Transcript: Nightly Business Report – February 28, 2018

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

closes this historic February with a nearly 400-point drop, snapping its
longest win streak since 1959.

national gun seller will immediately stop selling assault-style weapons.
And the CEO is calling on elected officials to do more on gun reform.

MATHISEN: Filling up. Prices are on the rise and expected to go even
higher. And that could throw the economy a curveball.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
February 28th.

HERERA: Good evening, everyone, and welcome.

Well, February is in the books, and what a month it was. The Dow fell
1,000 points, not once, but twice. The fear of inflation and the prospect
of rising interest rates spread quickly through the market. But as quickly
as stocks fell, they rose again. The major indexes recouping a large part
of those losses.

If anything, the month marked the return of volatility, something that
hasn`t been seen in quite some time. The Dow Jones Industrial Average was
off 380 points to 25,029, led lower by a drop in energy stocks and also oil
prices. The Nasdaq was down 57. And the S&P 500 fell 30.

For the month, all of the major indexes suffered losses.

Bob Pisani takes a look at the month that was, and what March may bring.


be nothing short of tumultuous for the market, even though stocks have
recovered roughly 70 percent of their losses since the correction, the Dow
is still down 4 percent for the month. It`s the first February loss in
nine years.

Beyond that, both Dow and the S&P also snapped a 10-month winning streak.
This is an amazing run. We haven`t seen a 10-month stretch of gains since

So, will March be a mess too? Not necessarily. Data shows in February,
where the S&P drops more than 2 percent, the S&P was positive in March 67
percent of the time, and average of 2 percent. It`s not bad.

Still, March brings no shortage of other market-moving events for investors
to focus on. First off, the Fed. Federal Reserve Chairman Jay Powell
returns to the hot seat tomorrow when he testifies before the Senate.
We`ll see if he walks back any of his previous comments about the economy
strengthening that spooked equity investors on Tuesday. Right now, the
markets are pricing at about a 90 percent of chance of a March rate hike.

But it`s looking more likely that there will be four hikes this year
instead of three. And that`s got people concerned. But there`s plenty of
other data for the Fed to factor into the equation. The jobs report is
next Friday. It means another update on wage growth along with a handful
of other inflation reports and a first look at first quarter GDP.

Finally, lawmakers in Washington will have their hands full dealing with
another debt ceiling deadline. Government funding is set to expire in the
first half of the new month.

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


MATHISEN: All right. Here to talk about where the market stands and where
she sees stocks heading next is Kristina Hooper, chief global market
strategist at Invesco.

Kristina, Kristina, Kristina, it was a rough month. What`s next?

era, Tyler. This is the beginning of what is likely to be market
conditions that will continue for most of this year if not longer. We`re
seeing monetary policy normalize. And as monetary policy normalizes, so
will market. And this is actually more normal than what we`ve seen in the
past decade.

HERERA: You know, Kristina, it seems to me the market`s uncertainty also
is focused on the new Fed chief. He is not like Fed Chief Yellen was in
terms of his attitude towards the market. And I didn`t get a sense in his
testimony the other day of exactly what his position on monetary policy is.

HOOPER: Well, let`s put it this way. I don`t think he`s the monetary
policy ideology twin of Janet Yellen. And we actually got some insight
into that in January, when the transcripts from the 2012 FOMC meetings were
released. And what it showed was Janet Yellen being very, very supportive
of QE3 while Jerome Powell was much more concerned about the bloating of
the Fed`s balance sheet and really reluctantly agreed to embark on QE3.

So, what we see is some very significant differences already, but markets
didn`t necessarily expect that. And that`s why I think it`s no surprise
that we saw all this volatility this month just as the baton was being
passed from Janet Yellen to Jerome Powell.

MATHISEN: When you used the word earlier, the normalization of monetary
policy, I take that as code or economist-speak for rising interest rates as
the economy regains its footing and its health. But that doesn`t mean that
you can`t continue to make money in stocks, does it?

HOOPER: No, absolutely not. And in fact let me qualify by saying,
normalization in this case isn`t just about rate hikes.


HOOPER: It`s about taking down the balance sheet. And that actually was
the great experiment we`ve been in for the past decade. But having said
all that, while we expect to see more volatility, volatility creates

So, we would expect to see an upward bias to stocks this year but with a
lot more volatility attached.

