Transcript: Nightly Business Report – March 5, 2018

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Bounce back. Stocks start the
week with a 300-point rally, even as trade remains a big unknown for the
market.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Our country on trade has
been ripped off by virtually every country in the world.

(END VIDEO CLIP)

HERERA: Not backing down. The president pushes his plan to impose steep
tariffs on steel and aluminum, breaking with members of his own party and
clouding negotiations to rework NAFTA.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Protect your retirement.
A 401(k) checklist for a volatile market.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Monday, March
5th.

Good evening, everyone, and welcome.

And it was a rally to start the week. Stocks picked up steam midday, as
investors focused on the economy and a solid report on the U.S. services
sector. Concerns over trade — well, they may have eased just a bit today,
after House Speaker Paul Ryan urged the president to reconsider tariffs on
steel and aluminum and the head of the world`s largest hedge fund called
the threat of a trade war a political show.

Whatever the reason, the major averages rose more than 1 percent on the
session. The Dow Jones Industrials advanced 336 points to 24,874, Nasdaq
up 72, and the S&P 500 gained 29.

HERERA: Even though concerns over tariffs eased a bit today, many market
watchers consider it a big unknown. And that was evident during the
negotiations to rework the North American Free Trade Agreement or NAFTA.

They were going on in Mexico City, and that is where Steve Liesman is for
us tonight.

Good evening, Steve.

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Good evening, Sue.

The fate of the North American Free Trade Agreement is really unclear after
the conclusion of the seventh round of talks between Mexico, Canada, and
the United States, occurring under the threat of those steel and aluminum
tariffs proposed last Thursday by President Trump. In fact, the day began
quite dramatically with President Trump tweeting a direct linkage between
the NAFTA talks and the steel agreement, and the steel tariffs, saying that
one could be — if the Canadians and the Mexicans made an agreement with
the United States, then those steel tariffs could come off.

Now, at the press conference with the top trade representatives, Chrystia
Freeland, the economics minister for Canada, had very strong words,
opposing those steel and aluminum tariffs.

(BEGIN VIDEO CLIP)

CHRYSTIA FREELAND, CANADIAN FOREIGN MINISTER: As a key NORAD and NATO ally
and as the number one customer of American steel, Canada would view any
trade restrictions on Canadian steel and aluminum as absolutely
unacceptable. Should restrictions be imposed on Canadian steel and
aluminum products, Canada will take appropriate responsive measures to
defend our trade interests and our workers.

(END VIDEO CLIP)

LIESMAN: For his part, Robert Lighthizer, the U.S. trade representative,
said the tariffs are an incentive to get things done, and they want things
done, the United States wants things done quickly. He urged a quick
resolution of the issues to get ahead of political elections in Mexico and
the United States.

Here`s what he said.

(BEGIN VIDEO CLIP)

ROBERT LIGHTHIZER, U.S. TRADE REPRESENTATIVE: Finally, the United States
has midterm elections coming up in November. All of this complicates our
work. I fear that the longer we proceed, the more political headwinds we
will feel. Thus, in the U.S., we must resolve our outstanding issues soon
to maintain the possibility of having this measure be considered by the
current Congress.

(END VIDEO CLIP)

LIESMAN: Now, the actual agreement depends on what happens with these
steel and aluminum tariffs. Guys, we just got word that ISIS, the research
group put out a note saying they see the odds of NAFTA being redone or
agreed to at just 65 percent — Tyler.

MATHISEN: So what is next for NAFTA, Steve? Where do we stand?

LIESMAN: Well, I think we`re — I think a lot`s going to change this week
when President Trump puts out the details of those proposals. You know
there`s a lot of incentive now and motivation for him to — from the
Republicans, exempt Canada and Mexico. He has so far stood fast against
that trend that`s out there.

There`s another meeting, the eighth round next month. And then, I don`t
know. I don`t think they`ve agreed to go beyond that eighth round right
now. Robert Lighthizer saying only six of 30 chapters have been agreed to
so far.

HERERA: Wow. Steve, thank you so much.

Steve Liesman in Mexico City.

LIESMAN: A pleasure.

MATHISEN: Well, tariffs could have an outsized impact on the oil industry.
It is a very hot topic at the largest annual gathering of energy executives
and officials.

Jackie DeAngelis is in Houston for the CERAWeek Conference.

(BEGIN VIDEOTAPE)

JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: The energy
industry is facing a new pressing issue, tariffs. President Trump`s
promise last week of imposing tariffs on imported steel and aluminum could
raise costs for an industry that has scrambled to get them down since oil
prices have dropped. But analysts say the fear may be worse than the
reality.

