Transcript: Nightly Business Report – March 6, 2018

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Tough talk. The president
late today did not back down on his tariff threat, leaving the bulls on
edge over the possibility of a global trade war.

Thawing of tension. Does it prospect for talks between North Korea and the
U.S. remove one of the risks from the market?

Missing the Target (NYSE:TGT). Shoppers flock to the retailer`s Website
but at a cost to the company.

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

Good evening, everyone, and welcome. I`m Sue Herera. Tyler Mathisen is
off tonight.

Just when some investors thought maybe, just maybe, the tariffs proposed by
the White House would end up being more targeted, the president late this
afternoon said he had no choice but to follow through with levying steep
tariffs on steel and aluminum.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: When we`re behind on every
single country, trade wars aren`t so bad. You understand what I mean by
that? When we`re down by $30 billion, $40 billion, $60 billion, $100
billion, the trade war hurts them. It doesn`t hurt us.

(END VIDEO CLIP)

HERERA: At that White House news conference with the Swedish prime
minister, the president warned that he would impose a 25 percent penalty on
European car imports if the block carried out a threat to retaliate. The
possibility of a trade war sent stocks all over the place before the Dow
Jones Industrial Average finally finished just nine points higher to
24,884. The Nasdaq was up 41. And the S&P 500 added seven.

Bob Pisani has more on the push and pull in this market.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: More whipsaw action for
the markets today. The Dow Jones industrial average swung between triple-
digit gains and losses, higher by 166 points at its height, but essentially
unchanged at the close.

Traders have been hanging on every word out of the White House and other
congressional leaders on the state of the proposed tariffs. Stocks rose
briefly midday when Georgia Senator David Perdue suggested the president
might be flexible on the tariffs. But in a late day press conference with
the Swedish prime minister, the president did not back down on his threat
to slap tariffs on steel and aluminum imports, claiming China sends more
steel to the United States than most people think.

He disputed early reports that China imports only 2 percent of the steel
imported into the United States.

Where would all this end? Bulls are praying for a one-two punch, that by
the end of the week, President Trump will indeed sound more conciliatory on
tariffs and that Friday`s February jobs report will show wage growth is
subdued. Now, remember, January`s wage growth of 2.9 percent year over
year was the strongest since 2009. That caused a 50-point drop in the S&P
500 a month ago and was the start of much of the chaos in February.

If we get that one-two punch, the markets will definitely rally on Friday.
Until then, the bulls are going to be on edge.

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

(END VIDEOTAPE)

HERERA: House Speaker Paul Ryan pushed back against the idea of broad
tariffs and said he`s urging the president to take a more targeted approach
so as not to have a negative impact on the economy.

(BEGIN VIDEO CLIP)

REP. PAUL RYAN (R-WI), SPEAKER OF THE HOUSE: What we`re encouraging the
administration to do is to focus on what is clearly a legitimate problem
and to be more surgical in its approach so that we can go after the true
abusers without creating any kind of unintended consequences or collateral
damage.

(END VIDEO CLIP)

HERERA: The European Union is reportedly ready to play hardball.
According to “Bloomberg”, officials are preparing punitive tariffs
targeting roughly $3.5 billion worth of iconic U.S. brands that are
produced in the states of congressional leaders. For example, the list of
targeted goods includes motorcycles, Harley-Davidson (NYSE:HOG) is based in
Speaker Ryan`s home state of Wisconsin. Bourbon made in Senate Majority
Leader Mitch McConnell`s home state of Kentucky. And jeans, Levi Strauss
is headquartered in House Minority Leader Nancy Pelosi`s hometown of San
Francisco.

A new development tonight out of Washington. Economic adviser to the
president Gary Cohn is resigning. It was first reported by “The New York
Times (NYSE:NYT).”

Hampton Pearson is in Washington for us tonight.

Hampton, what did we know?

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Sue, national
economic director Gary Cohn is leaving the White House. First, we have a
statement from President Trump saying, quoting now, Gary has been my chief
economic adviser and did a superb job driving our agenda, helping to
deliver historic tax cuts and reforms and unleashing the American economy
once again.

From White House Chief of Staff John Kelly: Gary has served his country
with great distinction, dedicating his skill and leadership to grow the
U.S. economy and pass historic tax reform.

