Transcript: Nightly Business Report – March 9, 2018

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Hiring surges. The economy
created a lot of jobs last month, but wage growth was muted. Exactly what
Wall Street wanted.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Toys R not us. The iconic
retailer could close all its doors, leaving a big hole in the toy industry.

HERERA: Success from socks. A father/son team took a bright idea, turned
it into a million-dollar business, smashing stereotypes along the way.

Those stories and more tonight on NIGHTLY BUSINESS REPORT, for Friday,
March 9th.

MATHISEN: Good evening, everyone, and welcome. Glad you could join us.

What a way to end the week. Stocks rallied and rallied big. The Dow Jones
Industrial Average soared 440 points to 25,335. Nasdaq added 132, closing
at a record. And the S&P 500 gained 47, after the monthly jobs report for
February turned out to be just what Wall Street hoped for.

Wall Street and Main Street cheered the creation of 313,000 jobs, a lot
more than expected and a very steady unemployment rate of 4.1 percent.
Wages were up, but not a lot, easing investor concerns about a rapid
acceleration of wages and inflation.

Hampton Pearson has more on the rosy jobs picture in America.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: In February,
employers went on a hiring binge, adding 287,000 new private sector workers
to payrolls. On the way to the biggest monthly job gain in nearly two
years. Construction led the way, with 61,000 new workers. Professional
and business services and retail each added 50,000 new hires. And
manufacturing continues to rebound, with 31,000 jobs.

The unemployment rate remained at 4.1 percent for the fifth consecutive
month because of a blockbuster increase in the size of the labor force, up
806,000, the biggest monthly gain in 35 years. Treasury Secretary Steve
Mnuchin was encouraged by news of more job seekers returning to the labor
force.

STEVEN MNUCHIN, TREASURY SECRETARY: Everyone has said aren`t you concerned
about inflation given we are at full employment and given the tax cuts and
the growth in the economy? And my comment is, we`re not really at full
employment because of the participation rate. So I`m pleased it ticked up
a little bit. That`s a number that I`m very focused on.

PEARSON: But wage growth actually slowed down from previous months, up
just 2.6 percent over the last 12 months to $26.75 per hour on average.
Not the best news for Main Street, but easing market concerns about
inflation and the Fed.

DAVID KELLY, JPMORGAN CHIEF GLOBAL STRATEGIST: This economy seems
incapable of producing scary inflation. I think that`s the most important
message here. That`s positive for both stocks and bonds.

PEARSON: The next Federal Reserve meeting is less than two weeks away.
One monetary policy maker says today`s jobs report, with huge job gains,
and no sign of inflation, gives the Fed time to wait and see before raising
interest rates.

CHARLES EVANS, CHICAGO FEDERAL RESERVE BANK PRESIDENT: My own preference
would be to wait a little bit longer, let the March inflation, anomalous
inflation rate from a year ago fall out of that. Let`s make sure these
sort of Amazon (NASDAQ:AMZN) disruptive kind of pricing models aren`t
continuing to finding their way into keeping inflation lower than that.

PEARSON: There are economic X-factors in the months ahead. First, the
expected boost for both businesses and consumers from the Trump tax cuts.
But perhaps the biggest speed bump, the coming tariffs on steel and
aluminum, and their impact on the job market.

For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson in Washington.

(END VIDEOTAPE)

HERERA: Let`s turn now to Anthony Chan for more on that strong jobs
report. He is the chief economist over at Chase.

Anthony, always good to have you on the show. Thanks for joining us.

ANTHONY CHAN, CHASE CHIEF ECONOMIST: Glad to be here.

HERERA: Was this report as good as Wall Street seems to think it is?

CHAN: Well, I think that this report gave you some good news on a few
fronts. First of all, you have more jobs being created than the market was
expecting. And at the same time, you don`t see wage pressures that are so
concerning that the Federal Reserve has to end the party a little early.

And I think the reason for that is pretty simple. We had a lot of people
re-entering the labor force. And remember when new people come into the
labor force, they usually don`t have a strong bargaining position when it
comes to wages, and I think that`s what`s restraining wages.

MATHISEN: This was an extremely strong number it seems to me in terms of
the number of jobs added, in terms of the number of people who came back to
the workforce. What does it tell you about how strong this economy is?
And do you worry that it could get at some point into that overheating
phase?

CHAN: I don`t think that for the moment I`m really concerned. What I`m
more concerned about is that productivity growth doesn`t seem to be
accelerating. If you look at the number of hours worked and what the labor
input into the first quarter, that`s probably going to be 2 percent or a
little bit more. And I look for economic growth to be 2 percent or a
little bit more in the first quarter.

