Transcript: Nightly Business Report – February 6, 2018

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Dizzying day. Stocks were
whipsawed, sinking, recovering, over and over and over again as the Dow cut
yesterday`s losses in half.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: What not to do. How you
can protect your save prosecution the volatility if you are retired or
nearing retirement.

HERERA: Thrill ride. Theme parks deliver for Disney (NYSE:DIS) as the Dow
component reports a rise in revenue and easily tops earnings estimates.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Tuesday,
February 6th.

MATHISEN: And good evening, everyone.

What a wonderful turn on Wall Street if you are long on the stock market
but it did not come easy. Volatility reigned everywhere today as shock
waves from yesterday as dramatic selloff rippled through the financial
market. Stocks dropped sharply at the open, then they rallied, only to
fall, and then soar again. The comeback is the biggest for the Dow and the
S&P 500 since 2011.

And let`s get right to the closing numbers. The Dow Jones Industrial
average rose 560 points to 24,912. And get this: at the open, the index
immediately fell 567 points. There`s something about 567. Think about
that when you play the numbers. The NASDAQ added 148. The S&P 500 was up
46.

Investors blamed the volatility on interest rate concerns, computer-driven
trading, and obscure volatility funds that use leverage.

Bob Pisani now with a look at today`s action from the New York Stock
Exchange.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Talk about another
rollercoaster ride for the stock market. The Dow tumbled about 560 points
right after the open, breaching Monday`s lows, but reversed course to rally
600 points after wavering between gains and losses throughout. By the end
of the day, the Dow travelled at more than 1,000 point range. We haven`t
seen volatility like that in all of 2017.

So, the Dow did hit correction territory early on. So, we were down 10
percent from recent high. But held on to gains throughout the close and it
managed to stage its biggest comeback in seven years.

The good news is this is market mayhem driven by technicals. It`s not
fundamentals. This was not an economic scare. The credit markets are
doing fine. Gold did not budge. Corporate America is still healthy. The
world is still spinning.

Remember, the three major risks to the market are number one, inflation,
number two, valuation, market expenses, and third, politics. So in the
last 24 hours, nothing has really changed on the inflation front or even on
the political front. So, what`s different? Well, Valuation risk was a
little lower and that may account for the rally late in the day.

The market is getting a lot cheaper. We`ve gone from really overbought to
really oversold in a little more than a week. Not dirt cheap but a lot
cheaper than it was a week ago. And everybody said, I`d like to buy 10
percent below the market. Well, it looks like some people did.

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

(END VIDEOTAPE)

HERERA: And for more on why the market may be behaving this way is Peter
Costa, president of trading firm, Empire Executions from the NYSE.

Always good to have you with us, Peter. Thank you for joining us.

PETER COSTA, EMPIRE EXECUTIONS PRESIDENT: Glad to be here.

HERERA: What was it like down there today, and what does your trader`s gut
tell you about what is coming next?

COSTA: Well, several things. Number one, it was crazy. You know, and I
have been in some crazy markets. Not crazy busy, but crazy in the
movements. You know, having the market up 100, then down 75, then up 100
again.

The market whipsawed all day long until right after 2:00 when it started
its rise. And, you know what, everything kind of settled in as we were
going up.

But this is volatility. And you know, this thing, it doesn`t go away
overnight. So, what I think what will end up happening is it will probably
volatile the next couple of days, maybe early into next week. And things
will start to stabilize at certain level and the market will go back
looking at more fundamentals, earnings growth, what`s going to happen with
interest rates, so on and so forth.

Right now, for traders down on the trading floor, this is actually a very
profitable time because our clients are very active.

MATHISEN: Yesterday, Peter, felt to me like machines reacting to triggers
that only they could see. In other words, programmed trading and so forth.
Today may be a little less so. But how much of what is going on over these
past couple of days is really human beings buying and selling?

