Transcript: Nightly Business Report – March 27, 2018

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Bill Griffeth and Sue
Herera.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Unpredictable market. It was
a relatively quiet day until the bottom fell out of stocks. And investors
are left to wonder, what`s next?

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Corporate mistrust. Why a
scandal can exact a high cost on investors.

HERERA: Lesson plans. Apple (NASDAQ:AAPL) wants to play a bigger role in
the classroom, where providing schools with laptops and tablets is very big
business.

Those stories and much more tonight on NIGHTLY BUSINESS REPORT for Tuesday,
March 27th.

GRIFFETH: And we bid you good evening, everybody. Well, that was
certainly interesting. An unexpected turn of events late in the day sent
the blue chip Dow Industrials Average down sharply and once again moved it
into correction territory, meaning it`s now down 10 percent below its most
recent high.

It certainly didn`t look like that would happen when the market opened this
morning. In fact, for a time, the Dow was up more than 250 points. But
late in the day, as Sue said, treasury yields moved lower as traders bought
bonds, tech stocks tanked and the rest as they say is history.

When all was said and down, the Dow dropped 344 points to 23,875. The
Nasdaq was actually the bigger loser, down nearly 3 percent or the 211
points. And the S&P lost 46.

Bob Pisani has more on the surprise selloff from the New York Stock
Exchange.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was another whipsaw
session for the stock market after yesterday`s robust rally. Now, markets
took another turndown in the last hour when yields on the ten-year treasury
dropped 2.8 percent for the first time since early February. That brought
down bank stocks and other component for the markets.

With banks and tech both week, the overall market drooped. What`s going
on?

Two issues have emerged in the last month that may or may not have an
impact on earnings. First, the trade war story ebbs and flows, but
everyone agrees that an all-out trade war would be detrimental to earnings.
It`s a just not clear if we`re gong to have one or not.

Technology also took a turn for the worse midday, amid a whirlwind of bad
news. A possible crackdown from the White House on Chinese investments and
U.S. tech companies and the recent crisis in social media stocks around
Facebook (NASDAQ:FB) has led many to question whether user engagement and
advertising will listen. Not just for Facebook (NASDAQ:FB) but for other
social media stocks, as well as Google (NASDAQ:GOOG).

Finally, Nvidia announcing it was suspending testing on self driving cars
which dropped the entire semiconductor market. With semiconductor as a
leadership group, any question on earnings is going to add to the headaches
to technology.

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

(END VIDEOTAPE)

HERERA: So, let`s turn now to our guest for more on this unpredictable
market. Matt Maley is the equity strategist at Miller Tabak, and Brian
Levitt is the senior investment strategist with Oppenheimer Funds. And
they join us.

Welcome, guys. Nice to have you here.

So, Matt, what the heck happened?

MATT MALEY, MILLER TABAK EQUITY STRATEGIST: Well, it`s kind of funny. The
tech group seemed to be the catalyst today. And, of course, last week, it
was the trade issue.

But right now, we are — it`s a funny. In January, the market was riding
really high and everything was going good after the tax bill. But then
February, the market got cracked.

And people were saying, well, nothing has really changed. Well, some
things have changed now. I mean, whether it be interest rates moving
higher or the Fed being less accommodative.

And then, of course, the things that Bob was just talking about in terms of
the — whether we are going to be in a trade war or more trade stresses,
and the whole thing with social media. Some uncertainty is out there and
that`s causing the market to come down a little bit.

And to be honest with you, the one thing I`m worried about — therefore,
I`m a little cautious that we could go a little bit lower. But the other
thing I`m worried about is that everybody seems to think in the history of
the last 20 years if the market is going down, it`s got to go down 50
percent or more because that`s what happened in 2000 and 2008, where long
term history tells us that even bear markets are usually not that bad. So,
people need to adjust their thinking accordingly.

GRIFFETH: And, in fact, Brian, people have been waiting for some kind of a
correction. You know, funny, people sitting on the sidelines waiting for a
correction to get in. But now that it`s here, they`re wondering, gee,
should I get in with the market going low like this?

BRIAN LEVITT, OPPENHEIMER FUNDS SR. INVESTMENT STRATEGIST: Yes, that`s
always the case. I mean, it had been a while since we had seen a
correction. The last one was towards the end of 2015 into the beginning of
2016. The reason why the markets were sanguine last year is there just was
not a lot of policy uncertainty with regards to U.S. monetary policy. U.S.
trade policy, European monetary policy. So, the markets have a very
sanguine year.

What`s happened so far this year is uncertainty around monetary policy, the
Federal Reserve is raising interest rates and signaling more rate hikes
ahead and concerns over trade policy.