So that means we are not getting a lot of productivity growth. And we need
productivity growth because whenever you see wage gains if they`re not
accompanied by-productivity growth, then that has the potential to become
inflationary. But so far, the inflation is still contained but I want to
see some productivity growth.

HERERA: You know, Treasury Secretary Mnuchin on CNBC flagged the
participation rate as one reason why he is not worried about inflation.
What do you make of that participation rate?

CHAN: Well, everybody will look at the participation rate increase. And
they say that`s great news. And that in fact is exactly what you want to
occur so that inflationary pressures don`t get out of control.

One other number that I look at is the number of people working part-time
for economic reasons. That actually jumped in the latest month. And those
are individuals that actually want to work longer hours. And they don`t
necessarily demand higher wages to work longer hours. They actually want
to do it. And so, that`s another factor out there that is restraining
overall wage pressures.

Keep in mind that when you look at the change in the labor force over the
last 12 months, it`s running almost twice as fast as the increase in the
labor force that we saw all of last year. So, we continue to increase the
labor force, bringing people from the fringes into the labor force. That`s
going to also be another restraining factor for wages.

HERERA: On that note, Anthony, thank you as always. Anthony Chan with
Chase.

CHAN: Thank you.

MATHISEN: And that strong jobs report came on the nine year anniversary of
the bull market, one of the longest of all time. But just how much longer
can this bull run?

Mike Santoli tackles that one.

(BEGIN VIDEOTAPE)

MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT: There is a way to
view the past nine years as three shorter bull markets in one, separated by
severe setbacks that reset valuations and kept investors` risk appetite in
check. The first of the three phases was the initial burst off the March
2009 lows as the global financial crisis was ending and stocks were
depressed.

Federal Reserve support and a slowly recovery economy helped send the S&P
500 whistling higher about 100 percent over the nee two years. Then, in
mid-2011, the European debt crisis and fears of a U.S. government default
send the S&P 500 down 19 percent, slightly short of the popular 20 percent
threshold that defines a bear market.

That fall, the next mini bull run began as the economy survived and energy
prices surged, driving stocks up another 80 percent or so until mid-2015,
when the oil crash and global profit downturn caused a severe seven-month
market correction. Industrial energy and small cap stocks lost, well, more
than 20 percent in what some call another stealth bear market.

The market bottomed in February 2016, and accelerated after the election of
President Trump, heading up 50 percent to record highs this past January
before the recent sharp fall back. Now with the strong U.S. economy
getting a heavy dose of tax cut stimulus the Federal Reserve is set to lift
interest rates in coming weeks and months.

This will cause the usual debate over whether the economic expansion can
persist without inviting its own demise. But the idea that stocks are only
in their third brief bull run of the past decade might mean that this cycle
is not quite as old as it first seems.

For NIGHTLY BUSINESS REPORT, I`m Mike Santoli.

(END VIDEOTAPE)

HERERA: The head of Goldman Sachs (NYSE:GS) is reportedly planning to step
down as soon as the end of the year. According to the “Wall Street
Journal,” 63-year-old Lloyd Blankfein remains in control of the timing of
his exit. And today, he tweeted out a wry tweet about just that.

Quote: It is the “Wall Street Journal`s” announcement, not mine. I feel
like Huck Finn listening to his own eulogy.

Blankfein has been CEO over the past dozen years and saw it through the
financial crisis. It`s expected one of Goldman`s co-presidents will
succeed him. Shares of Goldman rose today. And since Mr. Blankfein was
named CEO in 2006, the stock is up 75 percent. But over that same time
frame, the S&P has more than doubled.

MATHISEN: Toys “R” us once considered the leader in toys may be on the
verge of shutting awful its U.S. stores. And as Courtney Reagan reports,
it could mark a new chapter for the entire toy industry.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s been more
than six decades since the first Toys “R” Us stores opened its doors. It
may be just a matter of weeks until all remaining stores open for the last
time. Toys “R” Us filed for bankruptcy in September and has been working
through a plan to restructure its business. It has already closed around
200 stores.

Under the law, companies only get 210 days to negotiate all leases, which
for Toys “R” Us is hundreds more stores. With just over a month left, the
toy retailer is running out of time. Bankruptcy experts say if Toys “R” Us
and its landlords can`t come to agreements by the deadline, liquidation is
all but inevitable.

Walmart sells the most toys in the U.S. and KeyBanc estimates Target
(NYSE:TGT) is second, followed by Amazon (NASDAQ:AMZN). Toys “R” Us isn`t
in the top three but it`s still important to toy makers. And at least one
analyst is considering how a full Toys “R” Us liquidation will hurt.

