Transcript: Nightly Business Report – March 8, 2018

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

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Today, I`m defending
America`s national security by placing tariffs on foreign imports of steel
and aluminum.

(END VIDEO CLIP)

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Tariffs set. But they
exclude key trading partners and stocks get a lift.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Health care heavyweight.
Cigna and Express (NYSE:EXPR) Scripts agree to a deal, marking the latest
attempt to reshape that industry.

MATHISEN: Flipping frenzy. More people are doing it, but they`re also
reaping smaller rewards.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
March 8th.

HERERA: Good evening, everyone, and welcome.

The president today made good on his promise to levy tariffs of 25 percent
on imports of steel and 10 percent on aluminum. But he softened the blow a
bit. The tariffs exclude key allies like Canada and Mexico, and they offer
some flexibility for other countries. The narrower approach was cheered by
Wall Street and stocks rose into the closing bell.

The Dow Jones Industrial Average added 93 points to finish at 24,895, the
Nasdaq was up 31, and the S&P 500 added 12. However, those narrower
tariffs sent steel stocks lower but by some significant percentage moves.

Kayla Tausche is following the story for us tonight from the White House.

So, Kayla, what exactly did the president put in place today?

KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, Sue, the
president put in place — he signed an official proclamation that in 15
days, we`ll levy steep tariffs on all foreign steel and aluminum that are
coming in to the United States, except for that steel and aluminum coming
in from Canada and Mexico due to that short term exemption that you
mentioned.

The announcement today is the results of an 11-month investigation that has
deeply divided the president`s administration and led to the resignation of
one of his top economic advisors Gary Cohn but the announcement that we saw
specifically today was the result of intense lobbying over the last week by
critics of a more broad approach and members of the Republican Party, as
well as a industry leaders opposed to this that led to that narrower
approach that we saw today.

And though it takes effect in 15 days, the president said it can still be
amended in the future. Take a listen.

(BEGIN VIDEO CLIP)

TRUMP: America will remain open to modifying or removing the tariffs for
individual nations as long as we can agree on a way to ensure that their
products no longer threaten our security. So, I`ve put Ambassador
Lighthizer, a great gentleman, in charge of negotiating with countries that
seek an alternative to the steel and aluminum tariffs.

(END VIDEO CLIP)

TAUSCHE: Countries are already getting in the queue. The E.U. trade chief
has a meeting with the Ambassador Lighthizer set for Saturday, and Canada
and Mexico which were quiet following the announcement will no doubt have
questions for the administration and as it seeks to understand exactly what
concessions the White House wants to extract in order for those exemptions
to be permanent — Tyler.

MATHISEN: All right, Kayla. Kayla, thank you very much. Kayla Tausche is
at the White House for us tonight.

Well, the aluminum industry is hoping that the tariffs will lead to a
renaissance of sorts. The president mentioned one aluminum plant in
particular during today`s event at the White House.

(BEGIN VIDEO CLIP)

TRUMP: After the signing of this proclamation Century Aluminum
(NASDAQ:CENX) in Kentucky — Century is a great company — will be
investing over $100 million to restart and upgrade their idled military-
grade high-quality aluminum production, which is also critically important
to our national security.

(END VIDEO CLIP)

MATHISEN: Well, Jackie DeAngelis traveled to that very plant in
Hawesville, Kentucky.

(BEGIN VIDEOTAPE)

JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Even with all the
concerns over a trade war, aluminum workers are cheering.

Century Aluminum (NASDAQ:CENX) in Kentucky makes high purity aluminum.
That`s the kind used in U.S. fighter jets, body armor and tanks. Aluminum
has many uses. Defense is one.

Century used to be part of the supply chain for defense, but the industry
is struggled because of anti-competitive practices that have made it
difficult to compete with the international suppliers. This facility is
only operating at 40 percent capacity right now.

COY ZUELLY, CENTURY ALUMINUM PROCESS TECHNICIAN: If the tariff gets
passed, it`s going to help us out tremendously. It`s going to up our
production to where we can go back to running five lines instead of where
we`re operating on two lines now. It`s going to create more jobs for this
area.

DEANGELIS: But when the green light comes, Century plans to invest $100
million in this plant, adding more than 300 jobs to get back to a 100
percent capacity eventually.

But it`s a slow process. They say it`ll take about six months to get to
just 60 percent.