And from Gary Cohn himself, quoting now: It has been an honor to serve my
country and enact pro economic growth policies to benefit the American
people, in particular again the historic passage of tax reform.

Gary Cohn leaving the White House. We know that he had been on the
opposite side of the president`s desire to enact strong trade tariffs
involving aluminum and steel. But the White House and White House
officials saying it was not the only reason that got us to this point where
Gary Cohn is now leaving and on his way out as national economic director
for President Donald Trump.

HERERA: All right. Hampton Pearson in Washington, Hampton, thank you very
much.

Bill Adams joins us now to talk about that and much more. He is the senior
international economist with PNC Financial Group.

Welcome, Bill. It`s nice to have you here. This is a late development —

BILL ADAMS, PNC FINANCIAL GROUP INTERNATIONAL ECONOMIST: Hey, good to be
with you, Sue.

HERERA: It`s a late development being reported by “The New York Times
(NYSE:NYT).” And we should add that Mr. Cohn was pushing back very hard
against the implementation of these tariffs. But given the talk from the
president this afternoon, it appears that he has definitely lost that
fight. What are the implications for the rest of the Trump economic agenda
if Mr. Cohn is not there?

ADAMS: I think the immediate implications of implementing these metals
tariffs would be retaliation from European Union and our trading partners.
It`s going to target U.S. exporting industries. So, I think that`s going
to be — if this does go through, it would be a headwind for those targeted
exporters, fewer export sales, reduced export profits and fewer jobs
servicing those exports than we would otherwise have seen.

HERERA: Can I turn you to “The New York Times (NYSE:NYT)” report that Gary
Cohn is apparently going to leave the White House?

He is the one who basically championed tax reform, the tax reform plan.
He`s involved with the infrastructure plan. He pushed back against the
tariffs. He`s obviously lost that particular fight.

How will this impact the economic agenda of the Trump administration if he
is not an adviser to the president any longer?

ADAMS: Well, there are obviously multiple streams of thought within the
administration about having more conventional economic policies versus more
of a protectionist policy. I have been watching over the course of the
last year plus to see of which those policies have been implemented. And
there are still forces on both sides, both within the administration, as
well as within Congress.

HERERA: All right. Let`s turn to —

ADAMS: So I`m still in “wait and see.”

HERERA: OK, you`re in wait and see mode. I guess one of my questions in
terms of trade specifically is whether this is just going to be a slight
retaliation if indeed it comes to that by the E.U., or whether or not we`re
going to be in a full-blown trade war like we saw in the 1930s and `40s.

ADAMS: I`m expecting in the base case that the E.U. will probably
retaliate. If this happens again, they`ll retaliate in a targeted way and
in a limited way. That`s what has happened between the United States and
our trading partners in previous rounds of trade conflicts.

We have imposed tariffs on foreign imports in each of the prior two
presidential administrations. So, the E.U. knows what the pattern of U.S.
policy-making is. The tail risk is an escalating — mutually escalating
trade war. But I think that still is fairly unlikely because of the costs
that it would impose on the U.S. economy.

HERERA: On that note, Bill Adams with PNC Financial Group — thank you
very much.

Well, for one family-owned steel business, tariffs could mean a brighter
future. Kayla Tausche is in Cincinnati.

(BEGIN VIDEOTAPE)

KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Every minute at Byer
Steel, old railroad axles are fed into a furnace, heated to 2,400 degrees
and molded into 1,200 feet of steel rebar. Burke Byer sells that rebar to
commercial construction companies. But it`s had to drop the price to
compete with cheap foreign imports.

BURKE BYER, BYER STEEL PRESIDENT & CEO: We`re over 16,000 miles away from
Japan or Turkey. And I can buy Japanese or Turkish rebar at the port of
Cincinnati nine miles away, cheaper than my raw material coasts. I don`t
understand how that works.

TAUSCHE: In the last three years, Byer`s profit margins have fallen nearly
40 percent. He says he`s laid off nearly half the workforce at this
northeastern Cincinnati mill. Byer says Trump`s tariffs would reverse that
trend.

BYER: We have production lines that are not operational right now. We
have — we were down from 180 employees to 95. Those jobs can come back.
We have capacity and machines right now that are waiting for a market to
sell to. And there`s people trying to work, that want to come back.