COLTON BEAN, TUDOR, PICKERING, HOLT & CO.: We don`t view it as much of an
issue. It comes out to about 5 to 7 percent of a total pipeline build
cost, actually coming from the raw steel material. So, even if we were to
see cost inflation in terms of steel tariffs driving prices higher, it
wouldn`t be all that impactful for the pipeline operators.

DEANGELIS: Another consequence of tariffs on imported steel is the fact
that U.S. producers are working on making the grade of steel needed for
large-scale pipe projects, but the ramp-up may not be as fast to meet
demand.

BEAN: It could actually result in being able to source less of that steel
from areas that could only produce the highest grade steel. That would be
a bigger concern, where we can`t actually build some of the large-diameter
pipes that are really underpinning a lot of the nation`s infrastructure.

DEANGELIS: This morning, the international energy agency said the U.S.
could be producing 17 million barrels of oil and gas per day in just five
years. Domestic oil output has already surpassed Saudi Arabia and could
soon surpass Russia.

FATIH BIROL, INTERNATIONAL ENERGY AGENCY: The fundamentals are there, and
if the — these levels, the U.S. will cover about 60 percent of the oil
alone in the next five years.

DEANGELIS: Other topics being discussed on the sidelines of the
conference, deregulation and the impact of the Trump tax plan, all seen as
positive for energy companies. But the question is, will that lead to
overproduction and could that put a cap on higher oil prices.

For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis, Houston, Texas.

(END VIDEOTAPE)

HERERA: But the view of tariffs is vastly different in steel country.
Take TimkenSteel in Canton, Ohio, for example. That company is just one of
many cheering the decision.

Leslie Picker reports tonight from one of its plants.

(BEGIN VIDEOTAPE)

LESLIE PICKER, NIGHTLY BUSINESS REPORT CORRESPONDENT: After more than a
century producing steel, TimkenSteel, which makes a higher-end product, was
in a state of crisis, as the energy and commodity prices tumbled in 2015
and 2016, they took TimkenSteel and other producers down with them.

Back then, TimkenSteel was running below 50 percent capacity. No longer
profitable, the company was forced to reduce head count by about 12
percent. These were employees making $72,000 a year on average. This new
facility that we`re standing in now remained idle for about a year.

That`s when CEO, Tim Timken (NYSE:TKR), started pleading with officials in
Washington to do something. Timken (NYSE:TKR), a fifth generation leader
of his namesake company, says that the steel industry would be better able
to withstand downturns if trade was on a more level playing field.

For years, the industry had complained of excess steel flooding the market
from foreign producers. He says globally, there are 700 million metric
tons of oversupply, 425 million of that coming from China, alone. Demand
in the U.S. is only 94 million.

TIM TIMKEN, TIMKENSTEEL CHAIRMAN, CEO & PRESIDENT: If we`re given a level
playing field, we can go toe to toe with anybody in the world. What I
can`t do is compete with foreign governments. And that is what we`ve been
doing over the last number of years.

PICKER: Last Wednesday night, around 7:00 p.m., Timken (NYSE:TKR) received
a phone call from the White House, asking him and six of his peers to be in
Washington the next morning. They also showed up for a meeting that lasted
about 45 minutes.

President Trump made it clear that it was important to look after the U.S.
steel industry, Timken (NYSE:TKR) says. If the U.S. were to give up on
steel, the country would be wholly dependent on foreign sources, which
could threaten national security, according to industry leaders.

The president announced that he would be imposing 25 percent tariffs on
steel imports, to protect the U.S. producers.

The backdrop for steel has been improving more recently without the
tariffs. Timken (NYSE:TKR) said he`s not sure what the tariffs will mean
for employment levels, capital investment, or steel prices. He`s waiting
for more details.

But most workers here are encouraged by the tariffs and what it means for
their job security, especially after a few tough years.

For NIGHTLY BUSINESS REPORT, I`m Leslie Picker, Canton, Ohio.

(END VIDEOTAPE)

MATHISEN: The Chinese government set aggressive economic growth targets,
as part of the national people`s Congress. But the outlook for the world`s
second largest economy did not grab headlines like it has historically.
Instead, the focus was on tariffs.

Eunice Yoon is in Beijing for us.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Fears of a trade war
overshadowed the national people`s congress, ahead of the event which sets
policy for the year, the congress` spokesperson responded to the U.S.`
trade tariffs, saying that China did not want to engage in a trade war,
but that Beijing wouldn`t sit by either and watch its interests get
damaged.