MICHAEL BLESS, CENTURY ALUMINUM CEO: There`s a million tons in the U.S. of
aluminum capacity. There`s 150,000 tons sitting out in this plant that can
get restarted. So we can get this industry at least back to its ability to
supply roughly 20 percent, maybe 30 percent of U.S. demand. We still need
a tremendous amount of imports, but it`s a start.

DEANGELIS: For those who are concerned about a trade war, the folks here
say it`s all about national security. They think it`s important for the
U.S. to have the ability and the capacity to supply the defense industry
domestically.

ZUELLY: I`m prior military myself, so for me knowing that we produce that
type of aluminum for our national defense, for one, it gives me a pride —
you know, the sense of pride in my job.

DEANGELIS: But critics of the tariffs say a potential trade war is not in
the best interest of the country and the downside risks outweigh the
benefits.

Still, here at Century, they believe an aluminum revival is on the way,
thanks to President Trump.

For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis in Hawesville, Kentucky.

(END VIDEOTAPE)

HERERA: While the aluminum industry here is cheering, the head of China`s
aluminum association is warning the Trump administration of the dangers of
tariffs and he`s advising the Chinese government to take action.

(BEGIN VIDEO CLIP)

WEN XIANIJUN, CHINA NONFERROUS METALS INDUSTRY ASSOCIATION V.P. (through
translator): We are not scared of a trade war because Chinese aluminum
production is mainly for the domestic market. We are against protectionism
and we are against a trade war. However, if the U.S. wants one, we are not
afraid.

(END VIDEO CLIP)

MATHISEN: Well, despite concerns of a trade war, there is a town in China
that may be a good example of why the Trump administration wants to impose
tariffs. The town was declared steel free when its last mill was recently
shut down, but production didn`t stop.

Eunice Yoon took a trip to Baoding to see what`s really going on.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: This steel mill used
to be at the center of life in this town in northern China. Now, it`s a
relic of its past as the country attempts to clean up the environment and
reduce capacity.

We`re in Baoding, about a three-hour drive from Beijing, and the government
here declared this city steel free back in November. When the authorities
visited the steel mill behind me the last one in this town and determined
that it had been officially shut down.

In its heyday, Baoding had eight steel mills, contributing to the country
status as the world`s largest steel producer. Yet China has come under
criticism, including by the Trump administration for flooding global
markets with cheap steel, pressuring steel makers in other countries like
the U.S.

The steel company has been all gated up and as you can see behind me,
there`s no activity, but the capacity has been shifted to a firm in the
south of the country. And that`s why so many of China`s trading partners
including the United States are frustrated with the Chinese.

Beijing may be reducing capacity here, but it`s moving it elsewhere.

This man worked 14 years at the plant. Now, he`s jobless.

I`ve been speaking to some of the former steel workers and they say that
they haven`t been happy with a compensation. In fact, many of them block
the road to the steel mill once they heard what they were going to get.

Eight hundred dollars for every year employed, a big reason why China may
never close steel plants as quickly as President Trump wants.

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

(END VIDEOTAPE)

MATHISEN: And back to the markets now. JPMorgan (NYSE:JPM)`s co-president
warns of a deep correction in stocks over the next two to three years. He
says equities could fall between 20 and 40 percent essentially wiping out
much of the rally of the past two years.

And we`ve got a roundtable to discuss his forecast. Chris Cordaro is chief
investment officer at RegentAtlantic. He`s been upbeat on the market, and
our friend Jim Paulsen, chief investment strategist at Leuthold Group is a
little bit more cautious.

Gentlemen, welcome to both of you. It`s not really a roundtable but we`ll
call it that for —

(CROSSTALK)

MATHISEN: Chris, would it surprise you to see a correction — oh and more
than that a bear market of 20 to 40 percent over the next couple years?

CHRIS CORDARO, REGENTATLANTIC CIO: Over the next couple years, anything is
possible. This year, I think with where the economic indicators are, I
don`t see it coming very soon. Investing in stocks you can always have the
possibility of a 20 percent decline but fundamentally, we`re still in a
very good place.

HERERA: You know, Jim, last time we had you on, you were — you were
cautious on the market and we did see increased volatility and a downward
bias in the market for a couple of weeks there. Are you still cautious on
this market? And why if so?

JIM PAULSEN, LEUTHOLD GROUP CHIEF INVESTMENT STRATEGIST: Yes, I am a
little bit. I don`t see anything like a 20 to 40 percent decline, Sue,
mainly because I think too that the economy is doing pretty well and is
likely to continue to avoid recession over the next few years. But I think
the markets are adjusting to a little higher inflation and a need to raise
interest rates even more yet.

