Transcript: Nightly Business Report – March 1, 2018

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR:  In like a lion.  Stocks fall
sharply on this first trading day of March, as the White House promises
steep tariffs on steel and aluminum, sparking fears of a trade war.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR:  Round two.  The Fed chief
back on Capitol Hill today.  A new tone, though.  The economy is not
overheating.

HERERA:  Tapping the brakes.  Auto sales slow, but few in the industry
appear worried.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
March 1st.

MATHISEN:  Good evening, everyone, and welcome.

It is hard to overstate just how much Wall Street had its eyes on
Washington today.  And today, Washington made Wall Street blink, hard.
Stocks tanked after the president said he plans to impose Steve tariffs of
25 percent on steel imports and 10 percent on aluminum, across the board.
The announcement caught investors off guard and raised concerns about
retaliation from some of our major trading partners.  Such a move, experts
say, could ripple through the economy, and affect the number of sectors,
given that the U.S. is the world`s largest steel importer.

And that is why stocks took such a tumble.  The Dow industrials shed 420
points to 24,680.  The Nasdaq off 92.  The S&P 500 fell 36.  Steel stocks,
though, went in the opposite direction, rising on the idea that tariffs
could be put in place.

Kayla Tausche is in Washington tonight.

(BEGIN VIDEOTAPE)

KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT:  President Trump told
steel and aluminum executives he`s made up his mind to slap tariffs on
imports.  Trump says that`s the way to end years of unfair trade practices.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES:  So, we`re bringing it back
and we`re going to bring it back relatively rapidly.

TAUSCHE:  The president`s decision clashed with some of his top aides and
GOP lawmakers.  They`re concerned about higher prices of goods made from
those products.  Everything from beverages in aluminum cans to farm
equipment to cars and trucks.

But Century Aluminum (NASDAQ:CENX) CEO Michael Bless says concerns of
higher prices are overblown.

MICHAEL BLESS, CENTURY ALUMINUM CEO:  If the worst case happened, unlikely,
history says it won`t, but if it did, and that whole tariff got translated
into the price of that motor car, $37.

TAUSCHE:  Auto executives scoff at that claim and free trade advocates say
tariffs would be a drag on the economy.

RUFUS YERKA, NATIONAL FOREIGN TRADE COUNCIL:  Historically, when we`ve
protected these industries with high tariffs or high restrictions, we find
that it ends up losing more jobs than it produces.

TAUSCHE:  The news was not well received outside the U.S.  The World Trade
Organization said the levies broke its rules and European allies as well as
China have considered retaliating on products like bourbon, motorcycles,
and grains and soybeans.

YERKA:  This is certainly a huge intensification of trade conflicts.  It
reverses, really, 70 years of the U.S. trying to open markets around the
world.

TAUSCHE:  The president is expected to sign the tariffs next week.  There
is still work to be done.  And that means uncertainty, in the meantime, and
potential pressure for a change of heart.

For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche in Washington.

(END VIDEOTAPE)

HERERA:  The other big story today was also out of Washington.  Fed Chair
Jerome Powell was back on Capitol Hill, testifying on the economy, just
days after suggesting that a strengthening economy could lead to more
interest rate increases than expected this year.  But today, his comments
appeared much more measured.

Steve Liesman has the details.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  On the second day of
his testimony, Fed Chairman Jerome Powell struck a more dovish tone.  While
he warned on day one that the economy could overheat, on day said, there`s
actually no evidence that it`s overheating.  And while the market worries
about wage inflation, Powell seems less concerned, at least for now.

JEROME POWELL, FEDERAL RESERVE CHAIRMAN:  We see wages by a couple of
measures trending up a little bit, but most of them continuing to grow at
about 2.5 percent.  So, nothing in that suggests to me that wage inflation
is at a point of acceleration.  And so, I would expect that some continued
strengthening in the labor market can take place without causing inflation.