HERERA: Are there areas of the market that you think still hold value? I
mean, we`ve come down obviously from the lofty levels that we hit at the
end of last year, but do you still find ample opportunity here at home, or
are you looking overseas for your clients?

HOOPER: Both. So at home, technology looks very attractive. And we
should be pleasantly surprised with earnings growth this year as well as
revenue growth. But we also want to look outside the United States because
there are an awful lot of opportunities in emerging market stocks, as well
as developed stocks, particularly in Europe where monetary policy is far
behind where we are in the United States.

And, of course, within the U.S., I can`t say enough good things about
dividends. Many companies are increasing their dividends as part of how
they`re spending the windfall they`ve gotten from the tax cut.

MATHISEN: All right. Kristina, great to see you.

HOOPER: Great to see you.

MATHISEN: Kristina Hooper with Invesco.

HERERA: Meantime, in economic news, economic growth was revised lower for
the fourth quarter. Gross domestic product, which is the broadest measure
of goods and services produced across the U.S., rose 2.5 percent. The
lower reading came as companies drew more from their inventories than
previously estimated, meaning that they had to produce less.

This report along with other recent data points led some economists to
lower their forecasts for first quarter growth.

MATHISEN: Pending home sales fell to a three-year low, primarily because
of a lack of supply, which the National Association of Realtors says is at
crisis levels. The report sent shares of some popular hold builder ETFs
much lower today, and it comes on the cusp of the important spring selling

Here is Diana Olick.


built home or an existing home, buyers purchased fewer of them in January.
A clear sign that while demand is still high, more and more people are
unable to find a home they can afford. Sales of existing homes fell
sharply in January, and index measuring signs contracts, meaning buyers out
shopping and making deals during the month, dropped close to 5 percent
compared to December and about 4 percent compared to a year ago.

Realtors blame a critical supply shortage, especially on the cheaper end of
the market where so much of the demand is.

There is plenty of supply in the new home market. But builders today are
focused on the move-up and luxury sectors, not on the entry level. New
homes in general come at a price premium, and that may be why those sales
fell in January as well. January was when mortgage rates began to rise.
And while they are historically still on the low side, they have been even
lower for so long that any increase is a shock to the system.

payments going higher on top of the fact that home prices continue to
escalate at an unusually high rate, and affordability does become an issue
at least psychologically, if not fundamentally, for a lot of buyers.

OLICK: Home prices are rising far faster than wage growth and inflation.
And the biggest price gains, again, are on the lower end of the market
where demand is strongest.

More new listings will come on the spring market. But they`re unlikely to
come close to meeting demand. Adding to the issue, homeowners are actually
staying in their homes longer than ever before, an average ten years. They
either can`t afford to move or are afraid they won`t be able to find
anything to move to.

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


HERERA: One of the nation`s largest sporting goods retailers is
immediately ending the sale of all assault style rifles. The announcement
by Dick`s is one of the strongest stances yet by corporate America in the
national discussion over guns. Shares of the retailer rose in today`s
trading session and the decision by Dick`s is being attributed to the
decline today in shares of gun makers.

Strum Ruger slid to a near three-year low. Vista outdoor fell 4 percent.
And American Outdoor Brands is near a five-year low.

Brian Sullivan has more.


against assault style weapons took another turn today as national sporting
goods chain Dick`s Sporting Goods (NYSE:DKS), said that it will immediately
stop selling AR-15 style guns, as well as high capacity bullet magazines.

CEO Ed Stack is the son of the founder of the company and head of the
Pittsburgh-based chain. He went on “NBC Nightly News” to explain that he`s
not antigun, but the emotional reaction around the nation to the Parkland,
Florida shooting spurred his decision.

EDWARD STACK, DICK`S SPORTING GOODS CEO: When we look at those kids and we
saw the grief that they were going through, the parents were going through
and how these kids organized to really have their voices heard, we talked
amongst ourselves and said, if these kids can be brave enough to do this,
we should be brave enough to make a stand ourselves.

SULLIVAN: This is not the first time the chain has reacted to a mass
shooting. After the Sandy Hook, Connecticut killings in 2012, Dick`s
suspended sales of assault style weapons.

However, a few months later, it resumed sales of those guns through its
field and stream subsidiary. This time though, the CEO said the change is
permanent. And he didn`t make it just about the industry. Stack also
called on Congress to take action.

STACK: This is a complex issue and we hope that Congress on both sides
will sit down with the intent of finding a solution.

