Transcript: Nightly Business Report – December 13, 2017

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

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES:  We want to give you, the American people, a giant tax cut for Christmas.

(END VIDEO CLIP)

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR:  Republican leaders reach
an agreement on a final tax bill.  Now, the pressure is on to tie up all
the loose ends.

(BEGIN VIDEO CLIP)

JANET YELLEN, FEDERAL RESERVE CHAIR:  We continue to expect that the
economy will expand at a moderate pace.

(END VIDEO CLIP)

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR:  The Fed raises interest rates
as Janet Yellen`s term nears an end and the economy powers on.

MATHISEN:  And paying up.  Why it`s costing drivers a lot more to fill up
this year than in years past.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
December 13th.

HERERA:  Good evening, everyone, and welcome.

On Wall Street, the Dow closed at a record.  Investors` focus was on
Washington and reports that Republican congressional leaders reached a
tentative agreement on a tax bill.

At the Federal Reserve, policymakers felt confident enough in the economy
to raise interest rates again and sharply lift their outlook for growth.
The Dow Jones Industrial Average rose 80 points to 24,585, an all-time
high.  It had been up triple digits for most of the day.  The Nasdaq gained
13 and the S&P 500 lost some steam into the close, falling one point.

MATHISEN:  Well, let`s start tonight with that big tax bill which does
appear to be nearing the finish line.  Republican leaders have made some
changes, reaching a basic agreement on a final proposal that sets up a
possible final vote next week.

Ylan Mui has our report tonight from Capitol Hill.

(BEGIN VIDEOTAPE)

YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Republican lawmakers
presented their tax plan to President Trump at the White House during lunch
today.  And the centerpiece of that proposal is a 21 percent corporate
rate.  Now, that`s a little bit higher than the red line of 20 percent that
the president had previously drawn.

But today, Trump said he would be thrilled to sign that bill into law.

TRUMP:  The bill is going to cut taxes for American businesses, both big
ones and small ones, so that they can grow higher and compete all around
the world.  Right now, they`re paying 35 percent.  And that`s the highest
in the industrialized world, in many cases by far.  And we`ll be bringing
that down to a number that will be extremely impressive.

MUI:  Republicans are under pressure to get this done after last night`s
special election in Alabama in which Democrat Doug Jones beat Republican
Roy Moore in an upset victory for Alabama`s Senate seat.  Democrats today
called on Republicans to delay on vote on the tax bill until Doug Jones can
take his seat.  They also blasted Republicans` plan to lower the top
individual rate to just 37 percent, saying that`s just a giveaway to the
wealthy.

SEN. RON WYDEN (D), OREGON:  I`m just really flabbergasted at the idea,
particularly when they promised a bill that would really help the middle
class.  Most of what`s there for the middle class is written in
disappearing ink.

MUI:  Some Republicans were unhappy with that idea as well.  Senator Marco
Rubio of Florida said he feels any increased revenue from raising the
proposed corporate rate should go toward paying for a bigger child tax
credit.  Also, Susan Collins of Maine says she`s no fan of lowering the
rate for the rich.  And several other Republican senators still remain on
the fence.

Now, lawmakers have been holding a conference committee meeting today to
discuss the final version of the tax bill.  They want to have some final
text out by Friday so they can schedule a vote early next week.

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

(END VIDEOTAPE)

HERERA:  Well, the prospect for tax reform is one of the reasons why the
stock market has rallied this year.  Now that the bill appears to be
nearing the finish line, what does that mean for the stock market and
investors?

We`re joined by Mike Holland.  He`s the chairman of Holland and Company.

Mike, great to see you.  It`s been a while, welcome back.

MIKE HOLLAND, CHAIRMAN, HOLLAND & COMPANY:  Sue, great to be here.

HERERA:  It`s been so long, I called you Mark, but you`re Mike.

Let`s start first of all with the market at this point.  You know, we do
have tax reform seemingly on the way.  How much more do you think the
market has in it?