In addition to trade wars, economic targets were a major talking point.
Premier Li Keqiang gave China`s version of the State of the Union address
and in his work report, he revealed the country`s GDP growth target
unchanged at around 6.5 percent. Lee stressed that the Chinese will
continue to control financial risk, which would be a huge concern of
investors.

Economists were also focused on his comments that China would reduce the
budget deficit from 3 percent to 2.6 percent of GDP. That implies that the
government will scale back some of the stimulus which has been helping to
support the economy. The premier said China would give tax cuts for
corporations and individuals, in equivalence to roughly 1 percent of GDP.
Some here have been concerned that the tax cuts in the U.S. could boost
America`s competitiveness versus China. The premier did not say anything
directly about trade with the U.S., but he did say that the country would
continue to reduce the capacity of steel and liberalized sectors such as
manufacturing, telecoms, health care, education, and new energy vehicles.

There were no specifics, though, so it`s unclear if any of the changes will
improve the climate for U.S. businesses. On the political front, the
constitutional amendment to end term limits for the presidency was formally
introduced to lawmakers today. The Congress will vote on that on March
11th, but it`s all but certain that those changes will be approved, paving
the way for President Xi Jinping to stay in power for much longer than his
second term.

For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.

(END VIDEOTAPE)

MATHISEN: Time to take a look at some of today`s upgrades and downgrades.

Valeant`s rating was upgraded to buy from hold at Deutsche Bank. The firm
says Valeant is doing right things to strengthen its business. The price
target now $20. Shares were up 3.5 percent to $15.40.

And General Electric`s outperform rating was reiterated at William Blair.
The analyst there cites last week`s announcement of three new directors and
says GE`s aviation and health care businesses performing better than
expected so far this year. The firm says the stock could climb top $20 to
$22 a share and GE was up 2 percent on the session to $14.42.

HERERA: Morgan Stanley (NYSE:MS) is upgrading Groupon (NASDAQ:GRPN) to
equal weight from underweight. The analyst calls the recent stock sell-off
following its mixed quarterly results overdone. The price target is raised
to $4.40. The shares closed just above that level at $4.49.

Monster beverage`s rating was raised from buy to hold at Deutsche Bank.
The analyst there is encouraged by the energy drink maker`s innovation
pipeline. Price target is $63. The shares were up nearly 3 percent to
$55.74.

MATHISEN: A still ahead, some heavy hitters are helping kids learn the
fundamentals of finance.

(MUSIC)

MATHISEN: Amazon (NASDAQ:AMZN) is reportedly in talks to create checking
account-type products. According to the “Wall Street Journal,” the process
is the in its early stages and the product would be aimed at younger
customers and those without bank accounts. Details, few, but the report
states that the online retailer is not planning on becoming a bank.

HERERA: Well, one account that many investors appear to be watching and
changing is their 401(k). The volatility in the stock market is putting
quite a few of us on edge.

Sharon Epperson joins us to calm us down and some new numbers on how savers
are reacting.

It`s great to see you, Sharon, as always.

SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Good to be here.

HERERA: So what are they doing? What are all of these investors doing in
response to the volatility?

EPPERSON: Well, 401(k) investors, they are moving their money around.
We`re looking at some data now that has just come up from light solutions
and their record keeper 401(k) plan. If you look at February 5th, we
remember that day when the S&P was down 4 percent. We saw 12 times the
average daily trading activity in 401(k), 12 times higher than normal.

And then just last week when we saw another market dip, we saw double the
average on Wednesday. So what 401(k) investors are doing right now is that
they`re moving their money around and this is retirement money.

MATHISEN: Is this smart to do?

EPPERSON: It`s not smart to do. They`re doing exactly what financial
advisers say don`t do. They seem to be panicking. And their biggest
threat to their 401(k) may be themselves. They need to figure out a way to
protect themselves from making these knee-jerk reactions.

HERERA: So, what should they do? I mean, what`s — do you do nothing? Do
you —

EPPERSON: You sit there and you assess your risks. You look at what your
goals are and you try to think, can I sleep at night? And if you can`t,
then probably your mix is too aggressive in terms of the funds that you`re
in in your 401(k).

You also want to consider whether your company has something called auto-
rebalancing. So, you pick the mix you want of your investments and it will
automatically readjust wherever the market changes to make sure that you
keep that mix. So, if you check that box, you`re going to be in good
shape. And a managed account where you pay a small fee for a professional
to take care of it for you, that is an opposition in many 401(k) plans.
So, maybe something to consider.

