronger ratings for channels that include MTV and Nickelodeon
helped its ad revenue remain flat. The street was expecting a decline.
But the company said it expects distribution revenue to continue to fall
through next year as cable companies become more reluctant to pay for
Viacom`s programming due to a weakening subscriber base. And that sent
shares down lower by nearly 4 percent to $23.69.

After the bell, Gap reported its fourth straight quarter of positive same-
store sales. The strength is largely due to strong performance in the
company`s Old Navy business. Gap`s overall results and full year outlook
also outpaced street expectations. Shares initially climbed in the
extended session and ended the regular day up 2 percent to $27.48.

And Williams Sonoma also reported better than expected revenue after the
bell. That company said results were driven by strong demand in its
pottery barn and PV teen stores. Earnings matched expectations. Shares,
though, initially lower in afterhours but they finished the regular day up
a full 4 percent to $52.87.

MATHISEN: Wynn Resorts has taken a huge gamble thousands of miles from Las
Vegas. It is building the largest private development in the history of
the state of Massachusetts.

Contessa Brewer in Everett tells us whether the bet can pay off.

(BEGIN VIDEOTAPE)

CONTESSA BREWER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Take a stroll
around Everett, Massachusetts, and locals say the times are changing.

RICH SASSO, 8/10 BAR AND GRILLE: I`ve been in Everett my whole life. I`ve
owned this business for 12 years. And 12 years ago, the outlook in Everett
was grim.

BREWER: Richard Sasso runs the 8/10 grill. Nearby, the most expensive
private development in Massachusetts history is going up, $2.4 billion.
The excitement is palpable.

UNIDENTIFIED FEMALE: I can`t wait. I can`t wait.

BREWER: A luxury casino rising like a Phoenix above a gritty industrial
city at the edge of Boston.

BOB DESALVIO, WYNN BOSTON HARBOR PRESIDENT: We`re thinking about this as
an urban Wynn. We located ourselves right in the middle of a major urban
destination. Mr. Wynn`s vision was that Wynn Boston Harbor would be a
great example in America of how a business can change a neighborhood.

BREWER: The president of Wynn Boston Harbor, Bob DeSalvio, is charged with
bringing that vision to life.

DESALVIO: We`re standing on the main casino floor. But it`s surrounded by
a tremendous amount of amenities.

BREWER: The cranes have lifted the soon to be hotel and casino to 14 of
its 27 total floors. Workers this week began installing the glass, 4,000
employees work on this project, most of them from Massachusetts. All of
them union.

Wynn is snatching up run-down properties adjacent to the casino at up to
four times market value to improve the local esthetics to match the Wynn
brand. It`s not cheap, with the price tag of roughly $100 million. But
locals approve, 86 percent voted to allow the casino.

Skeptics might ask about residents displaced by rising real estate values.
Wynn in the city of Everett are helping them find apartments.

Traffic congestion? Wynn is spending $260 million improving
infrastructure, local roads and mass transit. And environmental impact?

CARLOS DEMARIA, CITY OF EVERETT MAYOR: For us in Everett, we were always
told, don`t go near the water, you`ll get sick. Wynn cleaned the entire
site up. So, in Everett, it`s a huge environmental win.

BREWER: Barges dredged toxic soil from this former Monsanto chemical
facility. Wynn is spending $30 million to reclaim the land, plant
transforming the industrial waterfront to a living shoreline. The public
will get access to the river here for the first time in more than a
century.

Wynn`s $25 million annual tax bill makes up about a third of the city`s tax
base. Wynn feels confident its big gamble will pay out and no other casino
towns its struggles, notably Atlantic City or even Biloxi. Everett seems
to think it`s hit the jackpot.

SASSO: I would never bet against Steve Wynn.

BREWER: Wynn Boston Harbor is scheduled to open summer of 2019. So far,
it`s looking like a “Wynn-Wynn.”

For NIGHTLY BUSINESS REPORT, Contessa Brewer, Everett, Massachusetts.

(END VIDEOTAPE)

HERERA: Coming up, a masterpiece has its renaissance and shatters records.