SULLIVAN: Dick`s will continue to sell other types of guns, but is raising
the age to buy them to 21. And this move leaves fewer national retailers
selling assault-style weapons. Walmart stopped selling AR-style guns three
years ago.

Now attention will likely turn to the other major retailers still shocking
their shelves with AR-style weapons, including stores such as Bass Pro
Shops, its Cabela`s unit and Camping World`s Gander Outdoors.

CNBC did reach out to those retailers for comment but has yet to hear back.



MATHISEN: Some of today`s upgrades and downgrades.

Verizon (NYSE:VZ) saw its rating raised from buy to neutral at
MoffettNathanson. That firm says the rewards of tax reform outweigh the
risks of a challenging environment and sites a wireless market that`s
shaping up to be better than previously expected. But shares did fall
fractionally along with the broader market. They closed at $47.74.

Fellow Dow component Chevron (NYSE:CVX) saw its rating raised to buy from
neutral at Bank of America (NYSE:BAC)/Merrill Lynch. The analyst says the
company is in a better position than its international peers. And that
could lead to share buybacks. Price target still at $138. Stock fell
today to $111.92.

HERERA: Comcast`s rating was cut to neutral at Macquarie one day after
that company made a $31 billion bid for Sky. The analyst says that while
adding sky would diversify Comcast`s portfolio, it would also expose the
company to a satellite sector under pressure. The price target is $42.
Shares of Comcast (NASDAQ:CMCSA) (NYSE:CCS) fell 1 percent to $36.21.

Comcast (NASDAQ:CMCSA) (NYSE:CCS) is the parent company of CNBC which
produces this program.

The drug developer Tesoro saw its price target cut by at least nine firms.
Many cited disappointing quarterly results and sales of a key cancer
treatment. A number of firms also expect Tesoro to face increasing
competition. The stock fell 10 percent to $55.23.

Still ahead, why Lowe`s just can`t seem to catch up to rival Home Depot


MATHISEN: Lowe`s quarterly results fell well short of analysts`
expectations. Profit margins squeezed there. The company, a number two
home improvement chain, has been spending a lot of money trying to convert
shopper visits into sales. But that bet did not pay off, though, widening
the gap between what it and industry leader Home Depot (NYSE:HD) have been
able to put up. Shares of Lowe`s fell 6 percent in trading today.

Courtney Reagan digs deeper into Lowe`s quarter.


market sets up home improvement retailers well. But then it`s up to the
retailer to execute. That`s where Lowe`s stumbled in the most recent
quarter. Results were mixed, not as strong as rival Home Depot (NYSE:HD).
Sales to professionals grew at a faster rate than sales to do-it-
yourselfers at Lowe`s. Sales to pros is where rival Home Depot (NYSE:HD)

But Lowe`s gross margin, a measure of profitability, fell compared to last
year. On the earnings call, executives pointed out shortcomings and
customer service and sales staff, in Lowe`s stores, particularly during big
weekends and events. The home improvement retailer is entering the year
with a new plan to improve its business, which includes getting a better
understanding of its shoppers, processing orders more quickly and boosting
its supply chain.

It also has to make sure the right inventory is in stock, so when shoppers
come in, they buy. While Lowe`s management is taking an active role in the
strategy to turn around execution missteps, it may be from the influence of
activist investor D.E. Shaw, which took a stake in the retailer late last

BRIAN NAGEL, OPPENHEIMER ANALYST: It seems as though the activist
investors are already having some type of impact on the company. This may
reflect Lowe`s taking a much more aggressive tact towards investment and
sort of say repositioning its company. Activist intervention with Lowe`s
is long overdue. They`re doing the same thing as Home Depot (NYSE:HD).
They`re just doing it not nearly as well.

And so, if we can get someone in here to help run the company better, that
will be a positive.

REAGAN: While the holiday quarter just closed, for home improvement
retailers, the real holiday quarter is the spring which is just around the
corner. Investors will be looking for any green shoots to see if Lowe`s
new strategy is leading to growth.



HERERA: Sales take off at TJX companies, and that`s where we begin
tonight`s “Market Focus”.

The off-price retailer said more shoppers came into its stores during the
holiday period. And that helped revenue beat expectations. The company
expects to increase its sales and foot traffic in the year ahead. TJX also
raised its quarterly dividend to 39 cents a share and said it would
repurchase up to $3 billion of its shares this year. As a result the stock
rose nearly 7 percent to $82.68.