LIESMAN:  Powell stuck to his generally upbeat view on the economy and the
tax cuts.  He suggested they will help spur economic growth and capital
spending along with productivity and maybe even wage growth.  But the new
Fed chairman in his first congressional testimony followed his predecessors
in warning about big deficits.  He said the fiscal path to the United
States is unsustainable.

And Powell weighed in delicately on the critical issue of trade, tariffs,
and protectionism.

POWELL:  I think the record is clear that over long periods of time, for
many, many countries, trade is a net positive, it spreads productivity.  It
forces our companies to compete.  The tariff approach is not the best
approach.  The best approach is to deal directly with the people who were
affected rather than falling back on tariffs.

LIESMAN:  Next major stop for Powell?  The March 30th Fed meeting, his
first as chairman, will perhaps rise interest rates by a quarter point and
perhaps provide clarity on where rates go from here.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

MATHISEN:  And let`s turn now to our two guests for more on the markets and
the economy in light of this news today.  Art Hogan is chief investment
strategist with B. Riley FBR, and Joe Brusuelas, chief economist with RSM.

Mr. Brusuelas, welcome.  Good to see you.  And, Art, you as well.

Let me ask a simple question, Joe.  From an economic perspective, are these
tariffs a good idea?

JOE BRUSUELAS, RSM CHIEF ECONOMIST:  No, they`re not.  They`re one small
step towards a trade war and one giant step backwards for the U.S. economy.
If these are fully implemented at the levels Mr. Trump is suggesting,
you`re going to see job losses, higher prices, and disruption of critical
supply and value chains that both we and our major trade partners in NAFTA
rely upon.

While I`m definitely concerned with what`s said today, I`m much more
concerned with the larger spillover in terms of how the policy is designed
and whether it`s broad or narrow.  And if it hits Canada or Mexico.

HERERA:  Right.  And, Art, I think you share some of those same concerns,
do you not?  Specifically how it relates to the North American Free Trade
Agreement or NAFTA?

ART HOGAN, B. RILEY FBR CHIEF INVESTMENT STRATEGIST:  Yes, I think the
biggest concern I have going into 2018 is the successful renegotiation of
NAFTA.  It hasn`t been easy.  There`s been a lot of bumps in the road.
We`re continuing the process.

These tariffs could blow that up.  We could absolutely destroy the ability
to get this negotiated, especially if the tariffs are broad-ranging and
adversely affect our two most important trade partners, which are Canada
and Mexico.  So, you know, unfortunately, this is a small step, but it`s
really the beginning of something much larger, especially if it adversely
affects our ability to stay in NAFTA.

MATHISEN:  So, Joe, you mentioned the possible impact on trade with Canada
and Mexico.  Canada is the number one steel exporter to the United States.
Mexico is number four.  And in what the president said today, my sense was
that there was not going to be any exception for any steel exporter to the
United States.  So, it will hit Canada and Mexico.

BRUSUELAS:  Well, that`s right.  Canada and Mexico account for 36 percent
of our overall market.  The way they talk about it, though, it looks like
they`re targeting China.  China has only captured about 3.3 percent of our
market.  We really only import about 200,000 tons of metric steel per year.

So, I`m hoping the Trump administration reconsiders the broadness of the
way they`ve shaped the policy, at least in the early phases.  I do not see
any economic or financial logic to any of this.  This looks to have more to
do with Mr. Trump`s own interests than it does with U.S. policy.

MATHISEN:  So let me follow up, any might there, and, Sue, indulge me.

HERERA:  Yes.

MATHISEN:  People in the steel and aluminum industries make a very strong
and anguished case that they have been victimized by unfair competition
from lots of countries, including China, which as you point out, is a
small, direct exporter to the United States.  But in a conversation we had
earlier today with the former head of Nucor (NYSE:NUE), he said, that is a
masquerade, because a lot of that Chinese product is coming in through
other countries.

What about the legitimacy of the steel and aluminum industries who make a
very impassioned case on this?

BRUSUELAS:  OK, so there`s three things here.  Just real quick.

