Transcript: Nightly Business Report – March 16, 2018

6ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill
Griffeth.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: No place like home. But there
aren`t enough houses on the market to meet demand. So why aren`t builders
building?

Modern medicine. Scientists say they are making headway on what they call
the holy grail of the flu. A universal vaccine.

Going global. Why our market monitor says now is the time to look overseas
for returns.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Friday, March
16th.

Good evening, everyone, welcome. I`m Sue Herera. My partner, Bill
Griffeth, is off tonight.

Stocks closed out the week on a high note. The major indexes all rose as
investors focused on upbeat economic data and looked past some of the trade
concerns that kept them on edge the past few weeks. The Dow Jones
Industrial Average rose 72 points to 24,946. The Nasdaq was up just a
fraction. And S&P 500 added four points.

But for the week, the averages fell 1 percent or more.

Dominic Chu takes a look at the week that was and the week to come.

(BEGIN VIDEOTAPE)

DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Over the course of the
past week, business news headlines ran the gamut, chipping away at a big
takeover deal, more controversy at United Airlines, and no real fun and
games for a big toy retailer.

So, it was going to be the biggest tech merger and acquisition deal ever,
Singapore-based Broadcom`s takeover of San Diego-based competitor Qualcomm
(NASDAQ:QCOM). But it`s not meant to be after President Trump stepped in
and blocked the deal citing national security concerns.

United Airlines is under fire again, this time following the death of a dog
on one of its flights after a flight attendant ordered a passenger to put
her pet carrier in an overhead bin. Comes a year after one of his
passengers was forcibly dragged off of a flight. United Airlines is under
fire again, this time following the

And now, it`s official, Toys “R” us will be shutting down or selling all of
its U.S. stores after it failed to find itself a buyer or reach an
agreement with its creditors about restructuring billions of dollars worth
of debt.

As for what next week will bring, how about the Fed, Nike`s bottom line,
AT&T`s big day in court, and a big tech IPO?

The Federal Reserve convenes on Tuesday and Wednesday to decide on interest
rate policy with newly minted Fed chair Jerome Powell giving his first news
conference tied to a rate decision.

Athletic apparel maker Nike (NYSE:NKE) will report results and will likely
face lot of questions with regard to recent reports about allegations of
inappropriate workplace behavior from key executives.

Telecom giant AT&T (NYSE:T) goes to court to try to win approval of its
proposed takeover of media company Time Warner (NYSE:TWX), the government
is suing to block the deal on antitrust concerns.

And data storage company Dropbox is expected to start trading this week in
what will likely be the biggest tech-related IPO of the year so far.

For NIGHTLY BUSINESS REPORT, I`m Dominic Chu.

(END VIDEOTAPE)

HERERA: Dom just mentioned Nike (NYSE:NKE), where two high-ranking
executives are leaving. Late yesterday, the company said Nike`s brand
president resigned. The resignation came on the same day that the CEO told
employees about complaints of inappropriate workplace behavior. Today, a
second veteran is reportedly leaving in the wake of internal complaints.
Nike (NYSE:NKE) was the worst performing stock on the Dow today.

To the economy now, where consumer sentiment hit its highest level in 14
years. The University of Michigan survey said most respondents were upbeat
about the economy and their personal finances following the tax cuts.
Economists say the advance in confidence could contribute to solid consumer
spending.

The number of job openings hit a record in January, of more than 6 million.
According to the Labor Department, the number of people hired rose and
fewer people quit their jobs. The report suggests that employers are
having a hard time finding workers that they need. The unemployment rate
sits at a 17-year low.

Home builders broke ground on fewer homes than expected last month. And
that is not good news for housing market facing a critical shortage of
homes for sale.

Diana Olick takes a look at what`s keeping builders from building.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Nearly everything that
goes into building a home is getting more expensive — land, labor, and now
materials, thanks to new tariffs on lumber, steel, and aluminum. The price
of framing lumber is up over 40 percent since the start of 2017 and hit a
record high last week. Builders have been up against a shortage of labor
and buildable lots. Now tariffs on steel and aluminum as well as economic
policy all making it even harder to build homes buyers can afford.

GARY BOWMAN, TW PERRY CEO: It`s not just lumber. It`s lumber. It`s
steel. It`s impact fees, it`s permitting delays. It`s, you know, rising
interest rates.

You know, there`s a concern that a lot of these cumulative impact of these
increases will curtail demand at some point. That`s I think the bigger
concern.

OLICK: Higher costs mean builders can`t make enough money building entry-
level homes, the homes that are most in need. Demand is also growing as
millennials reach their home buying years. Add it up and it just equals
higher prices for buyers and more risk for builders and distributor.