Barclay`s estimates 9 percent of Hasbro`s sales come from Toys “R” Us and 8
percent of Mattel`s. It`s now forecasting Hasbro (NYSE:HAS) could
withstand a Toys “R” Us liquidation better than Mattel (NASDAQ:MAT).

The Barbie owner is early in its own turnaround plan and a Toys “R” Us
liquidation could be a more significant hit, pushing out of recovery.

KeyBanc estimates up to 80 percent of Hasbro (NYSE:HAS) and Mattel`s Toys
“R” Us business will ultimately be absorbed by other retailers but it could
take two years.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan.

(END VIDEOTAPE)

HERERA: Time to look at some of today`s upgrades and downgrades.

Kohl`s (NYSE:KSS) ratings was raised to outperform from market perform over
at Cowen. That firm calls Kohl`s a great American comeback story, pointing
to new products and a new strategy. The price target, $74. Shares today
closed up 1 percent to $62.97.

Wells Fargo (NYSE:WFC) lowered its price target on Cigna to $175 a share.
The firm cites concerns around Cigna`s long term growth outlook. The
analyst also says there are risks around the purchase of Express
(NYSE:EXPR) Scripts which of course we told you about yesterday. The stock
was up fractionally to $173.36.

MATHISEN: And still ahead, jail time for the man who became known as
Pharma Bro. But, first, a look at the week`s strong performance for
stocks.

(MUSIC)

HERERA: Intel (NASDAQ:INTC) is reportedly considering a bid for Broadcom
(NASDAQ:BRCM). According to the “Wall Street Journal,” the company is
considering a range of options in reaction to Broadcom`s hostile pursuit of
Qualcomm (NASDAQ:QCOM), including a bid for Broadcom (NASDAQ:BRCM) itself.

MATHISEN: Wynn Resorts (NASDAQ:WYNN) has agreed to pay more than $2.5
billion to settle a lawsuit brought by a Japanese slot machine company
ending a six-year dispute. The settlement could clear a path for Steve
Wynn, the company`s biggest shareholder and former chairman, to sell part
of his stake in the company. The new CEO says the deal allows him to focus
on the future.

(BEGIN VIDEO CLIP)

MATT MADDOX, WYNN RESORTS CEO: It was taking the air out of room. And so
when I looked at it, I thought, buying back 24 million shares of stock at
$78 financed to the 6 percent interest rate is great for our shareholders.
So just make that deal and be done.

(END VIDEO CLIP)

MATHISEN: Steve Wynn, of course, resigned from the company he founded last
month amid allegations of sexual misconduct against employees.

HERERA: Martin Shkreli, the former pharmaceutical executive who became
known as “Pharma Bro” was sentenced to seven years in prison for defrauding
investors.

Meg Tirrell is at the courthouse in Brooklyn.

(BEGIN VIDEOTAPE)

MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: A federal judge has
sentenced Martin Shkreli to seven years in prison for on his conviction of
three counts of securities fraud and conspiracy to commit securities fraud.
That sentence will include credit for the time he has already served in
prison, about six months already. He will also have to pay a $75,000 fine
and be subject to three years of probation after his release.

The judge had already ruled that he will have to forfeit about $7.4 million
in association with those crimes, which have to do with former hedge funds
that he ran and illegally controlling the share prices or attempting to, at
a former biotechnology company called Retrophin that he ran. They don`t
have anything to do with what made Martin Shkreli famous and earned him the
moniker “Pharma Bro”. That was when he bought the rights to an old
medicine and raised the price by 5,000 percent overnight.

The government prosecutors had been seeking a sentence in these crimes of
at least 15 years in prison, whereas Shkreli`s defense team had been
seeking 12 to 18 months.

UNIDENTIFIED MALE: When the guidelines are 25 years and the government is
demanding 15 years, one would think that a seven-year sentence is good.
But I`m disappointed. I thought the sentence should have been less than
seven years. But you know, Martin is fine, and he will be fine. And
obviously it could have been a lot worse.

TIRRELL: Before the sentencing, Shkreli had an opportunity to address the
judge. He got emotional at times, even breaking down in tears, telling her
that he had made mistakes, but saying, quote, there is so much more I want
to do and I will do it the right way.

For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell in the Brooklyn courthouse.

(END VIDEOTAPE)

MATHISEN: Well, sales growth disappointed Big Lots (NYSE:BIG), and that`s
where we begin tonight`s “Market Focus”.

