Transcript: Nightly Business Report – December 12, 2017

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Climbing higher. The Dow and the S&P 500 extend further into record territory, as the tax bill advances and new details surface.

because there`s a good chance it could look very different come the New

HERERA: Changing fees. How you pay for the Internet could change with
this week`s FCC vote on rules that govern the Web.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Tuesday,
December 12th.

MATHISEN: Good evening, everyone. Welcome. Thanks for joining us.

The S&P 500 closed at — get this — its 60th record of the year. The Dow
also finished at a new high, thanks to two main drivers: the tax bill and
the Federal Reserve.

We begin tonight with that tax bill. A final draft does appear to be
taking shape in a House/Senate conference committee. There are reports
late tonight that an agreement has been reached on a few key issues.

And Ylan Mui has the new details.


the final version of the tax bill. Two sources briefed on the plan tell me
that the corporate rate will be 21 percent. It`s unclear right now when
that would kick in, right away or not until 2019. But it is slightly
higher than the 20 percent rate that was in previous versions of the bill.
The top individual rate would fall to 37 percent. That`s lower than the
Senate`s original proposal for a 38.5 percent top rate.

Now, the deduction for mortgage interest would apply to loans up to
$750,000. This would only apply to new loans, existing mortgages would
still be grandfathered in. Also the deduction for pass-through businesses,
that would be at 20 percent. So, not quite as generous as Republicans had
been hoping for.

A White House official confirmed all of these details and said they
represent, quote, the current state of play. The caveat here is that
nothing is final until everything`s final. But Republican members of the
Tax Bill`s Conference Committee are slated to have lunch with President
Trump at the White House on Wednesday before holding a public meeting later
on in the afternoon.

Republicans want to get to a final bill by Friday and send it over to the
president`s desk early next week.

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


HERERA: But optimism that a tax bill will get done put investors in a
buying mood and helped drive the blue chip Dow index and the S&P 500
higher. The Dow added 118 points to 24504. That`s a record. The NASDAQ
fell 12. The S&P 500 was up four. That`s also a new high.

Bob Pisani has more on the day`s market action from the New York Stock


today, lifting the Dow and the S&P to record highs once again. Now, two
main things powered today`s very modest rally, expectations for a rate hike
and continued hopes for tax reform.

We saw a mild rotation from growth back to value stocks, with technology
taking a breather and bank stocks getting a boost from rising bond yields.
This comes a day ahead of the Federal Reserve`s rate decision, of course,
that`s tomorrow, and many are expecting a rate hike this month.

House Speaker Paul Ryan elsewhere said House and Senate lawmakers are close
to the finish line, that`s his words, on a tax reform deal. We`ve been
waiting for this for a long time.

But Kentucky Senator Rand Paul raised some questions about whether he would
vote for the tax bill after tweeting that he would not, quote, in good
conscience vote for the proposed government spending bill to avert a
shutdown. He said the bill would add to the nation`s already massive debt.
So, he`s a maybe.

The S&P suffered a slight blip midday on this news but regained most of its
lost ground to close just off of the day`s highs.

Now, finally, Boeing (NYSE:BA) powered the Dow higher today. That was a
big help. It was up more than 2 percent after the aerospace giant raised
its quarterly dividends. Boeing (NYSE:BA) is already the Dow`s best
performing stock in 2017. It`s up almost 90 percent so far this year.

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


MATHISEN: As Bob Pisani just mentioned, the Federal Reserve policy meeting
started today and it ends tomorrow with what`s widely expected to be an
interest rate increase.

But what might happen after that?

Steve Liesman surveyed the exports.


year, and 98 percent of the respondents to the CNBC Fed survey think the
Federal Reserve will hike to end the year. After that, three rate hikes on
average expected in 2018. That will bring the funds rate back up towards 2
percent. That next rate hike next year, the first one happening in March,
67 percent see the rate hike happening in March.

This will be Yellen`s apparently last news conference, with Jay Powell, the
nominee. We asked our correspondents to compare Yellen and Powell. They
think Yellen is strong in six of the eight categories we asked about,
including economic expertise, economic forecasting, all the way,
leadership, monetary policy.

They think Powell is stronger in regulatory expertise and in market
knowledge. Put it all together, the overall rate, and you can see, not too
bad for Powell, but he has some work to do to catch up with the reputation
of Yellen, especially when it comes to the economy.