First is, they`re using national security as a fig leaf.  That`s simply not
the case.  We only absorb 9 percent — or excuse me, less than 1 percent of
Chinese overall exports, OK?

Two, Nucor (NYSE:NUE), AK Aluminum, AK Steel, ArcelorMittal (NYSE:MT), what
they`re doing is they`re asking for protection, right?  They want
protection from foreign markets, because they`re not competitive.  And what
they`re asking essentially American consumers to do is to accept higher
prices in terms of autos, aerospace products, and overall transportation.
They`re asking to be favored over GM and Boeing (NYSE:BA), which, you know,
if you take a look at our economy, that`s simply not — that`s a simple
non-starter from the get-go.

The third thing here is that I think is really, really important, OK, that
these companies as currently constituted simply are not competitive on a
global basis.  And they do not deserve the protection.

HERERA:  Art, let me turn you to the market and what this all portends for
the market going forward, because we saw a fairly vehement reaction in the
market this afternoon.  And there is some talk in Washington that these
tariffs or the suggestion of them might be expanded.

What does all of this rhetoric out of Washington and possible significant
action out of Washington mean for Wall Street?

HOGAN:  Well, Sue, that`s a great question.  And we should take it one step
at a time.

So, obviously, tariffs in and of themselves are a tax and they`re
inflationary.  So, one of our biggest concerns is rising inflation and what
would that mean for interest rates and monetary policy.

So, if you combine all the things we`re concerned about, rising a interest
rates, rising inflation, an aggressive Fed, all of that spells trouble for
the markets and spells trouble for the economy.  So, I think this is the
exact wrong move at the exact wrong time to exacerbate concerns we have
with this market to begin with.  I think the best thing to do on trade is
posture like we`ve been doing, trying to get better deals, negotiate better
deals, but not try to support an industry that employs by a factor of 100
times fewer employees than people that use the raw material that they`re
producing.

So, I think you ought to favor the people that are steel users, not the
people that are steel producers, because there`s a hundred times more jobs
created that way.

MATHISEN:  Very interesting conversation, gentlemen.  We shall see what
happens.  Art Hogan with B. Riley FBR and Joe Brusuelas with RSM.  Thank
you, guys.

HERERA:  Well, ExxonMobil (NYSE:XOM) says the implementation of tariffs on
import steel could impact the proposed expansion of an oil refinery.
According to “Reuters”, the nation`s largest oil producer, has been
weighing adding new capacity to a large Texas plant, but a final decision
has not been made.

MATHISEN:  And add automakers to the list of industries objecting to the
president`s call for tariffs on aluminum and steel.  One major auto trade
group said that taxes would raise the cost of vehicles and hurt the
competitiveness of U.S. automakers.  And that could depress sales even
before taking possible international retaliation into account.  Shares of
the automakers skidded lower today as you see there by close to 3 percent
or even more.

And the news — worries comes just as the industry reported a slowdown in
sales for February.  But there is one trend that is not slowing down.
Buyers continue to shift out of cars and into crossovers and SUVs and
pickups.

Phil LeBeau has the details.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Walk into a showroom
these days and it seems like buyers are only looking to drive away with a
bigger model, like a crossover or an SUV.  Last month, Jeep sales jumped 12
percent.  At Nissan, sales of crossovers, trucks, and SUVs climbed almost
10 percent.

The move into higher priced and more profitable SUVs and pickups is one
reason few in the industry are worried about overall sales edging lower.
With GM, Ford, and Fiat Chrysler all seeing a drop in business last month.

MICHELLE KREBS, AUTOTRADER.COM:  The pie is shrinking.  We`re in an off-
peak era, and so, everybody is vying for a piece of the pie.  We`re seeing
a lot of incentives around trying to keep loyal customers, as well as
conquesting the competitors.

LEBEAU:  General Motors (NYSE:GM) hopes to meet the growing demand for
pickup trucks with a redesigned GMC Sierra Denali, that will hit showrooms
later this year.  While pickups continue to be in demand, the hottest
market is with crossovers and SUVs.  They now make up 40 percent of all
vehicles bought in the U.S., partially because there`s now a slew of new
models to choose from, but also because they are more fuel efficient than
SUVs and crossovers in the past.