The discount retailer said weaker demand in its furniture category caused
sales to slip overall. The company currently renovating its stores to put
a stronger emphasis on furniture and seasonal items. Big Lots (NYSE:BIG)
expects profits for the quarter and full year to miss estimates. And
shares were off 10 percent on this up day. They close at $48.45.

Meantime, Party City reported quarterly profits and sales that topped
analyst expectations. Revenue for the full year also picked up. And the
company`s gross margins improved. Party City shares finished up more than
7.5 percent at $15.65.

HERERA: Merger talks between agricultural companies Bunge and Archer
Daniels Midland have reportedly come to a halt. “The Wall Street Journal”
says the two companies have failed to reach an agreement following talks on
how to avoid antitrust issues. Shares of Archer Daniels Midland were up a
penny to $43.30. Meanwhile, Bunge shares fell more than 2 percent to
$74.96.

And General Electric (NYSE:GE) is reportedly considering selling its
electric engineering business. The company bought the division back in
2011 for more than $3 billion. But according to “Reuters”, a potential
spin-off will likely fetch much less. GE shares were up 4 percent to
$14.94.

MATHISEN: This week`s market monitor has names he says will benefit from
positive economic growth this year. The last time he was on back in July,
he chose the SPDR S&P biotech ETF, which is up 20 percent, Google
(NASDAQ:GOOG), up 20 percent. And Alibaba, 25 percent higher.

Here`s Ron Weiner, partner at RDM Financial Group at Hightower.

We are going to go lightning round here, Ron. Your first pick is Bank of
America (NYSE:BAC). Why?

RON WEINER, RDM FINANCIAL GROUP AT HIGHTOWER PARTNER: We like all the
financials right now. Interest rates are going up. They are going to make
what we call net interest income. It`s going to fall to their bottom line
by charging more from people who borrow.

We like that the tax rates is going up from 30 to 20. We like they are
going to be lending more because of a growing economy and they are not that
cheap. It makes sense. We like them all. We actually like regionals even
be better. We think there`s going to be a lot of consolidation, but we`ll
go at Bank of America (NYSE:BAC) for this round.

HERERA: All right. United Rentals (NYSE:URI), you wouldn`t think of a
digital strategy with United Rentals (NYSE:URI). But that`s one of the
reasons why you like it?

WEINER: Well, you know, they say people went out to the gold rush to find
gold and Levi Strauss made all the money selling them jeans. This is what
they are doing.

So, what they are doing is they will rent you anything for business. They
also made an acquisition last year of a company that sells Caterpillar
(NYSE:CAT) type equipment or that rents Caterpillar (NYSE:CAT) type
equipment. So, with infrastructure, with increase in CapEx, which is
expected, most of them are going to rent equipment, they were soft for
about eight quarters. They had soft rentals. Now they are turned around
and they`re seeing stronger rental rates. So, we like that going forward.

MATHISEN: And your final pick is a departure from those first two. It is
Nvidia, which is one of the leading semiconductor companies involved in
autonomous drive vehicles and artificial intelligence.

WEINER: Yes. Well, it`s only about 5 percent of their revenues right now,
which is why we`re still so high on a company that`s done incredibly well.
You know, you have to look at when Eisenhower built out the interstate
commerce system in the United States, it changed everything.

So, whether you bought Chrysler or GM or Ford, it didn`t matter. Whether
you bought Reynolds Aluminum or you bought Alcoa (NYSE:AA), it didn`t
matter. It was the infrastructure build out.

Now, we have the technology build out. AI is artificial intelligence,
autonomous cars, they`re going to need many chips. There are going to be
many winners around the world and a lot of companies. Nvidia just knows
how to do it well. They have chips that are lightning fast.

MATHISEN: Ron, have a great weekend. Enjoy it down there in Boynton
Beach. It`s snowy here.

Ron Weiner with RDM Financial Group —

WEINER: Yes, sorry about that.

MATHISEN: — at Hightower.

And to read more about Ron`s stock picks, head to our Website, NBR.com.

HERERA: Coming up, a young entrepreneur who is really socking it to them.
Tonight`s “Bright Idea” is next.

(MUSIC)

MATHISEN: A hundred years ago, people with the chromosome disorder known
as Down syndrome could expect to live about 10 years. That`s all. Today,
they can expect to live into their 50s, maybe even longer. But the labor
force participation rate for people with any disability in the United
States is only about 20 percent.

That`s one reason a young entrepreneur with Down syndrome got the bright
idea to start his own business, selling socks.

(BEGIN VIDEOTAPE)

MATHISEN: Down syndrome never hold you back?