TAUSCHE: Employment in Ohio`s still and iron industry has fallen in recent
years. But its 15,000 jobs are a small portion of the state`s labor force.

Critics warn the downside could be much bigger.

SEN. MITCH MCCONNELL (R-KY), SENATE MAJORITY LEADER: There is a lot of
concern among Republican senators that this could sort of metastasize into
a larger trade war.

TAUSCHE: But Byer says it`s an industry worth protecting.

BYER: There`s nothing you can do without steel. You can`t get lipstick.
You can`t get soup. You can`t get cars. You can`t get all these things.
You can`t get computers. You have to have steel and commodities.

TAUSCHE: While President Trump`s proposed tariffs would have far-reaching
effects outside the U.S., they would give Burke Byer`s fourth generation
family business some posterity.

For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche, Cincinnati.

(END VIDEOTAPE)

HERERA: The head of the Dallas Fed said tariffs on imported steel and
aluminum have the potential to hurt trade relations with Canada and Mexico.
He calls these two countries critical to U.S. competiveness and jobs.

(BEGIN VIDEO CLIP)

ROBERT KAPLAN, DALLAS FEDERAL RESERVE PRESIDENT: I`m concerned we`re in
the middle of the trade negotiations with both countries. This could have
some chilling effect. But it`s so clearly in the interests of the United
States to have strong trading relationships with both those countries. I`d
be optimistic about how this actually gets implemented.

(END VIDEO CLIP)

HERERA: Kaplan also said he favors three interest rate increases this year
and that those should happen sooner rather than later. Many expect the
central bank to raise rates when it meets later this month.

Well, there may be signs of a thaw on the Korean peninsula. According to
the South Korean delegation, the North is willing to hold talks with the
U.S. about giving up its nuclear weapons. That helped send the South
Korean ETF higher in trading today.

David Riedel joins us now to discuss what possible talks between North
Korea and the U.S. could mean for the stock market. He is the founder and
president of Riedel Research Group.

Good to see you. Thanks for joining us again, David.

DAVID RIEDEL, RIEDEL RESEARCH GROUP FOUNDER & PRESIDENT: Thank you, Sue.

HERERA: Certainly, a stunning and surprising development between North and
South Korea and the United States. But we have seen hopeful signs before,
and then they kind of fall to the wayside. How should the market react to
this? Because that was one of the big risks that was in the market not so
long ago, just a couple of months ago.

RIEDEL: That`s exactly right. It was recently that this was top of mind.
I think it`s been replaced in investors` minds in the U.S. with issues on
trade and the impending trade war if we go that route, the number of Fed
hikes in 2018 and so on and so forth. But it should not be downplayed.
This is a very big deal.

If we can get some level of peace and communication going on that`s
constructive in the South Korean peninsula, I think that`s very positive
for global markets.

HERERA: So what do we look for? What would be another sign or the next
sign, perhaps, that these talks might actually come to fruition?

RIEDEL: Well, I think if you start hearing more noises about the U.S.
participating in these talks, remember, there was reporting that Vice
President Pence was looking to meet with the North Koreans when he was in
Seoul and that got scrapped at the last minute during the Olympics. But if
we start to see moves by the U.S. around this topic, I think that could be
very important for solidifying the move towards talks and eventually
perhaps a deal.

HERERA: And what role will Beijing play, if at all, in either pushing
these talks forward or perhaps even mediating parts of them?

RIEDEL: Well, President Trump said today that he felt the Chinese had been
helpful, that Beijing had been helpful. I think if it shows that they have
been helpful — some of our people on the ground in China have observed
that there`s been a lot less goods going across the North Korea/China
border recently. There was a big effort in the U.N. by the U.S. to crimp
North Korea`s moves on shipping and Beijing pushed hard against that.

So, if Beijing played a role in getting them to the table, I think that`s
very positive longer term. Because with Beijing and South Korea both
working on North Korea, moving them towards this, that could really make a
big difference.

HERERA: So, you kind of touched on this earlier. But do you think the
trade tariff issue and the possibility of retaliation has now superseded
the worries that we had or the fears that we had of a conflict of North
Korea in the market`s mind, anyway?

RIEDEL: I do. I do. I think in the U.S. market, it really has. We saw
the South Korean ETF responded favorably. I would expect the Asian markets
to respond favorably tonight. But in the U.S. investors mind, I think
they`re more concerned about the growth trajectory here and the interest
rate trajectory here at home.