Still, with gas prices expected to rise this spring and summer, we could
see prices at the pump reach their highest level in years.  That may
finally prompt Americans to finally hit the brakes on their growing
appetite for larger vehicles.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

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

Wendy`s saw its ratings raised from neutral from sell at UBS.  The analyst
cites better sales trend and an attractive valuation.  The price target was
increased to $17.  The shares rose fractionally to $15.98.

Macy`s (NYSE:M) saw its rating lifted to buy from hold at Gordon Haskett.
The firm expects improved sales over the next couple of years.  The call
comes just days after the department saw a reported better-than-expected
earnings.  The price target was raised to $36.  The stock fell half of 1
percent to $29.25.

MATHISEN:  Croc`s rating was lifted to overweight at Piper Jaffray.  The
rating upgrade follows its most recent earnings look and a disappointing
outlook.  The target price was increased to $15 a share.  Croc stock, I
love saying that, Croc stock was up 5 percent to $12.92.

The industrial company Eaton (NYSE:ETN) saw its rating lifted from neutral
to underweight at J.P. Morgan.  The analyst there says the risks and
rewards are more evenly balanced headed into the analysts meeting.  The
price target, $82.  The stock, though, down more than 1 percent to $79.59.

HERERA:  And still ahead, why share buybacks have surged over the past few
months.

(MUSIC)

HERERA:  A new development in a story that we`ve been following for you.
Georgia lawmakers overwhelmingly approved a sweeping tax bill that was
stripped of a provision that would have benefited delta and other airlines.
That provision would have eliminated sales tax on jet fuel, saving the
companies millions.  This comes just days after the state`s lieutenant
governor threatened to punish Delta for cutting its ties with the NRA.

MATHISEN:  Walmart taking steps to limit its firearm sales.  The world`s
largest retailer and biggest overall gun seller will no longer sell any gun
to anyone under the age of 21.  It will also halt sales of items resembling
sexual assault weapons, including toys and air guns.  Separately, a Kroger
(NYSE:KR)-owned Fred Meyer will ban gun sales to anyone under 21.  Kroger
(NYSE:KR) and Walmart both said that the tragic events in Parkland,
Florida, led them to take a look at their policies for firearm sales.  The
decision by both retailers follows a similar move by Dick`s Sporting Goods
(NYSE:DKS).

HERERA:  AB InBev is raising a glass and that is where we begin tonight`s
“Market Focus”.

The world`s largest beer company said improved performance in Brazil, one
of its key markets, helped that company grow profits at a faster clip than
analysts were expecting.  The company expects sales and profits to remain
strong this year.  AB InBev, which uses aluminum in its products, also said
the Trump administration`s plan to slap tariffs on aluminum could hurt the
beer industry.  Shares rose 3 percent to $109.45.

Sotheby`s said higher private sales helped total revenue and profits rise.
The auction house expects its performance this year to be strong.
Sotheby`s shares finished up nearly 10 percent to $50.78.

Best Buy (NYSE:BBY) said improved inventory management led to stronger-
than-expected sales and profits during the holiday period.  The electronics
company said the majority of its sales came from purchases of mobile
phones, gaming devices, and appliances.  The shares rose nearly 4 percent
to $75.30.

MATHISEN:  The cable channel company AMC Network said a drop in advertising
revenue caused sales to slip and miss estimates.  The company did, though,
top profit expectations.  Those results were helped by the new tax law.
Shares of AMC Networks, though, off nearly 4 percent on the session at
50.51.

Kohl`s (NYSE:KSS) reported better than expected same-store sales, but said
it figures growth to slow this year.  The company missed analyst profit
expectations and it is forecasting earnings for the current quarter to come
in below estimates.  Kohl`s (NYSE:KSS) shares off 5 percent to $62.75.