BOWMAN: We can digest through moth moderate price increases. But when
they are spiky, you know, we make commitments to our customers. They make
commitments to their homeowners, customers, and when our costs go up and
don`t have a chance to, you know, pass those through, then it damages our
profit margins and our businesses.

OLICK: Single family starts are up, but just 3 percent higher than a year.
To put it all in context, at the peak of the housing boom we were building
nine homes for every 1,000 people aged 18 to 65. At the bottom in `09,
that fell to just over two per 1,000. Now, we are barely back to four. A
normal level is about seven.

And those numbers don`t even take into account all that pent-up demand from
the recession or the millions of homes bought by investors during the
foreclosure crisis and turned into rentals. In other words, builders
aren`t even close to keeping up.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Silver Spring, Maryland.

(END VIDEOTAPE)

HERERA: One of the country`s biggest mortgage lenders is reportedly the
subject of a widening Department of justice investigation. According to
the “Wall Street Journal,” the FBI has interviewed employees at Wells
Fargo`s wealth management business that extends the sales practice probe
beyond the firm`s retail banking unit.

Well, it was ten years ago, Bear Stearns was bailed out. The once storied
Wall Street firm was forced into a shotgun marriage with J.P. Morgan and
nearly $30 billion in assistance to save it from bankruptcy. In the months
prior, the bank had written down bad loans, cut jobs, and looked for
investors.

And as someone who was covering that story, the run on the bank and its
ultimate sale was a remarkable turn of events.

(BEGIN VIDEO CLIP)

HERERA: A stunning day on the stock market. Stocks under severe pressure
earlier this morning after Bear Stearns gets a bail out.

UNIDENTIFIED MALE: It lost its ability to finance itself. And when you
are an investment bank and you are levered significantly, you need to be
able to finance yourself. These things can happen like that.

UNIDENTIFIED FEMALE: The speed at which the firm collapsed, the fire sale
price shocked Wall Street.

UNIDENTIFIED MALE: Attempts to help Bear Stearns has damaged the stock
and, in fact, has damaged confidence overall, particularly in financials.

This is part of the great frustration. You do nothing, the stock goes
down, you try to help it, the stock goes down.

UNIDENTIFIED FEMALE: J.P. Morgan Chase is buying Bear Stearns at a rock
bottom price, $2 a share.

UNIDENTIFIED FEMALE: People at Bear Stearns I have spoken with are stunned
by what happened here.

UNIDENTIFIED FEMALE: One individual told me 17 years I have been saving
for my kids` college education, now I have got to start all over again.

UNIDENTIFIED MALE: Investment banking will never be the same.

(END VIDEO CLIP)

HERERA: And Steve was right. A lot never was the same.

Many financial historians marked that day as the starting point of the
biggest financial crisis since the Great Depression.

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

Netflix (NASDAQ:NFLX) saw its price target raised to 350 a share over at
RBC Capital Market. That firm sees Netflix (NASDAQ:NFLX) growing in Japan,
which can be difficult for western companies to do. The analyst is also
upbeat on the company`s original content. Nonetheless, shares fell
fractionally to $318.45.

Dominion was downgraded to neutral at J.P. Morgan. The analyst cites
uncertainty around Dominion`s funding strategy following a tax ruling by
energy regulators. Price target was cut to $74. Shares of Dominion fell
today to $70.61.

Wayfair saw its rating cut to underperform to neutral over at D.A.
Davidson. That firm cites increased competition in the online retail home
furnishings market. The price target remains at $65. Nonetheless, shares
of Wayfair fell nearly 6 percent to $78.95.

Still ahead, rolling out the welcome mat.

(BEGIN VIDEO CLIP)

SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Puerto Rico is trying
to become the destination for Blockchain and cryptocurrency developers.
Will it succeed as the island recovers from one of the worst hurricanes on
record? That story when NIGHTLY BUSINESS REPORT returns.

(END VIDEO CLIP)

(MUSIC)

HERERA: A city in Upstate New York is the first to ban new bitcoin mining.
Late last night, Plattsburg City Council approved an 18-month moratorium on
new cryptocurrency mining operations. The mining process involves the
heavy use of computer servers, and they use a lot of electricity, which in
turn is raising rates for city residents. Miners have flocked to
Plattsburg because for its proximity to hydroelectric dam and cheap energy
prices.

Meantime, Puerto Rico wants to attract the Blockchain industry to help that
island help fund its economic revival. Blockchain is the technology behind
cryptocurrencies.