HERERA: Absolutely. Sharon, as always, thank you.

EPPERSON: Sure, my pleasure.

HERERA: Sharon Epperson.

MATHISEN: Nice to see you.

All right. Small cap Dermira pulls the plug on its experimental acne
treatment and shares head south. But that is where we begin tonight`s
“Market Focus”.

The biotech said it was discontinuing plans to develop the medication for
treating moderate to severe acne after it wasn`t anymore effective than the
placebo. That`s not what a drug company wants to hear. During studies,
the news came as a surprise to analysts and investors. Dermira previously
reported two successful trials with the treatment.

Dermira shares plunged, and I do mean plunged, look at that, 66 percent,
finishing the day at $8.59.

Walmart pushing deeper into the meal kit space. The nation`s largest
retailer, which currently sells dinner kits through its online grocery
service and in about 200 stores, said it wants to make the offerings
available in 2,000 locations this year. Unlike other meal kit companies,
Walmart said customers will not be required to purchase a subscription.

Walmart shares finished up 1 percent at $89.98. Meanwhile, shares of meal
kit delivery service Blue Apron fell 5 percent to $260.

And the hedge fund Starboard Value said it has nominated two more directors
to the board at Newell Brands, bringing its total count there to 12, as the
activist investor continues to pursue management changes at the consumer
products maker. Just two weeks ago, Newell Brands, which makes Sharpie
markers and Rubbermaid containers increased its board size in an effort to
ward off Starboard`s efforts. Shares of Newell up 5 percent to $28.09.

HERERA: The French insurance giant AXA is expanding its global reach its
deal to buy XL Group for more than $15 billion. AXA said the merger
strengthens its position in the commercial property and casualty insurance
markets, and presents opportunities for growth. Shares of XL Group popped
29 percent to finish the day at $55.92.

And Nordstrom (NYSE:JWN) rejected a takeover offer from a Nordstrom
(NYSE:JWN)-founding family, saying that proposal undervalues the retailer.
The family which owns more than 30 percent of the company offered $50 a
share for the parts of Nordstrom (NYSE:JWN) it doesn`t already own. The
shares initially fell in after-hours and ended the regular day down 2
percent to $51.90.

MATHISEN: A new program teaching inner city kids how to invest in real
estate drew some heavy hitters to Yankee Stadium yesterday.

And Diana Olick was among them.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: These kids from the
Bronx are not heading into a baseball game. They`re taking a step toward a
brighter future. Part of a program called Project Destined, designed to
teach teens the fundamentals of finance, specifically investing in real
estate.

CEDRIC BOBO, PROJECT DESTINED CO-FOUNDERS: We have to help them
understand, you can actually make money from real estates and have a good
life from real estate.

OLICK: It`s the brain child of Carlisle Group executive Cedric Bobo who
launched it barely two years ago in Detroit and brought on former Yankee
legend, Alex Rodriguez, who now runs his own real estate development firm.
He brought it to the Bronx.

ALEX RODRIGUEZ, PROJECT DESTINED: I was born right down the street in
Washington Heights. And I`ve always loved baseball and I love doing this.
And real estate is a way out of the hood.

OLICK: The kids attended seminars, learning how to value and finance
apartment buildings.

ZAINABOU DARBOE, PROJECT DESTINED SENIOR: We had to talk to a lawyer, we
had to talk to a banker, and we also had to talk to a broker.

One-bedroom apartments, four two-bedroom apartments, and one three-bedroom
apartment.

OLICK: Then they pitched purchase offers for two buildings, “Shark Tank”
style, to a panel of experts in the Yankee boardroom, including former
Bronx native, Jennifer Lopez.

JENNIFER LOPEZ, PROJECT DESTINED SUPPORTER: To be able to teach this to
kids who maybe won`t be able to have the Harvard education or don`t have
that opportunity is to me a beautiful thing, because it`s not just about
kind of your life, it`s about your life. It`s not just about owning a
property, it`s about learning how to manage everything about your life.

OLICK: Holding the final competition at Yankee Stadium, one of New York`s
most iconic pieces of real estate, not only draws the kids in, but makes
for an exciting event. But what`s more important to the founders here is
not just that the kids take a swing at real estate, but that they follow
through.

BOBO: We give 20 percent of our profits to a 501c3 that issues
scholarships. So, every quarter, we`re issuing you a scholarship if you
continue to be engaged. And engagement is both in our classrooms, but also
online.