We`ve raised the ten-year from two and a half to three and I think we might
raise it to three and a half yet before the years out, and I think wage
inflation and consumer inflation is also going higher. All of those things
will challenge the valuation of stocks. And even if earnings keep coming
through really good, if you`re paying us a smaller price earnings multiple
on those earnings, I think it might result in kind of a flattish market
throughout much of this year. And we could continue to have volatility but
maybe not o very far for the year.

MATHISEN: Chris, you`re a little more optimistic here you see the market
going higher at roughly 7 percent a year pace, but you do say that in any
given year, it`s possible that you get a correction of some sort.

CORDARO: Right.

MATHISEN: Who knows?

Should I feel safe putting fresh money to work now and if so, what are the
sectors or corners of the market or regions of the globe that you like
best?

CORDARO: Well, I think you should feel safe if it`s long-term money and
you have a long term strategy, that`s what you want to do. You really —
you don`t want to try and have any short-term movements. That`s where it`s
a little bit dangerous coming out with, you know, co-president of JPMorgan
(NYSE:JPM) saying there`s going to be a correction. There`s always going
to be some decline, we just don`t know when.

So, as a long-term investor, now`s a good time to commit to a long term
strategy.

MATHISEN: Where?

CORDARO: I think in the U.S. markets but also foreign markets. Foreign
markets are much cheaper than U.S. markets and you want to be broadly
diversified if you think about other countries around the globe their
economies are just starting to come online, whereas our economy is sort of
at its peak. So, there are better opportunities abroad, but you want to
include everything in your portfolio.

HERERA: And, Jim, you like commodities. How does the average investor
play that and why commodities?

CORDARO: Well, I would certainly own some stocks too, just like Chris
suggested. I like the international markets more than the U.S. and the
stock market as well. But I think as a part of the stock portfolio, you
could substitute a little bit of commodities, not a huge percentage but a
small amount in lieu of holding just all equities.

I think the real asset markets are going to be good this year and
commodities in particular, and it is difficult to participate, Sue. But I
think the best way for individuals to do that is through an ETF. There are
ETFs that try to mimic the performance of the broad-based United States
commodity price indices and I kind of think commodities are going to do
better than stocks and bonds this year.

MATHISEN: All right. Gentlemen, we`re going to leave it there.

Chris Cordaro with RegentAtlantic, thank you very much.

And, Jim Paulsen with the Leuthold Group, thanks to you as well.

HERERA: Coming up, it used to be all the rage but is flipping houses still
worth it? We`ll find out.

(MUSIC)

HERERA: Cigna, one of the country`s largest health insurers, is buying
Express (NYSE:EXPR) Scripts, one of the country`s biggest pharmacy benefit
managers, for $52 billion. The proposed merger is just the latest get
together in an industry undergoing massive consolidation. The deal sent
shares of Express (NYSE:EXPR) Scripts up 8-1/2 percent and Cigna down more
than 11 percent.

Bertha Coombs takes a closer look at how this combination could change the
sector.

(BEGIN VIDEOTAPE)

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Express (NYSE:EXPR)
Scripts was the last large standalone pharmacy benefit firm. Cigna CEO
says by coordinating medical and pharmacy benefits under one roof, the $52
billion merger will help drive down health costs for the company and its
clients.

DAVID CORDANI, CIGNA (NYSE:CI) PRESIDENT AND CEO: Our view is that the
current marketplace is not sustainable. The market demands more
affordability. The market demands more personalization. The market
demands more value.

COOMBS: It was well-known that Cigna wanted to do a deal, an Express
(NYSE:EXPR) Scripts was long thought to be in play. It follows pharmacy
giant CVS (NYSE:CVS)` $69 billion deal to acquire insurer Aetna (NYSE:AET).
But this deal was a surprise.

LISA GILL, J.P. MORGAN SECURITIES: It sounds something that I`ve been
talked about in the marketplace. So, I think there is a little bit of
shock right now.

COOMBS: The Cigna and CVS (NYSE:CVS) mergers aim at competing head-to-head
with the nation`s largest health insurer United Health, which already owns
a pharmacy benefit firm and integrates benefits.

GILL: If this deal is approved, the three large PBMs will all be owned or
will own a large health plan and they control about 80 percent of the
prescription volume in the U.S. And so, if you think about it, there`s
300-ish health plans out there that will have to do business with someone
that they also compete with.