HOLLAND:  Well, it`s a really interesting point in the market cycle, Sue,
because the market has been anticipating the earnings coming from the tax
cuts, how they view price earnings, multiples, what you`re willing to pay
for earnings into the future if Jamie Dimon is right, for example, he spoke
today, if Janet Yellen is right, she also spoke today, companies will be
making more money than they otherwise would have made in addition to the
current valuation concern, when — or applause, I should say.

So, you end up with a situation where you get a bump and then a further
bump.  Jamie Dimon referred to the fact that companies now can pay out more
in wages, they can buy other companies, they can do lots of things, raise
dividends, do stock buybacks.  If those things happen, you could get the
virtuous cycle of things getting better and feeding on themselves.

We`ve seen the other side, which goes in the other direction.  So, you
actually could get a fill up from this that lasts for a few years, that`s
possible.

MATHISEN:  So, that sounds very good for companies and shareholders.  Do
you think this tax bill might, broadly speaking — I know this isn`t really
what you do — but do you think it`s good for the economy?

HOLLAND:  If you end up, Tyler, with people getting higher wages, the
answer — in a simplistic way of looking at it, the answer is yes.  People
will have more money to buy more things and the economy could end up with a
higher GDP number a year from now than we have right now, because we both
know, the three of us know, we`ve got two-thirds of the economy, three-
quarters of the economy, is the consumer.  So, if that`s the case, and the
consumer feels better and has a little bit more money.

Actually, we`re going to get a pretty good test right this Christmas
season.  The numbers are beginning to look pretty good, particularly online
numbers.  I think people feel better and may have a few more bucks to spend
and the economy will benefit.

HERERA:  So, if you want to put money to work in this market, given how far
it has moved, where are you looking for value perhaps, or something that
you think has more upside, Mike?

HOLLAND:  Well, value is — the cliche is, in the eye of the beholder.
Janet Yellen of all people said she thought and the Fed thought stocks were
not overvalued.  I don`t want to overstate what she said, but she said it`s
a high end valuation, but she said — she basically said she was — and the
Fed were not worried about the level of where prices are today.

Presuming that they`re reasonably valued at the high end, I think
technology continues, because that is leading the charge for the global
economy right now.  Companies like Microsoft (NASDAQ:MSFT) are still
selling — I`m not talking about Alibaba and Tencent and Chinese companies
or any of the FANG stocks, but a company like Microsoft (NASDAQ:MSFT),
which is a leader, is still — Apple (NASDAQ:AAPL), they`re still trading
at reasonable valuations.

HERERA:  Got it.  Mike, nice to see you again.

HOLLAND:  Sue, great to see you, Tyler.

HERERA:  Mike Holland.

Ty?

MATHISEN:  Thanks, Mike.

All right.  Now to the Fed.  The Central Bank raised short term interest
rates as expected.  It`s ready to hike a few more times in the New Year,
maybe three more.  It was Janet Yellen`s last news conference as chair of
the Federal Reserve.

As Hampton Pearson reports, she started by giving an upbeat view of the
economy.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT:  At its last
meeting of the year, Federal Reserve monetary policymakers raised key short
term interest rates for the third time in 2017.  Updated forecasts see the
economy growing at a 2.5 percent rate next year with unemployment dropping
below 4 percent.  Monetary policymakers feel the economy is strong enough
to possibly stand three rate hikes next year.

YELLEN:  When you look at the projections, that there are many factors that
affect those projections and changes in tax policy that`s only one of a
number of factors.

PEARSON:  With President Trump and Republican leaders on the verge of
finalizing tax reform, the Fed chair`s last news conference was dominated
by questions about the possible impact on the Fed.  Monetary policymakers
expect a modest lift to economic growth, business investment, and increased
consumer spending.  But they also voice concerns about estimates it could
add a trillion dollars to the national debt over the next decade.

YELLEN:  I am personally concerned about the U.S. debt situation.  It`s not
that the debt to GDP ratio at the moment is extraordinarily or worrisomely
high.