And after the bell, Nordstrom`s said more customers made more purchases
online in the holiday quarter, helping same-store sales top expectations.
Investors and analysts focused on the retailer`s total profit and revenue,
both below expectations.  Nordstrom`s shares initially fell in the extended
session.  They ended the regular day down more than 1 percent at $50.48.

Also out after the bell, American Outdoor Brands.  It said sales fell in
the latest quarter as a result of what it called challenging market
conditions.  The gun maker, previously known as Smith & Wesson, said it
expects demand to weaken.  The company gave a downbeat profit outlook, said
sales for the year could remain flat.  Shares initially plunged in the
extended extension as you see on that graphic.  They ended the regular day
up 4.5 percent at $9.41.

HERERA:  You may have noticed that big U.S. companies are aggressively
buying back their shares.  According to the “Wall Street Journal,”
companies have announced more than $200 billion of share buybacks in just
the past three months.  That`s thanks to the corporate tax cuts.  And this
has created a boon and is raising some questions about how those savings
are being used.

Akane Otani wrote about it for the “Wall Street Journal”.  She joins us now
with some more details.

Akane, welcome.  Nice to have you here.

AKANE OTANI, WALL STREET JOURNAL REPORTER:  Thanks for having me.

HERERA:  Put this in perspective.  I mean, we`ve been tracking this for a
while.  And it does seem abnormally high.  Is that, indeed, the case?  This
number of buybacks?

OTANI:  Yes, I mean, already putting it into perspective from — compared
to last year, we`re seeing the amount of buybacks that have been announced
in this period is more than double what we saw over the same period in
2017, and S&P Dow Jones indices, which also has been tracking buybacks for
a couple of decades now, estimates that it could actually turn out to be a
record year for buyback authorizations.

MATHISEN:  Who`s doing these buybacks?  Is it the companies that are
bringing capital back from overseas under the tax provisions that give them
an advantage for doing that?  Or is it just every company?

OTANI:  Yes, we`ve so far heard from a number of large companies across
industries.  Cisco (NASDAQ:CSCO) is one of the biggest, has authorized one
of the biggest buyback programs so far this year, as well as Alphabet and
Wells Fargo (NYSE:WFC).  So, we`re seeing it across industries and it
really seems to be when you listen to the earnings calls, about the tax
overhaul, about the fact that there is now an incentive to bring back some
of that overseas cash to the U.S.

HERERA:  Will shareholders ever reap the benefit of all of this?

OTANI:  I think that`s where the debate lies.  I think some people would
argue that shareholders are actually going to be one of the bigger
beneficiaries of the tax overhaul, as a result of a jump in buybacks,
whereas people who are hoping may be this would trickle down into the
economy, this would result in higher wages might be left a little bit
disappointed.  That`s really where the debate has been lying.

HERERA:  Yes, and it does point to the idea that when you bring back this
money, if it goes back into buybacks, that is a tacit acknowledgement on
the part of the company that they don`t have any better investment use for
those dollars than to buy back their own stock.  They`re not going to build
new plants with that money then.

OTANI:  Yes.  And I think you`ve realized that companies have been somewhat
perceptive of this argument.  We heard Amgen (NASDAQ:AMGN) on their
earnings call saying that this was by no means them ignoring the health of
their workers, but rather, they were going to be investing in their
workers, as well as in their buyback program.  So certainly, it`s something
that companies are sensitive to, I think, especially with folks in
Washington sort of debating right now, the efficacy of buyback programs.

HERERA:  There`s more to this story to come, I`m sure.

Akane, thank you so much for joining us.

OTANI:  Thanks for having me.

HERERA:  Akane Otani with “The Wall Street Journal”.

MATHISEN:  And coming up, a new concern for Mexico`s tourism industry.
Just ahead, spring break.

(BEGIN VIDEO CLIP)

CONTESSA BREWER, NIGHTLY BUSINESS REPORT CORRESPONDENT:  It looks beautiful
with rugged terrain and children walking along the sand.  But there is
murder and mayhem in Mexico.  I`m Contessa Brewer in Cabo San Lucas.
Ahead, what the business community here is doing to stop cartel violence
ahead of spring break.