I want to make a couple of points on that. The first is, if you listen to
Jerome Powell at the Fed, he talked about allowing the economy to run a
little bit hot for some time. So, I don`t think the Fed is going to be
overly aggressive.

The second is everything we`ve heard so far around trade is very small. In
my mind, it`s very politically driven. It is not about macro economics.
The last thing the Trump administration wants is a bad macro environment
heading into the midterms or the 2020 elections.

So, I advise clients as always during market corrections is to take them in
stride. They happen almost every year and will represent buying
opportunities in what we believe will be an elongated cycle. This cycle is
going to end like all cycles do, on the back of Fed interest rate hikes and
an inverted yield curve leading to a recession. We are not there yet.

HERERA: You know, Matt, what seems to be unsettling though is the
volatility that was so absent last year is back with a vengeance. And you
are seeing whipsaw-like activity usually in the last hour or so of trading.
And it`s unnerving to some investors.

MALEY: It definitely is. Part of that of course has to do with the
mechanization of the trading. You know, whether it`s be high frequency
traders or algorithms, but these — you know, computerized trading has
caused this big whipping in the stock market, especially like you said in
the last hour. That`s why I think it`s really important to talk to your
investment adviser in advance.

If we see more weakness here, don`t be like what stock should I pick now,
the stock market is down a lot today. No, have it in advance. Pick the
stocks you want or the groups or the ETFs you want in advance so you can
calmly pick your spots and buy them. And I think right now, one of the
things, with all the uncertainty out there, is look for companies that have
not just paid good dividends but have a history of strong dividend growth
so that if the market is in an extended period of uncertainty, you can be
paid — you know, you`re paid to wait. So, that`s I think a good way to
play it right.

HERERA: All right. Gentlemen, we could go on forever and we will have you
back because we know this market, if anything, is going to continue to be a
headline for us.

Matt Maley with Miller Tabak and Brian Levitt with Oppenheimer Funds —
thank you both.

GRIFFETH: Elsewhere, we have a handful of mergers and acquisitions to tell
you about tonight. GlaxoSmithKline is buying Novartis out of its stake in
their customer health joint venture. The price tag is $13 billion. The
decision comes after Glaxo last week decided not to buy Pfizer`s consumer
health care business.

Elsewhere, Brookfield Property Partners is buying U.S. mall owner GGP for a
little more than $9 billion in cash. Brookfield already owns a third of
GGP, which is one of the largest mall operators in the country.

And finally, Dutch company Akzo Nobel is selling its specialty chemicals
unit to private equity firm Carlyle for $12.5 billion.

HERERA: Home prices started the year with some gains. According the Case-
Shiller Home Price Index, prices rose more than 6 percent in January. That
increase outpacing wage growth and inflation. As we have been reporting,
prices were pushed higher by a shortage of homes for sale and increased
competition for the ones that are on the market.

GRIFFETH: Consumer confidence eased in March. That`s the first decline we
have seen this year. According to the conference board, that softening
reflects a slight decline in the outlook for business conditions and the
stock market. Despite the dip, though, the shares of consumers who said
that jobs are plentiful, that climbed to the highest level since 2001.

HERERA: And that upbeat outlook for the labor market was reflected in
CNBC`s latest All America Survey, which gauges the sentiment of Americans
nationwide.

And Steve Liesman has the result.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: A strong majority of
Americans feel so good about their job prospects these days, they feel they
can up and quit. The CNBC All America Economic Survey, a poll of 800
Americans nationwide, finds that 61 percent believe they can leave their
job and find another one at similar pay and benefits in their own area in
just a few months, 30 percent not so confident.

And while many see the supply and demand for workers is balanced in their
industry, 37 percent say there are more jobs than workers, underpinning
their confidence in finding that new employer. Just 21 percent see more
workers than jobs.

That confidence in jobs does not spill over into the stock market.
Apparently spooked by recent market declines and the rise in volatility,
the percentage of Americans who say now is a good time to invest in
equities fell sharply to 41 percent from 50 percent in the prior survey in
December. Still, market optimism is only fallen back down to average
levels.

And the percentage of Americans who say they own stocks remains high at 58
percent. That growth could be coming from average mom and pop investors.
The percent of Americans with less than $50,000 in the market has actually
grown five points to 22 percent compared to last year.

Part of the recent market volatility has been linked to fears of a trade
war and Americans overall aren`t too keen on the tariffs imposed by Trump
administration. Thirty-six percent say they don`t know enough to say, but
35 oppose this deal and looming tariffs and just 29 percent support them.