The women`s clothing company Chico`s reported profits and revenue that beat
street estimates. The owner of the brand White House Black Market did see
same-store sales decline but it was an improvement from the prior quarter
and it was better than what analysts were expecting. The shares climbed 15
percent to $10.04.

Fewer customers made purchases at Office Depot (NYSE:ODP), causing the
office supply company to report a quarterly loss and weaker sales. The
company, which issued disappointing guidance for the year, said working to
grow profits — it is working to grow profits and that 2018 will be its
transition year. The shares fell 9 percent on the day to $2.63.

And the footwear maker Crocs (NASDAQ:CROX) reported a wider than expected
loss and is calling for revenue to be flat this year. The company is in
the process of reducing its store count. And that`s not what investors
wanted to hear. So, they sent the shares down 13 percent to $12.24.

MATHISEN: The FDA has turned down Celgene`s application for its
experimental multiple sclerosis drug, saying it needs more information on
the treatment to even consider approving it. The drug is considered a key
one in Celgene`s pipeline and this latest announcement creates an unclear
timeline of when the medication will be available to patients. And that
caused shares to plummet 9 percent to $87.12.

Bill Ackman`s activist hedge fund Pershing Square Capital reportedly
building a stake in the defense contractor United Technologies (NYSE:UTX).
The stake first reported by CNBC. UT recently said it was exploring a
potential breakup of its business lines. Shares of United Technologies
(NYSE:UTX) up a fraction to $134.74.

Mr. Ackman has also reportedly exited his long position in Herbalife
(NYSE:HLF) five years after he made a $1 billion bet against the supplement
company he called a fraud. He shorted the company. Ackman, according to
CNBC, expected shares of Herbalife (NYSE:HLF) to drop to zero. But instead
shares rose. Now up more than 60 percent over the past year. Shares of
Herbalife (NYSE:HLF) up 6 percent today to $92.10.

And after the bell, Salesforce reported earnings and sales that edged past
expectations. The cloud computing company also gave stronger than expected
guidance for the year and hiked its forecast for fiscal 2019. Shares
volatile in the extended session, but they ended the regular day down 22
cent at $116.25.

HERERA: Oil prices fell today but they are up 14 percent over a one-year
period and they`re expected to keep climbing. And since gas prices closely
follow oil prices, that could cause pain at the pump. So, how high will
they go and what does that mean for households and the economy?

Here to talk about that is Patrick DeHaan. He`s the senior petroleum
analyst at GasBuddy.

Welcome back, Patrick. Nice to have you here.


HERERA: Why are prices moving higher at the pump? Is it seasonal? I
mean, I know we see it in the spring, but is there more to it than that?

DEHAAN: Yes, there really is. Unfortunately, this isn`t just as simple as
baseball season coming. A lot of this has to do with seasonal maintenance
that starts to take place at refineries across the country. And as we
progress towards warmer weather, we`re also transitioning to more expensive
summer gasoline which adds to the cost. So, those two pressures, combined
with oil prices that you mentioned are much higher than they were last year
is kind of creating this foundation for gas prices that will likely be at
their highest seasonal level since 2014, and some places certainly could
get close to that key $3 a gallon threshold.

MATHISEN: But I thought production was higher, Patrick. Is this — the
fact that demand higher too?

DEHAAN: Exactly. So many people have been hearing about U.S. oil
production, which yes, is at its highest level since 1970. But the
takeaway is that while oil production here in the United States is very
high, about 10 million barrels per day, you`ll remember back to 2017 when
OPEC enacted production cuts which have more than offset any rise in U.S.
oil production.

So, we`re at a net loss here and over the last year and a half of those
production cuts from OPEC, U.S. oil inventories have been draining at a
fairly expeditious rate, setting the ground for higher oil prices moving

HERERA: So, what do you think, net/net, the economic impact might be?
Obviously, it`s going to cost consumers more to fill up at the pump. And
certain states like California tend to have very high gas prices anyway.
So, what do you think the economic impact might be?

DEHAAN: It`s going to sting. Gas prices could go up another 25 to 35
cents a gallon by Memorial Day. And, of course, if you talk about the
possible likelihood of an increase in federal gas tax, that could add
another 25 cents. You`re talking about a massive increase in price.