With big changes coming to the Fed, there`s also big changes coming to your
taxes. Seventy-two percent of our 44 respondents say Congress will pass
the tax bill this month, 23 percent next month.

But who will benefit? Just 5 percent say regular workers, 51 percent of
respondents say shareholders and executives. But 44 percent do say that
both will benefit equally.

There is a kick to GDP coming from this tax cut in the opinion of the
economists and fund managers who answered our survey. About half a point
in `18, another half a point in `19, and a half over the ten-year average.
So, not bad, something of a kick.

And you can see that when we look at the overall GDP forecast, year over
year for next year, 2.85 percent for 2018. You can see that`s risen since
June. And also, 2.85 percent for 2019 as well.



HERERA: A special election for an Alabama Senate seat has added to the
pressure to get the tax bill done. The Republican candidate is mired in
controversy. A Democrat hasn`t won a Senate seat in that state in 25

John Harwood is in Birmingham for us tonight.

John, good to see you as always. So, why is this vote so critical for the
broader Republican agenda?

Sue, have a 52-seat majority in the Senate. That leaves a very narrow
margin for error. If Doug Jones, the Democrat, wins tonight, that will
shrink even further, to 51.

So, if for some reason the tax debate were to be spend past the end of the
year and Doug Jones would win the race and would be in office, that would
mean the Republicans could only lose the one seat — the one vote that
they`ve already lost, which is Bob Corker`s, and no other to pass that

The same is true on other elements of the agenda, whether it`s nominations,
judicial appointments, or infrastructure bill or entitlement reform.

MATHISEN: When would a new senator be seated, John, in the chamber, number
one? And number two, what do the latest polls say, the last ones?

HARWOOD: All right. We expect the new senator would be seated probably
after Thanksgiving but before the first of the year. There`s some give in
that. And certainly, Republicans in the Senate leadership would like to
slow walk it and make sure tax reform is done before that happens if Doug
Jones wins, maybe even if Roy Moore wins because he`s somewhat

The latest polls are all over the place, we have no idea how this will turn
out. We have a poll from FOX News yesterday showing Doug Jones ten points
ahead. There was another poll showing Moore nine points ahead, a third
showing it tied. It all depends on which component parts of the electorate
end up turning out in high numbers.

Do African-Americans show up for Doug Jones, who is not politically well-
known and hasn`t run in previous races before. Do evangelicals stay home
because they`re discouraged by the child molestation allegations against
Roy Moore? And do a lot of those Republican suburbanites, especially
around Birmingham, in the suburbs here, do they defect and go with the
Democrat? Those things are going to determine the outcome of this race.

HERERA: So many things.

All right. So, after Christmas, we`ll see. Thanks so much, John.
Appreciate it.

HARWOOD: You bet.

HERERA: John Harwood in Birmingham.

MATHISEN: Homeowners are also watching the big tax bill, of course. Some
are concerned it`s going to wipe out valuable deductions. But investors in
single family rental homes see the bill as a potential boon to business.

Diana Olick explains.


aerospace engineer in southern California, and a landlord in Atlanta. He
rents his own place but owns two single family rentals.

what I would guess that the stock market and other asset classes would do.
And I think that will continue to be the case in the foreseeable future.

OLICK: Unlike owner occupants, who could see valuable tax deductions cut
in the Republican tax plan, landlords are taxed differently, as businesses.
They can write off all the costs like the mortgage interest, the
maintenance, the management, and the property taxes. The tax plan wouldn`t
touch them. They could instead see higher demand.

MILLER: If it`s competition for businesses to locate in somewhere like
Atlanta or Dallas versus somewhere like L.A. or New York, then, you know,
maybe it`s incrementally more attractive now in those lower cost areas than
it was if this tax plan hadn`t gone into effect.

OLICK: Home prices are already high and rising across much of the nation.
If the tax plan makes the cost of home ownership even higher, that could
put more potential buyers on the sidelines.

into home ownership, as they wait to see what prices will do, we`re going
to see people — more households stay on the renter side of the equation,
which could create even higher rents than are available today.

OLICK: Hovland says his company, HomeUnion, which helps investors find and
manage rentals, is seeing a surge in demand right now. Part of that may be
investors leery of an overheated stock market, looking to diversify. But
some is likely the expectation that rental demand will increase.