HERERA: All right. On that note, David, always good to talk with you.
Thank you so much.

RIEDEL: Thank you, Sue.

HERERA: David Riedel with the Riedel Research Group.

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

UPS saw its rating raised to buy from hold at Stifel. The analyst calls it
the most attractive dividend play among large cap transportation stocks.
The firm also calls the threat from Amazon (NASDAQ:AMZN) overblown. Shares
of UPS rose nearly 4 percent to $109.80.

Mylan`s rating was raised to overweight from equal weight at Morgan Stanley
(NYSE:MS). This is the first time the analyst has increased his rating on
Mylan (NASDAQ:MYL) in three years. The firm cites Mylan`s drug pipeline
and its growth prospects. The price target was raised to $50. Mylan
(NASDAQ:MYL) closed up 4 percent to $43.23.

Citi raised its rating on Herbalife (NYSE:HLF) to buy from neutral. The
analyst cites the company`s attractive evaluation and sees a big rally in
its shares now that activist investor Bill Ackman has exited his position.
The new price target is $114. The shares rose more than 2 percent to
$96.84.

Still ahead tonight, Target (NYSE:TGT) is making some very big investments.
But its investors are still looking for the big payoff.

(MUSIC)

HERERA: CVS (NYSE:CVS) Health plans to issue more than $40 billion of new
debt to fund its acquisition of Aetna (NYSE:AET). It will be the largest
corporate bond sale in more than two years. And it`s also being looked at
as a bellwether for the health of the corporate bond market.

Target (NYSE:TGT) is spending a lot of money to remake itself. But it`s
coming at a cost. The discount retailer missed earnings estimates and
issued a disappointing outlook. And that sent the shares of Target
(NYSE:TGT) down more than 4 percent.

Courtney Reagan spoke with Target`s CEO about what`s going on at the
company and its future.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Target`s holiday
quarter turned out the strongest sales in three years. Online sales grew
nearly 30 percent. And in-store sales increased after falling last year.

But there was a problem. Cost for the discount retailer rose, a lot.
Employee wages and a big investment in its stores cut into profit.
Target`s outlook was also disappointing because all that spending will
continue.

Target (NYSE:TGT) executives met with investors here in Minneapolis near
its headquarters as it begins year two of a three-year, $7 billion strategy
to grow.

BRIAN CORNELL, TARGET CEO: We`re going to continue to invest to grow.
We`re going to continue to invest in new capabilities to make sure we meet
the needs of the guests.

REAGAN: The big box retailer now plans to accelerate its store remodel
program and build out a smaller number of stores in bigger cities. It`s
also redesigning stores to build out smaller stores in bigger stories.
It`s also redesigning stores to better fill online orders and wants to give
shoppers several options for getting their online orders faster.

The retailer is expanding its network of personal shoppers in its Shipt
business and adding its drive-up pickup program from nearly 50 stores to
more than a thousand by the end of the year. While investors want to see
online sales grew, there is concern about the hit to profitability.

But CEO Brian Cornell is confident his strategy will work.

CORNELL: We`re off to a good start. We`re on a trajectory for positive
growth both in-store and online. Our new initiatives are being well-
received. So, I think we`re going to continue the progress we made in 2017
throughout 2018.

REAGAN: Shareholders want Target (NYSE:TGT) to invest in its business, as
long as it brings a return in the not so distant future.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan in Minneapolis, Minnesota.

(END VIDEOTAPE)

HERERA: UnitedHealthcare is lowering drug costs for millions of its
members. That`s where we begin tonight`s “Market Focus”.

Beginning next year, UnitedHealthcare said it would begin passing down the
discounts that it receives from drug makers directly to some of its members
in the form of rebates for prescription drugs. The new policy applies to
more than 7 million people covered by certain employer sponsored plans, but
it leaves out about 18 million members who are self-insured. The shares
were off nearly 1 percent to $226.18.

Ciena, which makes networking technology, reported a smaller than expected
loss and revenue that topped expectations. That company said results were
helped by growing demand for streaming services and mobile apps. Shares of
Ciena climbed 10 percent to $25.71.