COSTA: I think today there was more of the human element as far as traders
getting involved because of the volatility and the price points where
people could get in and get out. Yesterday, definitely, there was no
institutional selling as far as I could see. It was all computer-driven
and a lot of that was also the buyers disappeared.

Once there were certain levels reached, the buy side or those buy orders
canceled. So, the market had the downdraft and nothing could really stop
it until at some point something stopped it. More like maybe some
institutional buyers came in at the very low levels trying to pick a
bottom.

Today was more of a trader`s market. There were a lot of, you know, the
swings. Not so many computer programs. But there were programs going into
the close.

So, it was a mix of both. We want more institutional traders in. We want
more institutional interests in.

HERERA: Right.

COSTA: But I think they have stepped aside for a little bit to let this
market kind of like play this out and get back whatever they are looking to
accomplish either on the short side or the long side. They will be back
in. It`s just right now, I think right now they stepped away for a little
bit.

HERERA: Understandably so. Peter, thank you as always. Peter Costa with
Empire Executions.

COSTA: Thank you.

MATHISEN: The treasury secretary has been watching what has been happening
on Wall Street and today told Kayla Tausche that the fundamental of the
economy remain strong.

(BEGIN VIDEO CLIP)

STEVEN MNUCHIN, TREASURY SECRETARY: The economy is doing very well. Tax
reform is clearly helping earnings a lot. And the markets look like they
are functioning normally in terms of liquidity and other things.

KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: What about the
reaction across the world?

MNUCHIN: Again, markets move in both directions. And they are functioning
very well. I`m going to my testimony.

TAUSCHE: So, we can`t be worried about the volatility?

MNUCHIN: People should be focused on the long term investment. Americans
should be focused on the stock market over the long term. It`s been one of
the best investments. And we`ll continue to monitor it. Thank you.

(END VIDEO CLIP)

MATHISEN: And also on Capitol Hill, the head of the Securities and
Exchange Commission told lawmakers that the markets are functioning well
and that his agency continues to monitor the volatility.

(BEGIN VIDEO CLIP)

JAY CLAYTON, SEC CHAIRMAN: As I sit here today, there is nothing that
concerns me from a functioning standpoint. But days like yesterday, our
job is to look at them.

(END VIDEO CLIP)

MATHISEN: And Clayton declined to comment on why stocks fell so sharply
yesterday.

HERERA: Throughout the day, markets experts were sharing their thoughts on
what has been happening in the stock market and offering opinions on how it
all might play out.

(BEGIN VIDEO CLIP)

TOM FARLEY, NYSE PRESIDENT: A moment of volatility like this and a
pullback in price, quite frankly it`s to be expected. And I think as
group, we need to take a deep breath and realize we`re going to be OK.

J.J. KINAHAN, TD AMERITRADE CHIEF MARKET STRATEGIST: I do think these
types of events usually take two to three weeks to work through the system.
And so, with that I think volatility remains elevated for at least two or
three weeks.

ART CASHIN, UBS MANAGING DIRECTOR: Markets remain thin and they remain
volatile and quite frankly doing this 50 years that`s just what you need
for the bottoming process to succeed.

(END VIDEO CLIP)

HERERA: That`s what some of the pros have to say. But what about you, the
individual investor? Well, we took our cameras to find out.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I`m kind of just keeping moving in all of the frenzy
and hoping that my portfolio will hold out. And I have a couple of number
plus years I`m hoping to be in the market. So, I hope that`s on my side as
well.

UNIDENTIFIED MALE: The stock market will return, maybe not right away.
But it was a bubble, of course. Everybody understands that it was riding
up like crazy, like a rocket.

UNIDENTIFIED FEMALE: My thoughts are a little stressed but I remain calm
because I have been through a number of market cycles and I realize time is
on our side and as long as you hold on, it will come back.

UNIDENTIFIED MALE: I`m going the wait it out for a while. I have been
through this before. I was into it in 1987, and then again in 2000, 2006
or 2008. So it always comes back.

UNIDENTIFIED FEMALE: His wife is hitting the sell button, saying get it
out and get it in cash.