Seema Mody is in San Juan.

(BEGIN VIDEOTAPE)

MODY: Puerto Rico was already struggling through a decade-long recession
which pushed the U.S. territory into the largest municipal bankruptcy in
U.S. history when one of the most destructive hurricanes in history made
landfall in September. It`s now been six months after hurricane Maria and
Puerto Rico is desperate to bring business back to the island. And the
government positioning itself as a hub for the rapidly growing Blockchain
industry which has yet to claim a city as its headquarters.

This past week, thousands of crypto and Blockchain developers descended
upon the island to attend three separate industry conferences in the
capital of San Juan. Puerto Rico`s government even hosted a three day
event in conjunction with Blockchain industries, where the secretary of the
Department of Economic Development announced a new advisory council
initiative to help develop and attract Blockchain business to the island?

SEC. MANUEL LABOY, PR, DEPARTMENT OF ECONOMIC DEVELOPMENT: We are
welcoming, you know, with open arms, Blockchain technology for Puerto Rico
because we know there is a huge potential for the island.

MODY: Tax incentives make Puerto Rico an appealing destination,
specifically Act 22, which says if you become a resident of Puerto Rico,
you essentially pay no taxes on long term capital gains. It`s at the main
reason cryptocurrency investors and Blockchain entrepreneurs have moved
down to the island.

JEFF THOMPSON, RED CAT CEO: This is one of the best places to put a start-
up company. The tax incentives are incredible for a start-up. The talent
down here is incredible.

MODY: Thompson decided to make the move to the island in September of 2016
where his drone storage and analytics company utilizes the tax incentive
for his business and himself personally.

But challenges do exist. While over 90 percent of the island`s power has
been restored, many citizens tell us they still deal with power outages on
a weekly basis. A few entrepreneurs also told us that while the government
is receptive to Blockchain, the local banks haven`t been as supportive,
which makes lending and access to credit a challenge.

But some experts say if Puerto Rico can improve its talent pool, the island
will have a better shot at competing with likes of Switzerland, South Korea
and Japan, which are also competing to be the headquarters for the
Blockchain industry.

Seema Mody, NIGHTLY BUSINESS REPORT, San Juan, Puerto Rico.

(END VIDEOTAPE)

HERERA: Tiffany (NYSE:TIF) loses its shine and that`s where we begin
tonight`s “Market Focus”.

The high end jeweler reported disappointing same store sales, citing soft
demand in overseas markets. The company is also forecasting full year
profits largely below expectations as it invests heavily in its turn around
plan. Tiffany (NYSE:TIF) shares fell 5 percent to end the session at
$97.51.

A private equity firm has offered Johnson & Johnson (NYSE:JNJ) more than $2
billion to acquire its diabetes unit. J&J has been considering options for
that business which has suffered from falling sales. The company has until
mid-June to make a decision. J&J shares rose fractionally to $133.68.

The former chairman of Qualcomm (NASDAQ:QCOM) is reportedly trying to take
that company private. Multiple reports say Paul Jacobs, who currently
holds a board seat told the board of his plan and approached companies to
become investors. The deal is considered a long shot, though, for Jacobs
who once ran that company. Qualcomm (NASDAQ:QCOM) was recently the target
of a hostile takeover by Broadcom (NASDAQ:BRCM). The shares rose 1 percent
to $60.62.

Investors had their first chance to react to overstock`s quarterly results,
which the company described as, quote, terrible. The company reported a
loss and a drop in sales. It also warned that the previously disclosed SEC
probe tied to its upcoming crypto coin offering could hurt its performance.
The shares were off 5 percent to $45.70.

Our market monitor tonight is looking to the global economy for his returns
and he`s recommending three ETFs. This is his first time on the program.

So, we welcome Scott Kubie. He is the chief investment officer at the
Carson Group.

Welcome, Scott. Nice to have you here.

SCOTT KUBIE, CARSON GROUP CHIEF INVESTMENT OFFICER: Thanks, Sue. Glad to
be here.

HERERA: So, you see the global growth picture as perhaps more compelling
or equally as compelling as the U.S.?

KUBIE: Yes, I think we`ve seen an upswing globally, not just in the U.S.
but Europe, which had great growth last year. We also saw Brazil come out
of recession, strong emerging market growth out of China, solid growth in
India. And Japan put out pretty good numbers for Japan as well. So, it`s
been a real surge. And we think that`s going to adjust the opportunity and
set the investment landscape quite a bit.

HERERA: All right. So, let`s start with your first pick. They`re all
three are ETFs.

The Power Shares International Buyback Achievers — why do you like that?