Meanwhile, views on Canada, Mexico and China actually improved, compared
with a prior survey in 2016, few Americans see this countries as economic
threats and more view them as economic opportunities for the United States.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

HERERA: And when it comes to trade, the White House says it has reached an
agreement in principle on a new deal with South Korea. Though details were
not released, Seoul announced a deal yesterday to limit U.S. imports of
steel while increasing automakers` access to the Korean market.

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

And we begin tonight with Facebook (NASDAQ:FB). Bank of America (NYSE:BAC)
cutting its price target on that stock for the second time in five days,
now down to $210. The firm says that the FTC probe raises the risk of
civil penalties and it could take years to resolve. However, the analyst
did maintain his buy rating on Facebook (NASDAQ:FB). The stock lost nearly
5 percent in the selloff today to close at $152.22. And we`ll have more on
Facebook (NASDAQ:FB) a little bit later in our program tonight.

Meantime, SunTrust is lowering its rating on Newell Brands from hold to
buy. The analyst there cites the recent agreement with an activist
investor and the decision to sell $10 billion worth of company assets. The
price target now, $30. The stock today was down 3 percent to $25.19.

HERERA: Citi is no longer telling clients to sell Roku. Today, it
upgraded the stock to neutral. The analyst cites the rollout of the Roku
channel app on Samsung`s smart TVs. The price target is now $36 a share.
Shares fell more than 3 percent to $33 even.

UBS upgraded its rating on KB Home (NYSE:KBH) to neutral from sell. The
analyst cites stronger housing fundamentals and the stock`s current
valuation. The price target was increased to $32, but the stock fell 1
percent in an overall down market to $28.13.

Bill?

GRIFFETH: Still ahead, Apple`s big push into America`s classrooms.

(MUSIC)

GRIFFETH: A legal win for Oracle (NASDAQ:ORCL). A federal appeals court
has revived Oracle`s multibillion dollar copyright infringement claim
against Google (NASDAQ:GOOG). The judge today that Google`s use of
Oracle`s java programming technology was unfair and he ordered a trial to
determine the damages. This case has divided Silicon Valley because it
pits those who develop interface code against those who rely on it to
develop software programs.

HERERA: There are conflicting reports tonight on whether Facebook`s CEO
will testify in front of Congress. He has been asked by a number of
different panels. If he does, it will be Mark Zuckerberg`s first
congressional testimony. CNN first reported he agreed to testify but a
statement from a House committee says that the committee is still working
to determine the day and time for his possible appearance.

Separately, Mr. Zuckerberg declined to appear in front of a U.K.
parliamentary committee hearing that is also investigating the Cambridge
Analytica scandal.

GRIFFETH: And Facebook (NASDAQ:FB), of course, is just the latest company
to add its name to a long list of corporate scandals from Wells Fargo
(NYSE:WFC), Wynn Resorts (NASDAQ:WYNN), companies have been behaving badly.
But at what cost is corporate mistrust hurting investors?

Vito Racanelli wrote about it in “Barron`s” and he`s here to join us to
talk about that tonight.

I mean, it`s a confidence game in many cases because these companies in
many cases rely on the confidence of customers. And if they don`t have
that confidence, they are going to flee and there goes to stock price,
right?

VITO RACANELLI, BARRON`S SR. EDITOR: That`s right. That`s right. In the
case of Facebook (NASDAQ:FB), it has been very painful for shareholders.
You may have noticed that market cap was down $95 billion when it checked
it today and it hit a low today.

So, that`s pretty painful in the short term. And in the long term, there
is loss of trust. And I think that Wells Fargo (NYSE:WFC) is a pretty good
example of that in that their problems began in 2015 if you remember with
bogus accounts and such. And there were other issues as well since then.

You look at Wells Fargo (NYSE:WFC), which I might add, had a pristine
reputation going through the 2008 financial crisis with an untarnished
reputation. And since then, their earnings have gone down and their stock
has underperformed not only the market but the group that`s done really,
really well in the last 18 months.

So, there`s definitely prices to pay for investors.

HERERA: It seems to me we are also at kind of an inflection point perhaps,
if you will, that people now seem to care about the way that companies make
their money and produce their product and service their clients, not just
the bottom line.

RACANELLI: Sue, like it or not, that`s correct, at least in the studies
that we have done. And I`ll give you an example.

We do something called — “Barron`s” does something called most respected
companies every year. And we ask our readers, usually professional money
managers, to rank companies. But another thing that we do is we ask them
to rank what they think is an important, an important characteristic for
the company, we offer them like sound business, strong management. One of
them is ethical business practices.