UNIDENTIFIED MALE: I think the most important thing is to think for the
long term. Most people see this and get scared and they don`t realize that
they probably have another five or 10 or 20 years, and over time, there`s
been very few things that have done as well as the stock market as Warren
Buffett will probably tell you.

(END VIDEO CLIP)

MATHISEN: All right. So, do those individual investors have it right?
Let`s bring in a long-time market watcher who says the recent pullback in
stocks may actually be a good thing for the market.

Joining us is Jeremy Siegel. He`s a finance professor at University of
Pennsylvania`s Wharton School of Business.

Over time, Professor Siegel, the stock market has really performed better
than almost any other asset class.

JEREMY SIEGEL, WHARTON SCHOOL FINANCE PROFESSOR: It has.

MATHISEN: Does yesterday change that at all?

SIEGEL: No, not the long run. What we really had was the market went up
too far too fast. I was even saying to myself January is crazy.

Momentum players. Now momentum investors are those who say I`m going to
follow the trend. I don`t dare about valuation, I`m jumping on the train
and they place their stop orders, sell orders just a few percent below.
And say when the train starts slowing I`m going jump off.

Well, you know what the interest rates begun to go up. Friday there was a
little problem. It multiplied and they all jumped off yesterday. And that
produced a vacuum and the big decline.

I mean, we have got much sounder values right now. You know, there is an
old saying on Wall Street that goes back decades called up the staircase,
down the elevator. And January was our staircase. And early February was
the elevator.

And this type of behavior is not something new. It`s been true of
speculative markets for ages.

HERERA: Did the shakeout yet — did all of those momentum players take the
elevator and get off, do you think?

SIEGEL: I think most of them did because it wiped out the gains of January
at the low. You know I`m not saying all of them are out. You know, even
last year, I said, this year is not going to be as good, anywhere near as
good as 2017, and it`s going to be challenged by higher interest rates.

We have a very strong economy. I think the Fed is going to raise three, I
think four times. Higher interest rates are a negative factor for stock
prices. Now, on the other side you have great earnings. So, it is a
battle between great earnings and the higher interest rates. And that`s
what I think we are going to see throughout 2018.

MATHISEN: Professor, talk to the individual investors who I can well
imagine might be concerned at what he just heard Peter Costa say. And that
is that yesterday`s spasm of selling was being driven largely by computers.
Have the machines got too much power? And what should I as an individual
investor think of that?

SIEGEL: I`m not sure of that because momentum players, speculators — they
were around in 1929. They kept on driving the market up. And they were
around, of course, in 1929, 1999, during the Internet bubble. It is a
feature of speculative markets.

Whether you set it on a machine or a human being, you know says I`m selling
at this point, really the final result is the same. It`s just that in
today`s world, it`s going to happen so much faster. It`s going to take
place in a matter of minutes, not a matter of hours or days.

MATHISEN: All right. Professor Siegel in Philadelphia, congratulations on
the Eagles.

SIEGEL: Thank you very much. I`m proud.

MATHISEN: Thank you.

HERERA: And still ahead, the president says he welcomes a shutdown. Even
as lawmakers say progress is being made on a budget deal.

(MUSIC)

MATHISEN: Disney (NYSE:DIS) shares closed higher today. And after the
closing bell, the company reported earnings that blew past Wall Street
estimates. Disney (NYSE:DIS) earned $1.89 a share. That was a full 28
cents better than forecasts. Revenue up nearly 4 percent from a year ago
to $15 billion. Investors liked what they heard about strong attendance at
theme parks and resorts.

Julia Boorstin now with more on the quarter. She spoke to Disney`s CEO.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Disney (NYSE:DIS)
beating expectations thanks largely to the outperformance of its parks and
resorts division. The company saying it saw higher spending and higher
attendance at its U.S. parks both in Orlando and Anaheim, California, also
saying it has seen higher performance of its cruise line division as well
as Disneyland Paris.