PEARSON:  And lots of questions about the digital currency bitcoin, which
the Fed chair characterized as a highly speculative asset.

YELLEN:  I really don`t see any significant exposure of our core financial
institutions to threats from bitcoin if its value were to fluctuate.  I
don`t see a threat to our core financial institutions.

PEARSON:  This was Fed chair Janet Yellen`s last news conference.  She`ll
preside over one more meeting early next year.  Between now and then, she
says her goal is to provide a smooth transition to her designated
successor, Jerome Powell.

For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson in Washington.

(END VIDEOTAPE)

MATHISEN:  So, what is in store for the economy next year?  And are there
new risks that investors need to be aware of?

Patrick Chovanec is with Silvercrest Asset Management Group.

Patrick, good to have you with us.

You know, the economy seems by most measures to be doing quite well.  The
labor market is very strong.  The Fed says unemployment next year may come
down below 4 percent, 3.9.  I think was their forecast.  But there`s a tax
bill that is stimulative on a hot economy.

Are you worried that some of the precursors of inflation or of economic
overheating may be in the pipeline somewhere and that the fed will as a
result start raising rates faster, perhaps triggering a recession in a year
or two?

PATRICK CHOVANEC, SILVERCREST ASSET MANAGEMENT:  The economy is doing very
well.  And the forward indicators like new orders suggest there`s a lot of
growth momentum coming into the New Year.

There is some talk now, increasingly, about the prospect for inflation.
Inflation remains low.  It`s below 2 percent.  It`s a point that Janet
Yellen stressed today.

But we`re at a point in a business cycle where normally you would be
looking for the signs of inflation picking up.  And then when you add the
stimulus from a tax cut, that could pour more fuel on the flames.

But it`s important to keep it in perspective.  Inflation right now is low.

HERERA:  What about the impact of the tax bill?  I mean, they still have to
work out some of the differences.  But it looks like we may have a deal and
a vote by next week.  Net-net, do you agree with the fed chief when she
says it will be mildly stimulative to GDP and economic growth?

CHOVANEC:  So, it`s interesting.  A year ago, when the prospect of both new
spending increases and also tax cuts were raised after the election, Janet
Yellen gave some testimony, and she said that to the extent that it`s
simply any kind of fiscal stimulus, pour more demand into the economy, that
would not be a good thing.  But to the degree that changes to the tax code
or other sorts of things could actually generate productivity gains, she
would look on that much more positively.

And I do think, you know, if we are talking about stimulus, just talking
about adding demand, it comes at a very unusual point in the business cycle
where the economy is starting to reach full capacity and you want to be
careful about doing that.

MATHISEN:  You know, we all know that, Patrick, as soon as she leaves
office, she`s going to load up on bitcoin, right?  We can agree on that.

(LAUGHTER)

MATHISEN:  But let me ask you — let me ask you, what do you think, it`s
early for legacy writing, I know.  But what do you think she will be
remembered for?  What do you think the final grade on her term will be?

CHOVANEC:  So, it`s always tricky to give a Fed chair their grade just as
they`re leaving, because if you remember, Alan Greenspan left to accolades
to his genius.  And a few years later, it didn`t look quite the same way.
I think one of the big challenges going forward is this huge balance sheet
with the Fed that under Janet Yellen`s watch that accumulated.

And all the money that`s lying within the banking system, not circulating,
but if we saw a pickup in lending, if we saw a pickup in inflation, these
could be problems.  The Fed unwinding its balance sheet, which she`s begun
to do, I think is really the task ahead, before we can say that they`ve
stuck the landing.

MATHISEN:  All right.  Great point.  Patrick, thanks very much.  Patrick
Chovanec with Silvercrest Asset Management.

HERERA:  Still ahead, Apple (NASDAQ:AAPL) is investing hundreds of millions
of dollars in an American company in an effort to create American jobs.