(END VIDEO CLIP)

(MUSIC)

HERERA:  Nearly 2.5 million more Americans were impacted by the data breach
at Equifax (NYSE:EFX).  The company says had less information stolen, just
their names and a partial driver`s license number.  The original 145
million Americans had their social security numbers exposed.  But
nonetheless, this remains the largest breach of personal information in
history.

MATHISEN:  Mexican beach resorts on both coasts are hot destinations for
spring break, but over the past year, something ominous has been happening.
A drug cartel violence has been on the rise.  In Cancun and Cabo, murders
have skyrocketed, crime has risen.

What`s the tourism business doing now to keep vacationers coming back?

Contessa Brewer is in Cabo San Lucas.

(BEGIN VIDEOTAPE)

BREWER:  Last year in Los Cabos, there were some 300 murders, a nearly 500
percent jump from the previous year.  The drug cartels fighting over turf
are to blame here.  But you`re talking about public executions on a beach,
bodies hanging from a bridge, and a gunfight in a hotel.

CHERYL RUMBERGER, CABO TOURIST:  My first trip here was 1978.

BREWER:  Cheryl Rumberger (ph) loves Cabo San Lucas.  She along with 2
million other yearly international tourists come here for the rugged beauty
and the wildlife, the surfing and other water sports, and a high level of
service and luxury.

Were you surprised to hear that cartel violence was a factor at all here?

RUMBERGER:  Absolutely.  Yes, because it scares me to death anyway.  With
what`s been going on in the last year, as you all know, it was a factor.
It was, but not enough to keep us away.

BREWER:  Ninety percent of the economy here is dependent on tourism.  A
billion dollars in new hotel investments, 3,500 more rooms are scheduled to
come online in the next couple of years.  So when visits dropped 2 percent
in August and group bookings canceled 35,000 rooms, it grabbed the
attention of business leaders.

RODRIGO ESPONDA, LOS CABOS TOURISM BOARD:  We face some challenges that we
have never faced before.  But the important thing is that we — how we
react.

BREWER:  Business leaders partnered with the government and committed $7
million or more of private investment to fund public security.  They came
up with a five-point action plan.  A rapid response network for reporting
suspicious activity, enhanced surveillance with 200 new cameras along
highways and tourist areas, a new marine base opens in August.  A hotel
security committee meets bi-weekly.  And U.S. standards by the Overseas
Security Advisory Council have been implemented.

CARLOS VAZQUES, SOLMAR GROUP VP OF SALES:  We want a full presence of the
navy with the marina, which is the armada in Mexico, because that brings
stability, that brings intelligence.

BREWER:  Hundreds of federal police are now patrolling the area, as well.

RICK O`DELL, CABO TOURIST:  We feel very safe here.  Love the Mexican
people.  Everyone`s been super nice to us.  And like my wife said, there`s
a heavy security presence.  So we feel very comfortable here.

BREWER:  So when Rita Peet was considering another vacation to Cabo with
her sister, she didn`t hesitate.

RITA PEET, CABO TOURIST:  I feel safe here.  And you know, I know tourism
is this community`s life.  That`s how they survive.  And so they are going
to keep you as safe as they can.

BREWER:  Despite the spike in violent crime last year, there was also an
increase in international visitors to Cabo, up 16 percent over the previous
year and most of those coming from the United States.  The State Department
has issued travel advisories for the spring break destinations of Cancun
and Cabo.

In Cabo San Lucas, Contessa Brewer, NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

HERERA:  Before we go, here`s another look at today`s market sell-off,
driven by the threat of steep tariffs on steel and aluminum imports.  The
Dow shed 420 points to 24,608.  The Nasdaq was off 92.  The S&P 500 fell
36.

Fasten those seat belts.

MATHISEN:  Yes.

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

MATHISEN:  And I`m Tyler Mathisen.  Thanks from me as well.  Have a great
evening, everybody.  We hope to see you right back here tomorrow night.

END

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