BOB IGER, DISNEY CHAIRMAN & CEO: It starts with success across the globe,
particularly in some of our international — or in one particular
international park and resort in Paris that it had a number of years where
the numbers weren`t that good. And they have improved substantially.

But we have also had record results for our domestic operations as well,
record revenue, record bottom line. So, it is basically an across the
board success story.

BOORSTIN: Disney (NYSE:DIS) CEO Bob Iger also saying he is optimistic
about the company benefitting from digital distribution of its media
networks such as ESPN. He also announced ESPN Plus, the new subscription
app that`s launching time this spring will cost $5 per month.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Burbank, California.

(END VIDEOTAPE)

HERERA: Well, the battered tech sector bounced back after getting walloped
yesterday. It is a sector investors watched closely since it was the best
performing one last year.

Josh Lipton is in San Francisco for us tonight.

(BEGIN VIDEOTAPE)

JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT: As volatility returns
to the stock market, investors have been selling their winners. And that
includes some of biggest names in technology. That comes despite a pretty
good earnings quarter for the sector. Profit and revenue growth have both
exceeded expectations, but that doesn`t mean last year`s hottest sector is
immune to a broader decline.

YOUSSEF SQUALI, SUNTRUST ROBINSON HUMPHREY: We have the advantage of
having these companies just reported Q4 earnings just last week. And by
and large, what those numbers show you is that demand fundamentals remained
extremely strong, particularly for somebody like an Amazon (NASDAQ:AMZN).

But even for a Facebook (NASDAQ:FB) or even for an Google (NASDAQ:GOOG) or
an Alphabet, I think there is any pushback potentially to be had is on the
margin, on the fact that all these guys to continue to grow at that level,
they are going to need to invest and therefore there is potential for
margin contraction over the next year or two.

LIPTON: Take Apple (NASDAQ:AAPL), for instance. There`s been a lot of
focus on its iPhone franchise. The company recorded record quarterly
revenue and earnings per share but it sold fewer iPhones than expected
during the holiday quarter.

Then there`s Alphabet where revenue jumped more than 20 percent from its
latest report. But there is worry about the company`s higher expenses,
specifically the fees that it pays partners for traffic.

There are still reasons why tech is an attractive sector to investors even
as they prepare for the possibility of more volatility. One reason is
dividends. And some of those can be found in the bluest of blue chip tech
stocks.

For NIGHTLY BUSINESS REPORT, I`m Josh Lipton, San Francisco.

(END VIDEOTAPE)

MATHISEN: The rubber met the road at General Motors (NYSE:GM), and that is
where we begin tonight`s “Market Focus”.

The automaker said cost-cutting initiatives and demand for high margin SUVs
and crossovers helped results top estimates. Overall, GM said it saw a lot
of bright spots in the quarter.

(BEGIN VIDEO CLIP)

CHUCK STEVENS, GENERAL MOTORS CFO: Very, very pleased with the results in
North America. A record there at $2.9 billion and 10 percent margins in
the fourth quarter. Another half a billion dollar quarter of equity income
from China, and really important improvement in our GM international
markets, another profitable quarter in South America.

(END VIDEO CLIP)

MATHISEN: GM finished up almost 6 percent on the day at $41.86.

Strong demand for Botox treatments helped Allergan (NYSE:AGN) post better
than expected profits and sales. Separately, the company said its
experimental migraine treatment performed well during a study. And that
made investors feel better, sending shares up 2 percent to $168.33.

Tapestry said its Coach (NYSE:COH) and Stuart Weitzman brand saw more
customers by more stuff during the holidays and that helped overall sales
edge past expectations. It didn`t say it exactly that way, but that was
the point. Earnings also came in ahead of expectations. And the company
hiked its guidance for the year. That helped push Tapestry up more than 9
percent on the day to $49.02.

HERERA: The health insurer Centene (NYSE:CNC) raised its profit guidance
for the year after reporting stronger than expected earnings. The company
attributed the solid results to higher enrollment in its affordable health
care business and benefits from the new tax law. Centene (NYSE:CNC)
finishing up more than 4 percent on the day to $103.67.