(MUSIC)

HERERA: We would like to remind you about a special program that we`re
putting together. On Thanksgiving, we will explore the retirement crisis,
and different ways you can fund your future. We want to know how you`re
saving and some of the challenges that you may be facing. You can tell us
by logging onto our Website, NBR.com, clicking on “contact us,” or you can
also post a comment on our Facebook page or just tweet us. If you have a
question for our personal finance expert, Jean Shatsky, send a short e-mail
to nbrmail@cnbc.com.

MATHISEN: The industrial conglomerate Siemens will cut 6,900 jobs, most of
those will come from operations in Germany and the U.S., and will hit the
units that provide turbines and offer services to companies to generate
power. Siemens says the move is necessary to better compete.

HERERA: The world`s biggest sovereign wealth fund wants to exit its oil
and gas investments. Norway`s $1 trillion fund has proposed dropping its
holdings to companies like ExxonMobil, Chevron and BP, despite Norway being
Europe`s biggest energy producer. The fund would like to be less
vulnerable to drops in oil and gas prices.

A Leonardo Da Vinci painting considered by many to be the holy grail of the
old master shattered records at an auction last night. The bidding for the
painting with a controversial past started at $75 million. And it went
much, much, much higher.

Robert Frank has our story.

(BEGIN VIDEOTAPE)

ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s only 17 inches
tall and 15 inches wide. It is damaged, dogged by controversy, and
questions of origin. But Leonardo Da Vinci`s “Salvator Mundi” painting
smashed all records last night when it became the most expensive painting
ever sold, auctioned at Christie`s for slightly more than $450 million.

The buyer is unknown. It went to a phone bidder after a 19-minute bidding
war that elicited shouts and gasps from the normally composed crowd.

UNIDENTIFIED MALE: The piece is sold.

(CHEERS)

FRANK: Fewer than 20 of Leonardo`s works survive. This is the last in
private hands. The rest are in museums. Despite the painting`s
controversial history and condition, it has been painted over and restored
several times. Christie`s marketing campaign was considered a new model
for the auction business.

The painting attracted 27,000 people as it toured the world. Christie`s
made several slick promotional videos starring Leonardo DiCaprio and other
stars. And they sold it at a contemporary art sale which attracts all the
big money, even though the painting is more than 500 years old.

So, how did a painting that sold for less than $200 in 1958 now hit nearly
a half a billion? Well, for centuries, it was owned by different European
royals, including England`s Charles I. Somewhere along the way it became
damaged and repainted. It fell out of sight until 1958, when it sold at a
Sotheby`s auction in London for 45 pounds. It was then labeled a work of a
student of Da Vinci`s.

Now, it disappeared again until an art dealer bought it at an estate sale
in Louisiana in 2005 for $10,000. It was then authenticated and around for
around $200 million but failed to find a buyer. Now, in 2013, it was sold
to Swiss art dealer Yves Bouvier for $80 million. He quickly flipped it to
a trust owned by the family of a Russian billionaire Dmitri Rybolovlev for
$127 million.

Now, Rybolovlev sued his dealer, claiming he was overcharged. But after
selling it last night for a $323 million profit, it`s going to be hard to
claim he overpaid.

For NIGHTLY BUSINESS REPORT, I`m Robert Frank.

(END VIDEOTAPE)

HERERA: And finally tonight, “Fortune” has named its businessperson of the
year. It`s not necessarily a household name. Jensen Huang is the CEO and
co-founder of one Nvidia, and as we`ve reported, that stock this year has
been on a hot streak, up considerably in terms of percentage terms.

The company started out making chips that power videogames. And today the
company`s vision has changed and now it`s considered a leader in artificial
intelligence and augmented reality.

J.P. Morgan Chase`s CEO Jamie Dimon was number two. And Marc Benioff of
Salesforce came in as number three.

We didn`t make the list again.

MATHISEN: And we didn`t get that painting either.

HERERA: No, we didn`t.

That`s NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. Thanks for
joining us.

MATHISEN: Thanks from me as well. I`m Tyler Mathisen. Have a great
evening, everybody. And we`ll see you tomorrow, Friday.

END

END

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