There is of course a risk. Some in the housing industry argue that the tax
plan could cause home prices to drop by as much as 10 percent. But that
would likely be in higher cost areas, which is not where small investors
tend to play.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.


HERERA: The potential changes to the tax code come as many Americans are
doing their year end tax planning. As we reported yesterday, the timing is
creating some confusion. So, tonight, we`re going to focus on how it could
affect your paycheck in the New Year and how payroll departs are scrambling
to prepare.

David Karp joins us now to talk about those changes. He is the founding
partner at wealth management firm PagnatoKarp.

Nice to have you here. Welcome, David.


HERERA: You know, it is confusing, Tyler and I were just talking off
camera about the fact that everybody is going to have to file a new W-4.
But do you have to do that immediately? How soon will some of these
changes, once they`re finalized, kick in?

KARP: The sooner the better. The sooner you can make adjustments to take
advantage of whatever the tax law can afford you, the sooner it`s going to
reflect on your paycheck. But there`s a lot of paperwork that needs to be
created, but at the company level, the new W-4 needs to be produced. But
the time those get rolled out and process, it`s a pretty tedious process
for every employee who gets a paycheck.

MATHISEN: It`s going to be very different, isn`t it, not only for payroll
departments within companies or for the big payroll processors like ADP and
so forth, but for individuals who have grown accustomed to having these
things called personal exemptions. As I understand it, those exemptions go
away. A lot of people who may have itemized deductions may not under this

So, it could really be hard work to get the right amount of tax withheld so
you don`t face a huge tax bill or a big overpayment at the end of the year.

KARP: That is correct. I mean, exemptions are basically completely
removed from the current tax bill. We are yet to see how, if you will, the
itemized deductions are handled. We tend to believe that many of them will
be taken off the table.

And there`s also allowances which the IRS needs to opine on. The
allowances also affect your net take home paycheck. So, there are a lot of
moving parts that are yet to be determined and frankly they need to be
ironed out before you fill out a new W-4 and have it translate to a

HERERA: Yes. So, what do you do? Should you sit down with your financial
planner, should you consult somebody like you, a tax guy that really knows
what the implications could be? Because it could be very intimidating and
confusing and you don`t want to make mistakes.

KARP: Absolutely. It`s going to be a whole new form. It`s still going to
be a W-4 but there are going to be new fields, there are going to be fields
that are removed. Frankly, I think people are going to need help filling
it out.

So, the best action is to go to your tax adviser or at a minimum ask for
your human resources department, because you`re not going to be the only
one that has the question.

HERERA: All right. We`ll leave it there. Mr. Karp, thanks so much for
joining us. We appreciate it.

KARP: Thank you.


MATHISEN: Then there is the issue of a government funding bill. It`s all
about Washington these days. We reported early in the program that Senator
Rand Paul says he`s going to vote no on the spending bill.

But this afternoon, Senate Majority Leader Mitch McConnell said a deal
would be reached before December 22nd, preventing a government shutdown.
Senate Minority Leader Chuck Schumer said Democrats will oppose any budget
deal that allows defense spending to increase, while holding down domestic

HERERA: Still ahead, traffic lanes. Why the upcoming FCC vote on the
Internet could change how you use it and how you pay for it.


HERERA: America`s small businesses are feeling good. According to the
latest survey from the National Federation of Independent Business,
optimism is at its highest level since the early 1980s. That optimism
could translate into more hiring as a growing number of businesses say they
have plans to expand.

MATHISEN: Southern (NYSE:SO) California wildfires continue to rage. The
fires are climbing up mountainsides. Coastal communities covered in smoke.
The Thomas Fire, the biggest, has been the difficult one to contain. All
of them are difficult, of course.