(MUSIC)

HERERA:  An update now on the fires in southern California.  The winds
returned, hampering efforts to contain the Thomas Fire, which has burned
through more than 360 square miles in Ventura and Santa Barbara Counties.
These fires could push the amount of insured losses this year from natural
disasters to a record of more than $130 billion.  Insurers and reinsurers,
of course, saw hurricanes Harvey, Irma, and Maria, two Mexican earthquakes
and fires in northern California just this fall.

MATHISEN:  Oil prices fell for a second straight session.  Domestic crude
settled at $56.60, the lowest level in a week.  The slump in stockpiles was
offset by a larger than forecast rise in gasoline inventories.  Prices have
been up steadily over the past few months, and drivers are taking notice
every time they go to fill up.

Jackie DeAngelis explains.

(BEGIN VIDEOTAPE)

JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Gas prices are
the gift that won`t be giving to consumers this year.  The national average
for a gallon of regular is $2.45 according to AAA.  That`s 23 cents higher
than a year ago.

While prices could drop a little over the next few weeks, anywhere from 5
to 20 cents, AAA still thinks they`re going to be higher than the past few
years.

So, why are pump prices bucking the seasonal trend?  For one, crude prices
are closer to $60.  This time last year, they were closer to $50.  The hike
due to OPEC supply cut extension, and evidence of a little stronger demand.
But we also have two major hurricanes, making September prices the peak for
the year when they should have been falling at that time.

Add to that, continued growth in gasoline exports, and you have the perfect
mix for elevated gas prices.

JIM IUORIO, TJM INSTITUTIONAL SERVICES:  When you see increased export
numbers, I think it`s indicative of a global recovery that we suspect has
happened.  I think that`s supportive of gas prices.

We`ve seen increased export numbers.  We`ve seen pipeline problems.  We`ve
even seen the Saudis try to jawbone the price of gas and oil up, and it
hasn`t really worked over the last few days.  To me, that means an oil, the
$60 level is very important, and I don`t think we`ll get over it that
easily.

DEANGELIS:  Early next year, gas prices may fall a bit.  Perhaps the
national average of $2.25 to $2.35 by February.  But longer term, it will
all depend on crude prices, supply and demand here in the States and
overseas, and how OPEC members decide to play their cards.

For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis.

(END VIDEOTAPE)

HERERA:  AAA also says premium gas in some cases may not be worth the
money.  The organization tested six cars where manufacturers recommended
but did not require premium gasoline.  And they found that the fuel economy
did improve by about 3 percent.  But premium fuel costs about 25 percent
more than regular.

MATHISEN:  Apple (NASDAQ:AAPL) makes a big investment in a chip maker.
That`s where we begin tonight`s “Market Focus”.

Apple (NASDAQ:AAPL) awarded the chip maker Finisar (NASDAQ:FNSR) nearly
$400 million from its advanced manufacturing fund.  Finisar (NASDAQ:FNSR)
makes the laser chips used in the iPhone X.  The purpose of the fund is to
support manufacturing processes in the U.S. and create jobs.

(BEGIN VIDEO CLIP)

JEFF WILLIAMS, APPLE COO:  We`re thinking about where are the opportunities
across the U.S. to help nurture companies that are making advanced
technology and the advanced manufacturing that goes with that, that quite
frankly is essential to our innovation.  And so, we want to nurture those
companies.  Often, those operations are very capital intensive.  And we
want to help them.

(END VIDEO CLIP)

MATHISEN:  Finisar`s stocks surged 23 percent to $23.70.  Apple
(NASDAQ:AAPL) up about 60 cents to $172.27.

Worldwide sales of Caterpillar (NYSE:CAT) machines for the three months
ending in November were up 26 percent.  Biggest push coming from sales in
Latin America and Asia.  Shares of Cat rose more than 3.5 percent to
$148.57, making at it top performing Dow stock today.

And Honeywell forecast higher profit next year and says that a tax bill
could lead it to invest more cash in this country.  And that could include
acquisitions.  The industrial company says new products will help drive its
growth.  Shares of Honeywell up $2 to $155.80.