COOMBS: Integrating health and pharmacy benefits can generate big savings
by balancing prescription costs with overall health care says
Northwestern`s Craig Garthwaite.

CRAIG GARTHWAITE, NORTHWESTERN UNIVERSITY: If I`m responsible for only
your drug spending, I want to make sure you spend as little on your
diabetes medication as possible. But if I`m responsible for all your
health spending, I know that a diabetic that`s not adherent to their
medication is going to result in a costly in-patient hospitalization in the
future and therefore maybe I make sure you have almost no co-pay on your
diabetes medication.

COOMBS: At a time when middleman fees on prescription drugs are under
attack, the key is making sure consumers see the savings.

GARTHWAITE: We`re going to have to keep sort of a vigilant watch on
competition in this market because just generating cost savings doesn`t
necessarily mean that consumers benefit.

COOMBS: When it comes to large employer plans, Amazon (NASDAQ:AMZN)`s new
health venture with J.P. Morgan and Berkshire Hathaway (NYSE:BRK.A) is one
of the driving forces for firms to prove that they can bring down costs.

Cigna CEO says he`s been in touch with members of that group and thinks in
the Cigna Express (NYSE:EXPR) Scripts deal will help them deliver what
employers want.

For NIGHTLY BUSINESS REPORT, I`m Bertha Coombs, New York.

(END VIDEOTAPE)

MATHISEN: The largest U.S. supermarket chain has a disappointing quarter
and that is where we begin tonight`s “Market Focus”.

Kroger (NYSE:KR) says profits for the full year will come in below Wall
Street estimates. The company has poured a lot of money into its online
operations to compete with Walmart and Amazon (NASDAQ:AMZN), but that
investment is cutting into profits. And today, investors were not in a
shopping mood, trouble in aisle six.

Kroger (NYSE:KR) shares fell more than 12 percent to $22.98.

And American Eagle Outfitters (NYSE:AEO) offered customers big discounts
for a prolonged period of time and what did that do? Well, it hurt gross
margins. The concern among analysts is that the retailer may need to rely
on those discounts to keep shoppers coming back. They`re hooked on them.
That offset American Eagles rise in same store sales.

Shares dropped more than 9 percent to $18.63.

HERERA: Burlington stores topped quarterly profit and sales expectations
and issued an upbeat outlook. The CEO said its online operations continue
to grow and that trends are improving at its brick-and-mortar locations.
Investors seem to like the news, sending Burlington shares up nearly 6
percent to $122.86.

And investors had their first chance to react to Tronc`s weak quarter.
After yesterday`s closed, the newspaper publisher reported earnings that
missed Wall Street estimates. Higher than expected revenue also wasn`t
enough for shareholders, but the company did get the thumbs up to sell “The
L.A. Times” to a billionaire. Nonetheless, shares fell 24 percent to
$15.05.

And L Brands which owns Victoria`s Secret posted a double-digit rise in
same store sales last month. The company also authorized a new $250
million stock buyback. Nonetheless, shares of L Brands fell more than 5
percent to $41.62.

MATHISEN: Mortgage rates now at a four-year high according to Freddie Mac.
The benchmark 30-year fixed mortgage averaged 4.46 percent last week.
Rates have gone up now for nine straight weeks even as yields on treasuries
have bounced around.

HERERA: Well, maybe it`s all those TV shows, but house-flipping is growing
in popularity, and that`s kind of curious because the returns are actually
shrinking.

Diana Olick tells us what`s going on in that market.

(BEGIN VIDEOTAPE)

TAYLOR DENCHFIELD, HOUSE FLIPPER: All the doors and windows are replaced.
Front porch, our front stoop rehabbed, landscaping enhanced, and back patio
and deck.

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Taylor Denchfield has
been flipping home since he was 17. At 25, you could say he`s a veteran.

So, you basically gutted the house inside, right?

DENCHFIELD: Yes.

OLICK: Denchfield bought this home in Silver Spring, Maryland, in
September, renovated it and put it on the market last month. It sold in
two weeks.

DENCHFIELD: You have to be able to get in for a low enough price, it has
to be a hot enough neighborhood and you have to know exactly what the build
is going to entail,

OLICK: Denchfield is a real estate agent and a builder with a staff of
contractors, so he can cut costs on all sides of a deal. He says his net
return is about $100,000 per home, far more than today`s average flipper.