Recent updates put containment at 20 percent. It is estimated to have
caused more than $48 billion in damages. And that number is likely to

HERERA: The chairman of the FCC has a warning for investors looking into
bitcoin. Jay Clayton says be careful. In a statement on the agency`s
Website, Clayton cautioned investors to be wary of frau and market
manipulation in the crypto currency markets. The comments come as bitcoin
increases in value. It hit another record high on one of those exchanges

MATHISEN: Facebook (NASDAQ:FB) will change the way it pays taxes on its
international operations and that`s where we begin tonight`s “Market

The social media company said next year it will start paying taxes in the
country where the profits are made. The company currently funnels sales
through its subsidiary in Ireland, a country that has an attractive
corporate income tax rate. Facebook (NASDAQ:FB) is making the move at a
time when policymakers are urging tech companies to be more transparent
about where they pay corporate taxes. Shares finished down 1 percent at

Pepsi has reportedly placed a large order for Tesla`s new electric semi
trucks. “Reuters” says the beverage giant has reserved a hundred of the
new vehicles, making at it largest known order to date. The move is
intended to cut fuel costs and reduce fleet emissions. Pepsi joins a
growing list of companies that have placed pre-orders. Shares of Pepsi up
a penny to $117.40. Tesla`s shares rose more than 3-1/2 percent to

And after the bell, database provider MongoDB, who reported results from
its first earnings report since going public in October. The company said
strong demand for its services helped sales edge past expectations. Mongo
also reported a narrower than expected loss and gave upbeat guidance for
the current quarter. Shares volatile in the extended session, not mongo-
like, but they ended the regular day up nearly 8 percent at $29 even.

HERERA: Also after the bell, the card payment device maker Verifone
reported profits and sales that top estimates. The company said it plans
to launch a $100 million share buyback program. But Verifone is
forecasting disappointing earnings for the quarter and the year. And that
initially sent shares lower in after hours. They ended the regular session
up 1.5 percent to $18.47.

Biotech Amgen (NASDAQ:AMGN) after the bell said that it was raising its
quarterly dividend by 15 percent to $1.32 a share. Shares were flat in
after-hours but they ended the day down a fraction to $176.26.

MATHISEN: The Federal Communications Commission will vote on new Internet
rules this Thursday, changing rules put in place in 2015 that prevented
Internet service providers from blocking, say, access to your favorite
sites like Google (NASDAQ:GOOG) or slowing down Netflix (NASDAQ:NFLX) so
your favorite shows become basically unwatchable.

Many believe the outcome of the vote is a foregone conclusion, and if that
is the case, what could the changes mean for your mobile and wireless

Laura Moy is deputy director for the Center at Privacy and Technology at
Georgetown Law School. And she joins us now to discuss.

LAURA MOY, GEORGETOWN LAW SCHOOL: Hi. Thanks so much for having me.

MATHISEN: We`re delighted to have you with us.

What will it mean if we go away from net neutrality, which basically said
all sites have to be treated the same by internet service providers like
telecom companies and so forth?

MOY: Right. So the short of it is that consumers are likely to end up
paying more, either in their monthly service fees to Internet providers, or
in the monthly fees they pay to subscription services. And, you know, in
the long run, we could actually even end up seeing tiers of Internet
service based on what consumers like to see and do online, sort of similar
to the way that cable packages are now.

HERERA: So, more of an a la carte approach.

MOY: Right, it is possible.

HERERA: So, what do you do as a consumer? I assume you have to be
careful, read the fine print closely and make sure that the package you
have now would be what you want after these changes presumably go into

MOY: That`s right. Because, you know, if these rules do in fact go away,
then consumers could actually see a slowdown in some of the services that
they are currently used to doing online. So, right now, consumers are used
to maybe signing up for a basic Internet package and they assume they`ll be
able to view the content, view the streaming videos online that they want
to view and play the games that they want to play online.

But, again, if these rules go away, we could end up seeing fast and slow
lanes on the Internet and consumers are really going to have to get quite
careful about reading the fine print in their internet packages to make
sure what they sign up for is going to enable them to do —

MATHISEN: I`m going to use a loaded word here, Laura, but — and I don`t
mean it in a derogatory way, but it sounds like the reason prices will go
up, you think, for consumers is that the Internet service providers will
differentiate and discriminate between people who use very data-heavy
streams and those who don`t, and you`ll have to pay more if you are one of
those heavy data customers.

MOY: I think that`s right. You know, and really, the Internet companies
are going to want companies that provide content to pay more too. So the
Netflixes of the world. This is why consumers may end up seeing —

MATHISEN: Is there anything wrong with that? If you`re a heavy user,
shouldn`t you pay more, if you`re one of the companies like a Netflix
(NASDAQ:NFLX) or a Hulu that does — shouldn`t you maybe be charged a
little more? Quick answer, please.