After the bell, Chipotle topped analyst profit expectations as the burrito
chain said results were helped by fewer promotions and higher menu prices.
Same store sales and revenue also edged higher and the company said it`s
making good progress on finding a new CEO. Chipotle shares were volatile
in the extended session but they ended the regular day up more than 1
percent to $304.33.

Out after the bell, Snap reported active user growth that impressed Wall
Street analysts. The social networking company also saw sales pick up
larger than expected gains there. Snap shares popped in after-hours but
finished the regular day up 21 cents to $14.06.

MATHISEN: The president today called for a shutdown of the government if
Congress does not pass border security measures.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: If we don`t change the
legislation, if we don`t get rid of these loopholes where killers were
allowed to come into our country and continue to kill, if we don`t change
it, let`s have a shutdown. We`ll do a shutdown. And it`s worth it for our
country. I`d love to see a shutdown if we don`t get this stuff taken care
of.

(END VIDEO CLIP)

MATHISEN: The comments came as lawmakers on Capitol Hill said progress was
being made on a spending bill to keep the government up and running past
the Friday deadline.

Ylan Mui is in our nation`s capital tonight.

Ylan, where do we stand on these negotiations to keep the government open?

YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Tyler, it does not look
like we are headed for a shutdown. The House is looking to pass tonight a
short-term spending bill that would keep the government open through March
23rd. It could keep funding for most agencies at current levels but it
would increase spending for the Defense Department and for community health
centers.

Now, this is a very differ tack, though, than the Senate is looking to
take. Over in that chamber, both Republican and Democratic leaders are
trying to come to a compromise on a long term spending bill that would fund
the government for two years and it would increase spending both for
defense and for non-defense.

And that is a point that is very important to Democrats. They call it
parity. And they say that would be a win for them. Now, of course,
keeping the government open though is one of the key responsibilities of
lawmakers. This is a long term spending deal that has eluded them for many
months, but both sides say they are very optimistic that they can reach a
compromise soon.

HERERA: You know, one of the things that Wall Street is also worried about
right now is the status of the debt ceiling. What can you tell us there?

MUI: Sue, this is something that is on the table to be included
potentially as part of that longer term, two-year spending deal. But
lawmakers have not decided whether or not to actually go forward with that
strategy yet. The deadline for raising the debt ceiling is around mid-
March according to the Congressional Budget Office. So they have to do
this soon. Unclear if it will be part this larger spending deal or not.

MATHISEN: So, you know, let me understand this. Is immigration part of,
tied into, the budget deal that you were just talking about? And if it
isn`t, is the president ready to veto a long term spending deal?

MUI: It remains unclear. Right now, though, what we can tell you is that
immigration is a separate issue from this spending deal. Those are going
to be on separate tracks here on Capitol Hill.

MATHISEN: All right. Ylan, thank you very much. Ylan Mui on Capitol
Hill.

HERERA: Well, today, we learned that the trade deficit has soared to a
nine-year high. For 2017, the gap leaped 12 percent to $566 billion. Last
year, the U.S. imported more foreign-made cars, computers and cell phones.
The deficit with China hit a record. And imports were Mexico also hit a
new peak.

MATHISEN: Coming up, are you retired or nearing it? What you should do
and not do in this type of market.

(MUSIC)

HERERA: It is time to take a look at some of today`s upgrades and
downgrades.

ExxonMobil (NYSE:XOM) was downgraded to underweight from overweight at
Barclays. The firm says the stock is richly valued and cites a structural
deterioration in its upstream business. Exxon`s price target was cut to
$84 from $91. The stock fell nearly 2 percent to $78.35.

That same Barclays analyst upgraded rival Chevron (NYSE:CVX) to overweight
from equal weight. The firm cites improving fundamentals and an attractive
valuation. The price target was raised to $135. Shares of Chevron
(NYSE:CVX) were up 4 percent to $117.18.