KUBIE: You know, this is probably the most interesting, one of the three
and that it focuses on international markets directly. International
markets are cheaper than U.S. So, we like that right off the bat, but we
also realize that international stocks aren`t quite as shareholder-friendly
as they are in the U.S. So, we want to focus on those that are.

And one of the ways so they can more friendly is buying back their shares.
So, we zero in on those types of countries. Interest rates are lower
overseas than they are in the U.S. the cost to buy back shares is actually
quite a bit lower.

And we saw the same strategy work very well in the U.S. a number of years
ago. We think it translates well overseas right now.

HERERA: All right. The next one is the iShares EDGE MSCI (NYSE:MSCI)
Value Factors ETF. Tell me about that.

KUBIE: Yes, as the economic recovery starts to broaden, we just see that
the number of companies that will benefit from it will widen. This market
has really been characterized by a narrow set of growth companies doing
extremely well.

But as growth kicks in we see more companies are going to do well and we
want to revalue stocks. We think they will have a solid rebound after
years of growth and performance. One of the biggest changes in values is
do you want to have a big sector that could have been comes with value.

So, this ETF is sector neutral and it`s going to have the same amount of
technology as the overall index.

HERERA: OK.

KUBIE: The same amount in staples. And we like that mixture of
emphasizing the cheapest stock but being balanced across every sector
that`s out there.

HERERA: All right. Let`s wrap it up with the Fidelity MSCI (NYSE:MSCI)
Financials ETF. Why do you like that?

KUBIE: Yes, I think financials have really suffered through the recovery.
They haven`t done as welcoming out of that financial crisis which you
referenced earlier over the last ten years. And so, we see some big
opportunities in this space. We see some specific benefits from overall
global economic growth kicking in.

One of them is loan growth has been really, really slow during this
recovery. And so, we see an opportunity for that to kick up. And also see
the fact that long term interest rates should rise. And so, we should see
banks being able to earn more on the loans that we`re making. We really
that financials and those loans will likely be paid off as long as growth
continues to stay strong.

So, this seems to be a sweet spot for financials to take advantage of the
global economic growth and really be benefit shareholders.

HERERA: OK.

Scott, thank you.

KUBIE: Thank you.

HERERA: Scott Kubie with the Carson Group.

You can read more about his picks on our Website at NBR.com.

Well, thank goodness the peak flu season is behind us, but it`s not quite
over yet. This one has been especially severe. But there are maybe some
positive developments when it comes to creating a universal flu vaccine.

Meg Tirrell has our latest story on modern medicine.

(BEGIN VIDEOTAPE)

MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: Every year, the flu
takes a major toll, causing millions to get sick, hospitalizing hundreds of
thousands of people, and leading to tens of thousands of deaths in the U.S.
alone. This despite the availability of a flu vaccine.

DR. ANTHONY FAUCI, NIAID DIRECTOR: Of all the vaccines that we have
developed over the years, influenza vaccine can use a lot of improvement.

TIRRELL: Vaccines for other diseases like yellow fever, measles and polio
are more than 95 percent effective at preventing infection. The flu
vaccine, about 40 percent on average since 2005, but it is effectiveness
varies widely season to season, with essential estimates of this year`s flu
shot at about 36 percent.

That`s because the part of the flu virus targeted by the seasonal vaccine
changes each year. So, efforts are underway to develop a so call universal
flu vaccine, one that would work no matter what strain of flu is
circulating and be durable for multiple seasons.

Dr. Peter Palese`s group at Mount Sinai Icahn School of Medicine is among
those working on such a vaccines, what those in the field refer to as
influenza`s Holy Grail.

DR. PETER PALESE, ICAHN SCHOOL OF MEDICINE: A universal influenza virus
vaccine is one which would last lifetime hopefully, but at least we hope it
works for 20 years or even longer.

TIRRELL: Only recently have discoveries about the flu virus and new
technologies enable the work on the universal flu vaccine to accelerate.

FAUCI: We only realized ten or more years ago that there was a part of the
virus that doesn`t change from season to season. Once we recognized that,
the real problem and the stumbling block is how do you get the body to
preferentially make a response against that molecule?

TIRRELL: Palese`s team funded in part by the National Institute of Health
has one approach.

PALESE: We are building the virus in the laboratory a new one, which isn`t
out there and we make from there the vaccine.

TIRRELL: The new virus is meant to stimulate an immune response that will
protect from the flu from season to season. The experimental vaccine is
now being tested in the earliest phases of human clinical trials funded by
GlaxoSmithKline and the Gates Foundation. Work on the universal flu
vaccine is also underway at Johnson & Johnson (NYSE:JNJ) and Sanofi
Pasteur, as well as that smaller private companies. Initial results from
Dr. Palese`s trials are expected within a year. Then more testing will be
needed before it can reach the market.