JOHN CRONIN, CO-FOUNDER, JOHN`S CRAZY SOCKS: Down syndrome never hold me
back.

MATHISEN: In fact, one might say John Cronin`s disability helps push him
forward. Starting his last year of high school in 2016 on New York`s Long
Island, John thought maybe he and his father, Mark, could start a business
together.

MARK X. CRONIN, JOHN`S CRAZY SOCKS CO-FOUNDER AND PRES.: We walked and
talked about starting a food truck. But as he points out neither of us can
really cook.

MATHISEN: Instead, John cooked up an idea to sell socks.

J. CRONIN: I think it`s fun. I think they are colorful.

M. CRONIN: John, his whole life, had worn colorful crazy socks. It was
kind of his thing.

J. CRONIN: John Lemon —

M. CRONIN: John Lemon stocks, you like those.

MATHISEN: For about a thousand dollars, they build a Website, stocked some
socks, and by December 2016, they were online and in business, selling more
than $13,000 worth of socks in a month. John delivered a lot of them
himself, a long with “thank you” notes. Going that extra mile is what John
is all about.

M. CRONIN: Right away, we had people telling all the things John couldn`t
do. And John has spent his life demonstrating what he could do.

MATHISEN: John, an avid snowshoer and soccer player, also decided to
donate a portion of the company`s profits to the Special Olympics, a cause
he`s even lobbied Congress for.

M. CRONIN: People right away saw him as a role model. I had to wrap my
head around that because he is just my son.

MATHISEN: Last February, John designed a Down syndrome awareness sock.
For 2018, there is a new version.

J. CRONIN: I did it in yellow because it`s Down syndrome colors.

MATHISEN: Now, among the more than 1,700 different types of socks they
sell, the flowers, the sport stars, the presidents past and present, there
are socks aimed at raising awareness of autism, breast cancer, and other
causes the company donates to.

And somehow, John also goes to trade shows to find new products. He
participated in a Massachusetts startup incubator. And he has travelled to
do speaking engagements. It`s been quite a year, and business hasn`t been
too bad either.

M. CRONIN: We shipped over 42,000 orders. And we did $1.7 million in
revenue.

MATHISEN: But this story is less about dollars and more about what makes
sense. John is lucky. Most people with disabilities have few options
after high school.

M. CRONIN: It`s scary. The next big frontier is employment.

MATHISEN: John`s Crazy Socks has grown to employ 34 people, 14 whom have
disabilities.

MATT CARVAJAL, EMPLOYEE: I go to warehouse and I put a sock, I get it
ready for shipping.

BRANDON MICHITSCH, EMPLOYEE: I learned to make new friends, and I get
along with everyone. And that`s what makes me happy.

M. CRONIN: We want the world to see what`s possible when you give someone
a chance. Things are not segregated here. Everybody works side by side.
And it is a better workplace because of that.

J. CRONIN: I love you.

UNIDENTIFIED FEMALE: I love you, too.

MATHISEN: When one where going that extra mile comes naturally.

M. CRONIN: We have to succeed, because if we don`t, we are letting these
guys down. And we have to show other businesses you can do this, too.

(END VIDEOTAPE)

MATHISEN: What a guy. That new Down syndrome awareness socks has just
become available ahead of the Seventh Annual World Down Syndrome Day. It
comes up on March 21st. That`s 3/21 because Down syndrome indicates a
third copy of the 21st chromosome.

HERERA: I did not know that, but what a great story.

MATHISEN: Cool. Really cool.

HERERA: Well, before we go, we have news to share with you. Ty is taking
on a new role at CNBC. He is the vice president of event strategy, among
other things. Congratulations.

MATHISEN: Thank you very much.

HERERA: However, that also means that he will no longer be the co-anchor
of NIGHTLY BUSINESS REPORT. Starting on Monday, Bill Griffith will be
joining us every night.

I`m going to — I have got to get Kleenex. Sorry. Sorry. But —

MATHISEN: You know, I`ve done nothing. I have been accused of nothing
that I know of so far.

Bill and Sue, you will be happy to know, have known each other and worked
together since college days.

HERERA: Yes.

MATHISEN: That`s probably five years ago at least.

HERERA: Maybe.

MATHISEN: Five years ago at least. Congratulations to Bill. To you, my
sincerest thanks. To Susie Gharib, my sincerest thanks as well.

Keep coming back to NBR. It won`t change. It will still be the best place
to get your business news every single night.

And with that, thank you very much for watching NIGHTLY BUSINESS REPORT.
We want to remind you that this is the time of your where your public
station seeks your support. Have a good night.

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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