BlackBerry is suing Facebook (NASDAQ:FB), claiming the social media giant
infringed on its massaging app patents. Blackberry said Facebook
(NASDAQ:FB) and its WhatsApp and Instagram units used technology and
features that were present in BlackBerry`s first smartphones. Facebook
(NASDAQ:FB) shares were off a fraction to $179.78. Shares of BlackBerry
rose slightly, to $12.44.

After the bell, tax preparer H&R Block (NYSE:HRB) reported results that
topped expectations. That company said promotions helped to bring in more
customers and H&R Block (NYSE:HRB) also reaffirmed its outlook for the
year. The shares initially rose in after hours but finished the regular
day down 3 cents to $25.77.

Up next, the big happenings going on with big oil.

(MUSIC)

HERERA: And here is a look at what to watch for tomorrow. The Federal
Reserve releases its Beige Book. That`s an anecdotal look at economic
conditions across the country. We`ll get new data showing where the U.S.
trade deficit stands. And ADP is out with its latest employment report for
the private sector. That comes just ahead of the big jobs report which is
due out later this week. And that is what to watch for on Wednesday.

New orders for U.S.-made goods recorded their biggest decline in six months
in the month of January. According to the Commerce Department, business
spending on equipment also appears to be slowing after a string of strong
growth last year.

Well, the biggest names in the energy industry say demand is picking up.
But their enthusiasm remains somewhat tempered because of all the
turbulence that sector faced not so long ago.

Brian Sullivan is in Houston at CERAWeek, one of the biggest gatherings of
oil executives and officials.

(BEGIN VIDEOTAPE)

BRIAN SULLIVAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Optimistic yet
cautious. Those words describe the mood at one of the world`s biggest oil,
gas, and energy conferences. After a boom, and then a terrible bust, all
in the last 10 years, the price of oil has remained relatively stable
lately. And the industry is once again talking about growth.

AMIN NASSER, SAUDI ARAMCO CEO: What we are seeing is healthy economic
globally, healthy demand that we are seeing and forecasting going forward.
The economy is doing very well, not only in OECD country, the rest of the
world. And with that, there will be healthy demand. That is our
projection.

SULLIVAN: But officials caution there is a new threat to that optimism, a
lack of new capital coming into the global energy markets. The head of
OPEC warns that unless major new investments are made soon, production
growth rates could actually drop. And with demand growing, the world could
one against face a new kind of energy crisis.

MOHAMMED BARKINDO, OPEC SECRETARY GENERAL: If the trend of the last two or
three years continue, and god forbid, we will be sowing seeds for a future
global energy crisis that nobody wants to see.

SULLIVAN: With global economies on the rise and stock markets everywhere
doing fairly well, the lack of new investment can seem perplexing. But an
investment banking executive says investors are simply worried about being
burned again.

RALPH EADS, JEFFERIES GROUP: Part of it is because the stocks have done
badly through the downturn. So, you know, people are sort of, you know,
affected by the fact that we had a difficult people just driven by lower
oil prices. And we`ve had another phenomenon which is naturally gas prices
which is very important to the U.S. sector have marched down over the last
decade pretty solidly.

SULLIVAN: Most experts agree that any major production issues are years
away. But in an industry where projects can cost tens of billions of
dollars and take years to develop, they want to lay the ground now for
future investment later.

For NIGHTLY BUSINESS REPORT, I`m Brian Sullivan, Houston.

(END VIDEOTAPE)

HERERA: There is a new billionaire that is richer than all others,
according to “Forbes” latest annual list. In the top spot, Amazon`s Jeff
Bezos. He is the first centibillionaire with a net worth of $112 billion.
Microsoft (NASDAQ:MSFT) founder Bill Gates fell one spot to number two with
$90 billion. Rounding out the top three, Berkshire Hathaway`s Warren
Buffett at $84 billion.

There are 2,200 billionaires around the world. They hold a combined net
worth of more than $9 trillion.

Before we go, here is another look at how the major averages finished the
day. The Dow finished just nine points higher to 24,884. The Nasdaq was
up 41. And the S&P 500 added seven.

Keep an eye on how the market reacts to the late evening report that the
president`s economic adviser Gary Cohn is resigning.

That will do it for NIGHTLY BUSINESS REPORT tonight. I`m Sue Herera.
Thanks for joining us.

We want to remind you, this is the time of year your public television
station seeks your support. And we thank you for it. Have a great
evening. 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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