PALESE: We are talking about years, but we are not talking about decades.

TIRRELL: Until then, public health officials still recommend a seasonal
flu shot. For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell.

(END VIDEOTAPE)

HERERA: Coming up, the great space race.

(BEGIN VIDEO CLIP)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: I`m Morgan Brennan,
inside a future spaceship. Meet star liner, this is Boeing`s capsule that
could by year`s end be carrying American astronauts into space. We`ve got
this story from here at the Kennedy Space center coming up on NIGHTLY
BUSINESS REPORT.

(END VIDEO CLIP)

HERERA: The race is on to get humans into space from U.S. soil. Something
that hasn`t happened since the space shuttle program ended. Both Boeing
(NYSE:BA) and SpaceX are leading the charge.

And Morgan Brennan got a closer look at Boeing`s operations at the Kennedy
Space Center in Florida.

(BEGIN VIDEOTAPE)

BRENNAN: Meet Starliner, a Boeing (NYSE:BA) spacecraft that`s been years
in the making. If all goes according to plan, before the year`s out, it
will carry astronauts to space. It would mark a major milestone. The U.S.
lost the ability to launch astronauts from U.S. soil when the space shuttle
program ended seven years ago.

UNIDENTIFIED MALE: Liftoff of the Soyuz rocket.

BRENNAN: Instead, we`ve been relying on the Russians to do it for us.
President Trump has talked about going to the moon and Mars.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: It marks an important step
in returning American astronauts to the moon.

BRENNAN: But the new space race really starts here, with NASA`s commercial
crew program.

JOHN MULHOLLAND, STARLINER PROGRAM MANAGER: Every other NASA human space
flight program has been cost-plus and the responsibility of the contractor
was to deliver the transportation platform to NASA for their use.

On commercial crew, it`s more of a rental car model where we retain the
asset and they take it just for their use in that particular mission.

BRENNAN: John Mulholland would know since Starliner`s program manager used
to work on the shuttle. Starliner is one of two spacecraft, the other is
SpaceX`s Dragon capsule being produced for manned missions to the
International Space Station.

Boeing (NYSE:BA) is building three, all of which will soon be leaving the
factory ahead of major tests. The crew module will be able to fit seven
people and reflown up to 10 times. The first manned flight is scheduled
for November, from Kennedy Space Center.

Astronauts are already doing evacuation drills.

TONY TALIANCICH, ULA DIR. & GM LAUNCH OPERATIONS: Yes, it`s really
exciting. We have the emergency escape system installed. We`ve actually
checked it out with the astronauts in full space suits, ready to support
any operation that`s occurring up on the tower.

BRENNAN: United Launch Alliance, the rocket company jointly owned by
Boeing (NYSE:BA) and Lockheed Martin (NYSE:LMT) will handle the launches.

Here, 17 stories up on the launch pad, this is the white room, quite
literally the last stop on earth for astronauts before they enter Boeing`s
Starliner and head to space. Boeing`s contract with NASA is a little more
than $4 billion, but it`s what comes after that could generate the biggest
business.

TALIANCICH: Commercial aviation is government sponsored foundation and
need for strategic need. It`s slowly evolved into a commercial market but
only for high wealth individuals. And now, we are at the point of the
market where we have a 737 take off and land about every two seconds. And
we can see the growth in the commercial space flight market paralleling
that.

BRENNAN: For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan at the Kennedy
Space Center in Florida.

(END VIDEOTAPE)

HERERA: And to read more about the race to launch the next generation of
human space flight, head to our Website, NBR.com.

Before we go, here`s a look at how the day on Wall Street ended up. The
Dow rose 72 points. The Nasdaq was up a fraction. The S&P 500 added four
points. But for the week the averages fell 1 percent or more.

That will do it for NIGHTLY BUSINESS REPORT tonight. I`m Sue Herera. We
want to remind you, this is the time of year your public television station
seeks your support. Thank you. Have a great weekend. See you Monday.

END

Nightly Business Report transcripts and video are available on-line post
broadcast at http://nbr.com. The program is transcribed by ASC Services II
Media, LLC. Updates may be posted at a later date. The views of our guests
and commentators are their own and do not necessarily represent the views
of Nightly Business Report, or CNBC, Inc. Information presented on Nightly
Business Report is not and should not be considered as investment advice.
(c) 2018 CNBC, Inc.

 

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