And I`ll tell you, in the 2005 survey we did, only 10 percent of the
respondents said it was the most important thing. Last year, nearly 30
percent said it was most important and it was the number one ranked
characteristic that professional investors wanted to see.

And then, secondly, you see Larry Fink of Blackrock saying that companies
should serve a social purpose. I mean, that`s a whole other ball of wax
there. But I mean, it`s all related to the ethics.

GRIFFETH: Indeed, it`s different in some cases.

Vito, good to see you.

RACANELLI: Well, I mean —

GRIFFETH: I got to go at this point. That was a summation there. It
wasn`t a question.

But thanks for joining us.

Vito Racanelli from “Barron`s”.

RACANELLI: Thanks for having me.

GRIFFETH: You bet. Thanks.

HERERA: General Electric (NYSE:GE) shares take off on rumors of a possible
investment by Warren Buffett. That`s where we begin tonight`s “Market
Focus”.

“Bloomberg” said there was speculation among traders that the billionaire
investor may be considering a stake in the struggling industrial giant.
The uncertainty led to a run up in GE`s stock. The shares climbed more
than 6 percent at one point. And while Mr. Buffett hasn`t made an
announcement of a GE investment, in the past, he said he would consider
taking a position in the company at the right price. GE shares rose nearly
4.5 percent to $13.44.

Citron Research said it is betting against Twitter because it is vulnerable
to potential privacy regulations. Citron was bullish on the stock just
about two months ago. It has since changed its views due to the growing
conversation around how companies handle users` data.

Twitter responded saying users know their tweets are public and added that
users` direct messages are not sold. Twitter shares though were off 12
percent to $28.07.

And the spice maker McCormick (NYSE:MKC) said a recent acquisition helped
the company`s quarterly results. Earnings were a beat while revenues was
in line with estimates. The company also said some of the savings from tax
reform will go to employee bonuses, wage increases and strategic
investments. The shares were up a fraction to $107.35.

GRIFFETH: Aetna (NYSE:AET) is going to offer prescription drug rebates to
about 3 million of its members that have fully ensured plans. The health
insurer said that the move is intended to give consumers more transparency
when it comes to drug pricing. We told you earlier this month that
UnitedHealth Group (NYSE:UNH) has made a similar move as well. Aetna
(NYSE:AET) shares today finished down 1 percent to $168.36.

And after the bell, Lululemon said that strength overseas coupled with
robust e-commerce sales here in the U.S. helped its earnings beat on the
top and bottom line. Shares initially rose sharply in the extended session
but they finished the regular session today down 2 percent to $78.71.

And also after the bell, Nike (NYSE:NKE) announced it has extended its
partnership with the NFL. Under that deal, Nike (NYSE:NKE) will continue
to provide players who are under contract with Nike (NYSE:NKE) with
footwear and gloves for game days. Nike (NYSE:NKE) shares initially rose
in the extended session. They ended the regular day up a fraction to
$66.17.

HERERA: Well, it goes without saying that classrooms today don`t look like
they did when you and I were kids. Gone are the days of number 2 pencils
and those sharpeners. Technology is playing a bigger role in schools.

And as Josh Lipton reports from Chicago, Apple (NASDAQ:AAPL) is fighting
for a bigger presence in America`s classrooms.

(BEGIN VIDEOTAPE)

JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Chalk boards and
notebooks are a thing of the past in America`s classrooms. Today, they are
outfitted with laptops, tablets, and smart boards to prepare students for
21st century learning.

It`s also a big business for America`s tech companies. The global
educational technology market generated revenue last year of an estimated
$18 billion.

So, it`s no surprise that Apple (NASDAQ:AAPL) wants a bigger piece of that
market. Today, Apple`s CEO, Tim Cook, took the stage here at Lane Tech
High School in Chicago where he introduced new products and apps for
teachers and students.

TIM COOK, APPLE CEO: At Apple (NASDAQ:AAPL), we care deeply about
education because we love kids. And we love teachers. We love creativity
and curiosity. And we know that our products can help bring out the
creative genius in every kid.

LIPTON: Apple (NASDAQ:AAPL) set up a demo room at the school showing off
new iPads and apps. Analysts who attended the event say this could be a
smart move.

GENE MUNSTER, LOUP VENTURES: The education is about 15 percent of Apple`s
business. And the reason why this helps is this is the first time we have
a comprehensive suite of management tools and curriculum around iOS
devices, specifically the iPad, which is critical to education.

LIPTON: Apple (NASDAQ:AAPL) has a real fight on its hands, though. Tim
Cook`s company is not the dominant force in the American classroom.
Instead, rival Google (NASDAQ:GOOG) leads the way. Devices running
Google`s operating systems on Chromebooks and Android tablets controls
nearly 60 percent of the U.S. education market last year. That dwarfs both
Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT).