Every penny that gas prices go up, it generally takes $1 billion to $2
billion out of other areas of the economy. So, you really could see a
slowdown in economic growth if gas prices continue to go up.

MATHISEN: And it takes more if you get those kinds of price increases, it
takes more than $1 to $2 a week out of the pockets of American consumers.
Are you banking on the possibility, on the likelihood of a gas tax
increase? I mean, it has been floated as an idea. But the GOP Congress is
not particularly friendly toward any kind of tax increase.

DEHAAN: Yes, this is certainly not the time, now that there is a great
time for any tax increase, but with gas prices now already, without this
tax, being among the highest they`ve been in several years, to pass a gas
tax increase that`s so significant, especially if it were to happen all at
once, really could be political suicide, especially when it could push the
national average above that key $3 a gallon threshold.

HERERA: Patrick, we`ll leave it there. Thanks so much, appreciate of

DEHAAN: My pleasure.

HERERA: Patrick DeHaan with GasBuddy.

Coming up, thieves have a new target. It`s your gift card.


MATHISEN: Washington has become the first state to pass rules governing
the Internet. The bill reinstates protections recently repealed by the
Federal Communications Commission. The measure forbids broadband companies
from blocking or slowing lawful Internet traffic or selling so-called fast
lanes at a premium. Lawmakers in more than 25 states have introduced
similar legislation.

HERERA: Spotify has filed to go public. The world`s largest music
streaming service plans to list on the New York Stock Exchange under the
symbol SPOT. The filing shows the company has more than 70 million paying
customers and nearly 160 million monthly active listeners. That`s as of
the end of last year. But that`s also — it`s also burning through some

MATHISEN: I bet you have used gift cards. They`re easy to use,
particularly when you`re in a pinch, they`re convenient, growing in
popularity. Americans spend nearly, get this, $30 billion a year on them.
And according to the National Retail Federation, that number is growing.

But the cards are also a prime target for hackers. They`re looking to cash
in on all that spending. Criminals have figured out how to use gift card
balances before you or your gift card recipient get the chance.

Andrea Day has more.


OMRI ILUZ, CEO, PERIMETER X: Last year, a billion dollars was stolen out
of gift cards. That`s definitely going to be an increase in the risk this

Omri Iluz, CEO at cybersecurity company Perimeter X, where they`ve been
watching criminals drain billions in gift cards in seconds flat.

ILUZ: You`ve never scratched the numbers, it`s brand-new, and the balance
is already out.

DAY: And he says they don`t need to steal numbers from those gift cards
you see in store racks or the card in your wallet.

ILUZ: What we have seen them do today is taken online gift cards and
manufacture a physical gift card from thin air.

DAY: Here`s how it works. He says hackers unleash an army of bots or a
botnet. They can attack the retailer`s Website or mobile app where you
register the gift card and check the ballot and start guessing numbers.

ILUZ: These attacks are completely automatic and they operate very
quickly. We`ve seen attacks as large as doing 10 million guesses an hour.
The moment you are able to guess a gift card number, extracting the value
out of it is very easy.

DAY: And he says criminals simply add the balance to fake cards and put
them up for sale on the dark web, before your real gift card is even

ILUZ: This is what makes this attack so much more dangerous. As a
consumer, there is not a lot you can do to actually stop these attackers.

DAY: So, what can you do?

ILUZ: Always make sure to know how much money is on your gift card. Most
stores will give you your money back if you tell them that the balance
disappeared. When you check the balance, always do it only on the real
authentic merchant Website.

DAY: But he says even that won`t keep your money safe. According to Iluz,
it`s up to retailers to stop virtual thieves.

ILUZ: We urge merchants to use more complex text lines for the gift cards,
combine numbers and digits, include a PIN number.

DAY: According to the National Retail Federation, some security measures
are already in place.

are actually eliminating the opportunity for individuals to go online and
check their balance and instead are putting in 800 toll-free numbers to

DAY: And Iluz says there are solutions out there retailers can use to have
almost complete protection not just for Websites but for mobile apps too
which are critical to safeguard.



HERERA: Volatile day and a volatile month to close out. The Dow was down
380 points. The Nasdaq was off 57. And the S&P 500 was down 30. For the
month, all the major indexes suffered losses.

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

MATHISEN: Thanks from me as well. I`m Tyler Mathisen. Have a great
evening, everybody. March 1st is tomorrow. February is behind us. We`ll
see you then.


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