HERERA:  Eli Lilly (NYSE:LLY) is lifting its earning and revenue forecasts
for the next year.  The company said that outlook is due in part to strong
demand for its recently launched diabetes drug and its psoriasis drug.
Lily is also optimistic about its experimental rheumatoid arthritis drug.
Shares of Eli Lilly (NYSE:LLY) $1.18 to $87.89.

Delta is set to place a huge order with Airbus.  According to reports, the
airline could place orders for 100 jetliners.  That deal would be a blow to
Airbus rival Boeing (NYSE:BA).  Shares of Delta rose slightly to $53.63.
Boeing (NYSE:BA) shares blew off that report however.  That Dow component
rose to $291.84.

Well, the holiday shopping season is not shaping up to be a very good one
for Pier 1.  The furniture and decorations retailer said sales softened at
the start of December after a relatively strong Black Friday.  The company
says it`s using discounts to get customers into the stores.  Shares of Pier
1 were very volatile today.  They dropped sharply in extended after hours
trading but finished the regular session up 6 percent, about, to $5.84.

MATHISEN:  It looks like T-Mobile plans to launch a pay TV service.  T-
Mobile is acquiring Layer 3 TV, a company that integrates TV streaming and
social networking and uses your Internet connection to deliver TV channels.
No specifics were announced.  Shares of T-Mobile rose on the news.  The yet
to be announced service will compete against traditional providers, which
fell in trading today.  Comcast (NASDAQ:CMCSA) (NYSE:CCS), one of those
providers, is the parent company of CNBC which produces this program.

HERERA:  Meantime, AT&T (NYSE:T) has started testing high speed Internet
delivered over power lines.  The second largest U.S. wireless carrier said
the trial marks its latest push to offer faster broadband service.  The
testing is taking place in rural Georgia.  But the company said it could
eventually be deployed in cities and suburbs.

MATHISEN:  And a deal between Disney (NYSE:DIS) and 21st Century Fox could
be announced as soon as tomorrow.  According to CNBC, the acquisition of
some of Fox`s assets will be valued at about $60 billion.  Disney
(NYSE:DIS) became the sole suitor after Comcast (NASDAQ:CMCSA) (NYSE:CCS)
dropped out of the bidding earlier this week.  An announcement tomorrow on
the management of the new company is not expected.

And coming up, retail battleground.  Did target hit the bull`s-eye when it
comes to speedy delivery?

(MUSIC)

HERERA:  Here`s a look at what to watch tomorrow.

The FCC is scheduled to vote on changing the rules that govern the
Internet.  As we reported, Disney (NYSE:DIS) is widely expected to announce
I say purchase of certain Fox assets.  It`s also one of the busiest package
delivery days for FedEx (NYSE:FDX).  That`s what to watch for on Thursday.

MATHISEN:  And the Labor Department is giving the public more time to
comment on its proposed tipping rule.  Under the proposal, restaurants
could require waiters and bartenders to split their tips with co-workers.
Even with managers.

The move would reverse a rule enacted during the Obama administration which
declared tips the property of the workers who collected them.  The rule
could impact thousands if not millions of employees, and billions of
dollars in tips.

HERERA:  A major American mall owner is being acquired by a European
shopping center company.  Westfield is selling its 35 malls to a French
company for nearly $16 billion.  Included in the deal is the mall at the
World Trade Center.  One analyst said this deal could trigger others in the
sector as developers look to consolidate and better compete in a changing
retail industry.

MATHISEN:  Amazon (NASDAQ:AMZN) will expand its same day delivery and one
day shipping to thousands more cities across the country.  The services
will now be available in about 8,000 municipalities, up from 5,000.  The
move could give Amazon (NASDAQ:AMZN) an advantage over other online
retailers as last minute shoppers look to get their packages delivered
before Christmas.