MATHISEN: Micron Tech upgrade to overweight from sector weight at KeyBanc.
The firm says the stock is too inexpensive to ignore following Micron`s
upbeat earnings guidance. The price target now $53, stock climbed 11
percent today to $43.88.

And fellow chip maker Cirrus Logic (NASDAQ:CRUS) downgraded to hold from
buy at Needham. The firm cites weak third quarter results and guidance.
Analysts also concerned about weaker smartphone demand given that Cirrus
makes chip for Apple`s iPhones. The stock off 3 percent to $43.40.

HERERA: Well, the flurry of activity in the markets has many investors
taking a closer look at their portfolio. So, what should the average
investor do to prepare for more volatility? And what about soon to be
retirees or those who are in retirement.

Joining us now to offer insights on that is Stacy Francis, president and
CEO of Francis Financials.

Stacy, welcome. Nice to have you here.

STACY FRANCIS, FRANCIS FINANICAL PRESIDENT & CEO: Thank you. Great to be
here.

HERERA: So, given what we saw yesterday and then today, if the you are in
retirement, what should you do or perhaps better said, what should you not
do?

FRANCIS: Exactly. The latter part is definitely true, what should you not
do? The biggest thing you shouldn`t do is you shouldn`t panic. And we
have seen that individual investors who think they are smarter than the
market are actually not and the individual investigator typically
underperforms the market by 6 percent because we tend to sell at the worst
time, like now, and we tend to buy at the exact worst time, like bitcoin.
Do you remember that one?

HERERA: Yes, we do.

MATHISEN: And, really, Stacy, drill home the point. If you are going with
an asset allocation plan of 60 percent stocks and 40 percent bonds or
50/50, or whatever it is, if you are out of the stock market for a very
small number of days because you got an itchy trigger finger, you miss out
on a lot of the returns in stocks, right?

FRANCIS: You miss out on a huge amount of those returns. A case in point
is we look at 2008. People who were out of the market that year after, for
many of them, they still haven`t actually recouped the losses that they
saw. Those who stayed in the market, even in the worst time, and we saw
February 2009 really at the bottom, that`s when it started back up.

You have to be in the market. And the most important thing is that, if
anything, yesterday and today was a gift for you. It was a wake-up call.
It was a wake-up call after a year in 2017 where we really didn`t see much
volatility.

It`s important to make sure that you have weatherproofed your portfolio
because I have to tell you, for 2018, there is going to be more storms
around the corner, definitely more than what we saw last year.

HERERA: So, take a look at your asset allocation, make sure you are
comfortable with it. And you have made the point in the past to us that
make sure it fits the goals that you have for retirement. Correct?

FRANCIS: Exactly. Unfortunately, a lot of people think of their
portfolio, I feel, the wrong way. The portfolio, it`s truly an engine. It
is an engine to get you to your goals of that retirement date, of living
that beautiful golden years in Tampa, somewhere warm. Maybe it`s
Albuquerque.

But essentially, that portfolio needs to be your engine. And so what
engine do you need? You need a souped up engine. You are going to have
more stocks because you might be a little bit behind. Otherwise, you could
have a Prius engine because you have been able to save enough you don`t
have to take on that risk.

HERERA: OK. On that note, thank you, Stacy. We appreciate it.

FRANCIS: Thank you.

HERERA: Stacy Francis with Francis Financial.

MATHISEN: All right. Before we go, let`s take another look at today`s big
turnaround on Wall Street. The Dow rose 567 points to 24,912. That cut
yesterday`s losses basically in half. The Nasdaq added better than 2
percent or 148 points, the S&P 500 up 1.75 percent or 46 points.

HERERA: And it`s only Tuesday.

MATHISEN: It`s only — no wonder we are all so tired.

HERERA: I know.

That`s it for us tonight. I`m Sue Herera. Thanks so much for joining us.

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

END

Nightly Business Report transcripts and video are available on-line post
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