Gross flipping profits that`s without the renovation costs came in at just
over $68,000 last year nationwide, according to Adam Data Solutions.
That`s the highest in eighteen years when they began tracking it. The
dollar profit is higher but the percentage return for investors dropped a
little, because the housing market is getting so expensive.

Still, the number of flippers in jumped to a ten-year high, and the share
of flippers using mortgages rose to a nine-year high.

More people may be flipping more homes, but the risk is rising. Home
prices are soaring and there`s a critical shortage of homes for sale. That
makes it harder to find the perfect property to profit on.

DENCHFIELD: Investors will come hungrier for deals. Their margins will
get tighter and at some point, it does not make financially sense to take
all the risk of a flip, floating the entire home purchase for margins that
are too tight.

OLICK: That point is not here yet, but already higher competition is
translating into lower returns.

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

(END VIDEOTAPE)

HERERA: And to read more about the state of house flipping, you can head
to our website NBR.com.

MATHISEN: Coming up, leveling the playing field for women on and off the
court.

(MUSIC)

HERERA: Here`s a look at what to watch for tomorrow.

The employment report for February will be released. It`s expected that
250,000 non-farm payrolls were added last month. Former pharmaceuticals
CEO Martin Shkreli is scheduled to be sentenced. A number of Fed officials
speak on the economy, including Chicago Fed President Charles Evans and
that`s what to watch for on Friday.

MATHISEN: Venus and Serena Williams are forces to be reckoned with, of
course, on the tennis court. And on this International Women`s Day, they
are leading the charge to close the gender gap in the workplace. Contessa
Brewer talked to them about what they`re doing both on and off the court.

(BEGIN VIDEOTAPE)

CONTESSA BREWER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Venus and Serena
Williams have been volleying for the top spots in tennis for decades.
Serena is the highest paid female athlete in the world, but ranks 51st on
“Forbes” list of all athletes. And Venus who famously pushed Wimbledon for
pay parity ranks fifth among women but doesn`t even crack “Forbes” Top 100.

VENUS WILLIAMS, PRO TENNIS PLAYER: I think there`s a lot happening.
There`s a lot more that needs to happen of course in women`s tennis now, we
have equal pay. But around the world, there`s still discrepancies.

SERENA WILLIAMS, PRO TENNIS PLAYER : In tennis, we`re lucky that most time,
it`s not all our equal pay, but then there`s off the courts things from
endorsement deals to other stuff and that just should be more equal. And
so, there`s a long way to go but I just feel like we`re getting there and,
you know, would you Venus said, we just need the other females supporting
it and we need men advocating for it as well.

BREWER: The sisters faced off for practice in Madison Square Garden
(NASDAQ:MSG) for tiebreak tens, a knockout format that pits eight top
players against each other. The practice is important for Serena who gave
birth to daughter Alexis in September and it`s given her a new perspective
on parental leave.

S. WILLIAMS: I hear some of my friends say, yes, we got I got four weeks
off when I was I couldn`t have gone back to work in any job in four weeks.

BREWER: As she heads to Indian Wells Tennis Tournament this week, Serena`s
juggling her career and family responsibilities, mindful of the struggles
of other women.

S. WILLIAMS: We have to remember we`re fighting for the bigger picture.
We might not get it today, but we want the future be better for maybe my
daughter or her daughter and so, that`s what we really are fighting for.

BREWER: Both sisters say having a support system, people who believe in
them and their value has been key to their success.

For NIGHTLY BUSINESS REPORT, Contessa Brewer.

(END VIDEOTAPE)

HERERA: McDonald`s is marking International Women`s Day by turning its
iconic logo upside down. The Golden Archers will be flipped to look like a
W on its digital channels like Instagram, Twitter and Facebook (NASDAQ:FB),
and even on some of its packaging. It was also flipped at different
restaurant locations.

More than 62 percent of McDonald`s employees are women.

MATHISEN: It`s pretty cool.

All right. Before we go, here`s another look at the day on Wall Street.
The Dow added 93 points to 24,895. Nasdaq up 31, and the S&P 500 added 12.

HERERA: And that will do it for us tonight on NIGHTLY BUSINESS REPORT.
I`m Sue Herera. Thanks for watching.

We`d like to remind you that this is the time of year your public
television station seeks your support.

MATHISEN: And we`re grateful for that support. I`m Tyler Mathisen.
Thanks again and have a great evening, everybody. We`ll see you back here
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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