HERERA:  But it`s not just Amazon (NASDAQ:AMZN) that`s focusing on faster
delivery.  Target (NYSE:TGT) today said it`s buying online delivery company
Shipt, a move that will enable customers to have groceries brought to
their door soon after they place their order.  That helped lift shares of
target and it ramped up the competition of speedy deliveries.

Courtney Reagan has more.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  As Amazon
(NASDAQ:AMZN) delivery gets faster, traditional store-based retailers have
to up their delivery game.  Today, Target (NYSE:TGT) joined a growing list
of retailers offering same day delivery options for time-pressed shoppers.

But there are key differences between Amazon (NASDAQ:AMZN) and the rest of
retail when it comes to how it works.  Amazon (NASDAQ:AMZN) ships from its
network of heavily automated distribution centers and uses more traditional
couriers for delivery like UPS and the Postal Service.  For store-based
retailers, the best way to deliver to shoppers same day is to fulfill the
order from a local store.  But that introduces some problems.  First,
retailers need inventory systems tracking what`s available minute to minute
on store shelves.  So shoppers aren`t disappointed if someone else buys it
in the store before it`s tacked out for delivery.  Plus, same day delivery
is expensive.

JOEL BINES, ALIXPARTNERS GLOBAL CO-HEAD OF RETAIL CONSULTING:  Every time
that you touch an individual item and move an individual item, you are
adding cost into the overall supply chain of that item.

REAGAN:  Retailers are increasingly partnering with start jump logistics
companies to make that last leg of the delivery, or the last mile less
expensive and faster.  Still, retailers aren`t able to offer same day
delivery completely for free.  Target (NYSE:TGT) will now be using Shipt`s
personal shoppers to also deliver consumers` orders for same day delivery.
But you have to pay $99 per year Shipt`s membership for the unlimited
service.

Best buy uses startup Deliv and Geodisk to deliver same day orders and for
the U.S. markets for $5.99.  Macy`s (NYSE:M) also uses Deliv for its same
day delivery in 33 markets, charging eight bucks for those that meet free
shipping thresholds, otherwise, it`s $18.95.

Amazon (NASDAQ:AMZN) same day or two-hour prime now delivery isn`t free
either, it`s only available with a $99 a year prime membership.  But Amazon
(NASDAQ:AMZN) does offer other services with that membership, too, like
streaming video and music.

BINES:  Amazon (NASDAQ:AMZN) has done a good job of masking it and making
it feel like it`s not a cost where is it`s a visible cost with the other
retailers.

REAGAN:  Walmart doesn`t currently offer same day delivery, but like other
store-based retailers does offer same day store pickup.

Target`s deal to buy Shipt`s outright does take the same day delivery wars
a step further but with an estimated 40 cents of every order online going
through Amazon (NASDAQ:AMZN), it`s going to take a lot more than buying a
delivery startup to catch up.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan.

(END VIDEOTAPE)

MATHISEN:  And we end tonight with a tribute to one of the fathers of
American business journalism.  Marshall Loeb died after a long fight with
Parkinson`s.  He grew up not exactly poor, but far from rich on Chicago`s
West Side, got a journalism degree at Missouri and went to work.

He never really stopped.  He was a writer and an editor, a columnist at
“Time.”  He went to struggling “Money” magazine and made it a money
machine, and did the same at “Fortune”, turning it into a business must
red.

He interviewed presidents and CEOs, edited the “Columbia Journalism Review”
and popularized business and economics coverage on TV and radio.  He twice
won the most prestigious award in business journalism, the Gerald Loeb
Award, Gerald Loeb was no relation.

In 1982, he hired a green kid from Virginia to come write for him at
“Money.”  I owe my career to him.  Loeb was 88.

HERERA:  And he was a very nice man.

MATHISEN:  Nice fellow.

HERERA:  That does it for us tonight.  I`m Sue Herera.  Thanks for joining
us.

MATHISEN:  I`m Tyler Mathisen.  Have a great evening.  We`ll see you
tomorrow.

END

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