RUBEN GERMOSEN, PROJECT DESTINED SENIOR: I never knew that for a young kid
like me, I would be able to invest in something so real that is actually on
the market, to now being presented in front of like millionaires.

OLICK: The program now has major partners, including Viacom (NYSE:VIA),
MasterCard (NYSE:MA), and Blackstone`s president and COO, Jonathan Gray.

JONATHAN GRAY, BLACKSTONE COO: I think this works pretty much anywhere.
What you need, obviously, is some people on the ground, some people in the
community, the business community, local real estate people, who say, I
want to take some time, I want to try to educate some kids and give them
some opportunity.

OLICK: The opportunity to turn a little learning into a foundation to
build on.

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

(END VIDEOTAPE)

MATHISEN: And that is pretty cool. You can learn more about this program
on our Website, NBR.com.

HERERA: Coming up, why cannabis and casinos do not mix.

(MUSIC)

HERERA: Martin Shkreli has been ordered to forfeit more than $7 million in
assets. The former drug company executive was convicted of defrauding
investors. He is scheduled to be sentenced for securities fraud Friday.
Some of the assets Shkreli could give up include a Picasso painting and an
album by Wu-tangs clan.

MATHISEN: Recreational and medicinal marijuana are legal in Nevada and
sales are strong. But the casinos don`t want anything to do with the fast-
growing business.

Jane Wells has the story from Sin City.

(BEGIN VIDEOTAPE)

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s the biggest
economic boon to Vegas since gambling, marijuana. In the first six months,
recreational pot was legal in Nevada. Sales hit close to $200 million.
But the gaming industry insists cannabis and casinos don`t mix, something
Isaac Dietrich learned the hard way.

ISAAC DIETRICH, MASSROOTS CHAIRMAN & CEO: So I was gambling with a couple
of friends, playing blackjack, and a security guard came over and asked to
escort me off the floor.

WELLS: Dietrich is CEO of MassRoots, a marijuana news and review Website
that doesn`t even handle actual pot. But when he listed his business in an
application for a loyalty card at the Wynn, he was not only turned down,
but banned for life.

DIETRICH: We asked to be treated the same as every other business.

WELLS: But marijuana is not like every other business, because it remains
illegal in the eyes of the federal government. Casinos have to abide by
federal law, or they could lose their licenses.

The casinos have to be extra vigilant against money laundering, if it
involves money that is legal in the eyes of the state. One CEO of a very
successful pot enterprise told me off-camera that since no bank will take
his cash, he brings it to Vegas. He goes to the casino, turns it into
chips, gambles with a little of it, and then eventually cashes those chips
in for a check that he can deposit into the bank account. No one knows how
much of that is going on or exactly how to stop it.

TERRY JOHNSON, NEVADA GAMING CONTROL BOARDMEMBER: I think the operative
term is reasonableness. They have to conduct reasonable due diligence to
follow up on any suspicions that they might have.

GOV. BRIAN SANDOVAL (R), NEVADA: There isn`t an organized effort by the
cannabis industry to go to a casino and do that.

WELLS: Governor Brian Sandoval led a gaming regulatory panel, which
decided new rules about how to handle pot.

JIM MURREN, MGM RESORTS CHAIRMAN &CEO: And this is a hard one.

WELLS: A panel that includes MGM resort CEO, Jim Murren.

MURREN: I think it provides teeth to a difficult issue, but also
understands the fluid nature of complicating laws between the United States
and Nevada.

WELLS: The panel decided casinos could not be in any sort of business
relationship with marijuana enterprises, except they could continue to
allow pot conventions on their properties.

SANDOVAL: This is simply a networking opportunity for those that provide
services affiliated with the industries. For instance, the grow facilities
and what best practices in that regard. They do not include consumption.

WELLS: It remains a sticky situation. Talk pot on the convention floor,
but keep pot money out of the casino, as Sin City works to keep its sins
separate.

For NIGHTLY BUSINESS REPORT, I`m Jane Wells in Las Vegas.

(END VIDEOTAPE)

HERERA: And before we go, here`s another look at the rally on Wall Street.
The Dow advanced 336 points, the Nasdaq was up 72 and the S&P 500 gained
29.

And that does it for NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera.
You know it`s been five years since CNBC began producing the broadcast. We
thank you very much for your continued support and viewership.

MATHISEN: We do, indeed. Man, it`s gone by fast.

HERERA: And we`re not —

MATHISEN: I`m Tyler Mathisen. We also want to remind you, it`s not just
five years, it is the time of year that your public TV station asks for
your support. We`ll see you tomorrow.

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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