MOY: Well, you know, I think in a way, it`s double dipping, right?
Consumers are already paying for their Internet connection, so are these
companies. Now, Internet providers want to charge more to connect with two
of them.

MATHISEN: Laura, we`ll have you back. Thanks.

MOY: Thank you.

MATHISEN: Laura Moy with Georgetown Law School.

MOY: Thanks so much.

MATHISEN: And coming up, Disney`s latest financial powerhouse found in a
galaxy far, far away.


MATHISEN: This is the time of year that a lot of people spend a lot of
money. But if you thought that was purely an American phenomenon, think
again. China creating its own special shopping days, and today, 12/12, is
one of them.

Eunice Yoon reports on what some call China`s Cyber Monday.


like a slimmed-down version of Double 11. But it`s growing and it`s
growing fast.

And this year, Double 12 is making a big international push. Alibaba says
that 100,000 overseas stores will be taking part. Sixteen countries will
be represented, including the U.S., Canada, Germany, and Japan. The
bestselling American brands for Alibaba on Double 12 are P&G, Yum Brands
(NYSE:YUM), KFC, as well as Burger King.

Now, Double 12 is a little different from Double 11 and that it tends to
focus on offline events. So discounts at stores. Today in China, we saw
long lines and from a major supermarket chains such as Walmart as people
were looking for major discounts on some of the staples, like vegetable oil
as well as salt.

Another big difference is that Double 12 tends to focus on smaller vendors
and smaller brands. So, all day today, some of the smaller vendors were
live-streaming themselves eating noodles, for example, that they like to
sell, or showing off some of their popular clothing that they made,
especially in women`s fashion.

It`s part of this big international push. Alibaba is expanding the use of
its payment system, Alipay, by leveraging off relationships in India,
Thailand and the Philippines. It`s also focusing its efforts on the
Chinese overseas community as well as Chinese outbound travelers by
offering major discounts at restaurants, hotels, and sites at Chinatowns
across the world.

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


HERERA: “Star Wars” fans are rejoicing and so are retailers. Not only is
the latest installment of the blockbuster franchise about to hit theaters,
but “Star Wars” themed products are filling up the store shelves. And it
may be putting a new lucrative twist on Disney`s well-known empire.

Julia Boorstin has more.


sold more toys than any other movie franchise in the history of the toy
business. It`s been the number one property for the toy industry over the
past year. This year, an estimated $1.4 billion worth of “Star Wars” toys
are expected to sell, according to the toy expert Jim Silver of TTPM.

JIM SILVER, TTPM CEO: The big winners are generally the retailers, because
it draws traffic to the stores, and also Hasbro (NYSE:HAS), because they
have 70 percent of the toys, and, of course, Disney (NYSE:DIS).

BOORSTIN: Including other categories such as videogames, apps, and
clothing, TTPM projects there will be $3 billion worth of “Star Wars”
retail sales this year. Disney (NYSE:DIS) doesn`t say what percentage it
takes from licensed “Star Wars” retail sales, but it`s likely in the
hundreds of millions of dollars.

This year`s lineup of toys around “The Last Jedi” aims to expand “Star
Wars`” appeal. There are more tech toys than ever, including droid
building kits battle drones that look like aircraft from the film and a
$200 Lenovo augmented reality headset, which includes a light saber to
recreate battles with Kylo Ren.

On the other end of the spectrum, Disney (NYSE:DIS) is partnering with
fashion brand rag and bone for a special edition line, most of which has
been sold out, including $700 boots.

For more mainstream gear, “Star Wars” is partnering with Gap (NYSE:GPS),
Kohl`s (NYSE:KSS), Macy`s (NYSE:M), Clark`s and others.

SILVER: The reason why “Star Wars” appeals to so many different age and
gender demographics. It appeals to both male and female. And it will
appeal to 3 and 4-year-olds, especially with a new character like the Porg.
But you have 60-year-old collectors. So, you have a wide age demographic
which really doesn`t exist on both brands.

BOORSTIN: You`ll even see some unexpected products emblazoned with “Star
Wars” characters, including Dole Pineapple. Dole is licensing characters
to put on its products and for a healthy galaxy game on its Dole app.

All of these products aren`t just generating revenue for Disney (NYSE:DIS).
They`re arguably also marketing the film.

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


HERERA: And that does it for 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.

Stay warm. We`ll see you tomorrow.



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