Some say Google`s advantage lies in the relative affordability of its
hardware and its software, like G Suite, which allows students to
collaborate on document and projects.

With today`s event, it`s clear that Cook`s intent is to teach rivals a
lesson about how to compete and win this the classroom.

Josh Lipton, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

HERERA: Coming up, a self driving jaguar. They may soon be on the road,
sooner than you think.

(MUSIC)

GRIFFETH: The state of Arizona has now suspended Uber`s driverless car
testing after last week`s deadly accident. In a letter, the mayor said the
video of the accident was both disturbing and alarming and it raises many
questions about the ability of Uber to continue testing in Arizona. Uber
had already suspended operations on its own and said it would keep a
dialogue open with the state.

HERERA: The chip maker Nvidia reportedly plans to suspend self driving
tests worldwide after that fatal Uber accident in Arizona. The company had
been testing self driving technology in New Jersey, Santa Clara, Japan, and
Germany. That news pressured the stock, sending it down more than 7
percent in trading today.

GRIFFETH: And still other companies are moving ahead with their plans to
roll out autonomous cars. Waymo, the company that was spun out of Google
(NASDAQ:GOOG), has now signed a deal with Jaguar, meaning you say soon see
driverless Jags on the road.

Phil LeBeau has our story tonight.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Think of Jaguar, and
this is what comes to behind mind, high-end performance cars. But soon,
this will be the image of Jaguar, an all electric I-PACE SUV modified to
become a Waymo self driving vehicle.

JOHN KRAFCIK, WAYMO CEO: We like the idea of something a little bit more
compact. As you do a tour of the world, there are very few full electric
vehicles with batteries the size of this incredible Jaguar I-PACE. So,
it`s really the perfect fit for us.

LEBEAU: The self-driving I-PACE SUVs will eventually join Chrysler
Pacifica hybrid minivans Waymo was currently testing in Arizona. And later
this year, they`ll start giving rides to the public as Waymo races to beat
auto makers and tech firms with a self driving ride share service.

SCOTT CORWIN, DELOITTE MANAGING EDITOR: One could easily imagine that at
some point, there will be a shakeout and we will end up with two or three
or four major autonomous operating system players that sort of dominate the
industry.

LEBEAU: But following the death of an Arizona woman hit by an Uber test
car in autonomous mode, some are asking if regulators should hit the brakes
on allowing self driving vehicles on public roads, a concern Waymo
executives have discussed with safety agencies.

KRAFCIK: We are continuously chatting with them. And again, I think
that`s part of our responsibility at Waymo, is to make sure the world and
the cities in which we perform and the regulators who regulate those cities
understand our technology.

LEBEAU: Waymo`s technology, including the LIDAR and cameras and dome on
the roof of this I-PACE will be out on the road in a couple of years. And
eventually, Waymo expects to have 20,000 of these modified SUVs giving
rides to the public with no one behind the wheel.

Phil LeBeau, NIGHTLY BUSINESS REPORT, New York.

(END VIDEOTAPE)

HERERA: IAC is reportedly exploring a possible sale of dictionary.com.
According to “The Wall Street Journal”, two potential suitors approached
IAC Interactive which owns the online dictionary. In February, 15-1/2
million unique visitors logged on to that side. Dictionary.com and its
sister site, Thesaurus.com took in more than $20 million in revenue last
year. My kids helped with that. Some say this could potentially be a
defining moment for the company.

GRIFFETH: That`s a lot of money for words, for sure.

Finally, tonight with the start of baseball season a few days away, the
league`s payrolls have been released. According to “The Associated Press”,
the Red Sox payroll will top the majors this year at about $223 million.
That ends the L.A. Dodgers four-year run at number one. In second place,
the San Francisco Giants with $203 million, and rounding out the top three,
as you can see, at $183 million, the cubbies in Chicago.

Traditional leaders, the New York Yankees, they are number seven on the
list this year with a payroll of just above $165 million. That`s their
lowest payroll since 2003.

HERERA: Before we go, a look at the selloff and the wild day on Wall
Street today. The Dow dropped 344 points to 23,857. Nasdaq was the
biggest loser, down 211 points, nearly 3 percent. And the S&P 500 was off
46.

On that note, that does it for us tonight. I`m Sue Herera. Thanks for
joining us.

GRIFFETH: Yes. What will tomorrow bring?

HERERA: I have no — volatility.

GRIFFETH: No doubt.

I`m Bill Griffeth. Have a great evening. We`ll see you tomorrow.

END

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