Transcript: Nightly Business Report – March 29, 2018

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Final push. A rally of more
than 1 percent today on Wall Street. But it wasn`t enough to keep most
stocks out of the red as the first quarter comes to a close.

So, how should you position yourself for the second three months of this
year?

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: The American stream. More
and more Americans are cutting the cord. How many? We have some numbers.
And they may surprise you.

HERERA: And batter up. It`s opening day for the teams and the fans, but
also for the big business of America`s favorite pastime.

All that and more on NIGHTLY BUSINESS REPORT for Thursday, March 29th.

GRIFFETH: And we do bid you good evening, everybody. And welcome.

Believe it or not, we closed the books today on the month of March and the
first quarter of 2018. And stocks went out with a very strong finish. The
tech sector which, as you know, had been showing signs of cracking recently
actually led the way higher today.

Here are the final numbers for this Thursday. The Dow rose by 254 points,
putting us back above 24,000. Intel (NASDAQ:INTC) actually helped out,
rising by 5 percent on the day. The Nasdaq climbed by 114. And the S&P
added 35.

Now, for the quarter, the Dow was the big loser, falling more than 2
percent, its worst quarter since 2015, in the summertime. And it snapped a
nine-quarter win streak as a matter of fact. It`s the longest in 20 years.

And even with tech`s recent problems, that is not a misprint. The Nasdaq
climbed by more than 2 percent. I triple checked that. Couldn`t believe
it. And the S&P was down by 1.2 percent during the quarter.

HERERA: And now onto the economy where there was some strong data out
today. Jobless claims fell last week to the lowest level since January of
1973. Personal income rose nearly half a percent in February, the third
straight increase. While spending rose marginally, and the University of
Michigan`s consumer sentiment reading last month hit its highest level
since 2004.

GRIFFETH: Well, despite today`s rallies, stocks have struggled, of course,
to stay above the lows so far this year, leading some to fear that the
momentum may have stalled.

Mike Santoli takes a look at whether the market has moved past what he
calls “peak happiness”.

(BEGIN VIDEOTAPE)

MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Stocks are showing
signs of finding their footing after two months of struggle. For now, the
major indexes held before their February low points. And most evident in
the case, they are still in a correction. That`s a drop of at least 10
percent from their high but still within a long term climb rather than
entering a deeper lasting downturn.

Still, even if the market starts making headway again towards its January
high water mark, it is possible Wall Street has passed its moment of what
some call “peak happiness”, for a while at least, and perhaps for this
entire cycle.

That is to say several investment factors are likely near or past their
best levels for this economic expansion and bull market which began nine
years ago. Among them, equity valuation, market momentum, financial
liquidity and investor optimism.

The market`s price to earnings ratio reached higher in late 2017 and
through January to reach 23.4, well above the five-year average of 18. It
since retreated below 20 again.

Market momentum, the sheer speed and angle of advance hit multi-year highs
in January as well. At the same time, financial conditions achieved their
easiest point in years, based on low interest rates, plentiful credit and
calm markets.

And investor optimism reached a crescendo of excitement early this year,
too, gauged by surveys and retail brokerage activity. But importantly, if
these factors have all posted their best levels of this cycle, it doesn`t
necessarily mean the market itself has already peaked. Growing earnings
and a new prolonged phase of the economic expansion can carry stocks higher
still even if the peak happiness point did occur in January.

That`s the way it happened in past bull markets of the `80s, `90s, and mid-
2000s. It`s what the battle scarred bulls are hoping for again right now.

For NIGHTLY BUSINESS REPORT, I`m Mike Santoli.

(END VIDEOTAPE)

HERERA: So, as we look ahead to the next quarter now might be a good time
to reposition your portfolio.

Joining us to talk about where your money will work best this the months
ahead is Nancy Tengler, chief investment officer at Heartland Financial.

Welcome back, Nancy. Good to see you.

NANCY TENGLER, HEARTLAND FINANCIAL CIO: Thank you, Sue.

HERERA: It is a hard to believe the quarter has come to a close. This
year is moving swiftly certainly. How do you feel about the upcoming
quarter? What challenges are you looking at for this market?

TENGLER: Well, thank you for having me.

I`m relieved we made it through the first quarter relatively unscathed. We
hoped for some sort of pullback in January. And we got it, for sure.

Now, we are looking forward at new levels to earnings. Earnings growth is
expected to come in around 13 percent for the overall market. So we are
looking for companies that are growing faster and raising their dividends
quicker than the market.

GRIFFETH: Technology certainly has been a focus, Nancy. You are looking
to some of those companies where they will benefit from spending. Who are
they?

TENGLER: Thanks, Bill.

So, yes, we like the real technology companies. These would be companies
like Microsoft (NASDAQ:MSFT), Cisco (NASDAQ:CSCO), Texas Instruments
(NYSE:TXN). You mentioned Intel (NASDAQ:INTC) earlier. It`s one of our
largest holdings.

These are the companies that receive the spend that corporate CEOs are
putting in place. Optimism on corporate CEOs is high. CapEx grew at 6.9
percent in the fourth quarter and we expect it to grow around 9 percent in
2018. So, these companies will benefit for sure.

HERERA: What are you getting rid of, what are you taking out of your
portfolio or what sectors perhaps, better said, do you think might not be a
good bet for this new quarter?

TENGLER: So, we have been out of electric utilities, Sue. We think they
are too expensive at these levels. We have been trimming a number of the
FANG names we had owned. So, Facebook (NASDAQ:FB) and Google (NASDAQ:GOOG)
were the two that we owned. And we were trimming those in January and
again recently before the recent decline.

And then I would say just overvalued stocks in general. When we get a nice
run in a stock we trim it back. That would be Apple (NASDAQ:AAPL) in the
last few months as well as Microsoft (NASDAQ:MSFT), actually, though we
still like it here. It just got way overvalued in our portfolios.

We are looking to replace those with stocks like Emerson Electric
(NYSE:EMR) that are lower level price to earnings ratio, higher dividend
growth.

GRIFFETH: Well, you mentioned higher dividend growth, an awful lot of
viewers here on this program love that kind of growth. Where are you
looking for the best dividends right now?

TENGLER: So, technology is actually old technology, real technology, as I
call it, Bill. That group grows the dividend quickly. Microsoft
(NASDAQ:MSFT) at 15. Texas Instruments (NYSE:TXN) and Cisco (NASDAQ:CSCO)
in the 20 percent range.

We also like what we call Amazon (NASDAQ:AMZN)-proof retailers. So, Home
Depot (NYSE:HD) has been raising the dividend in the 20 percent range. And
then FedEx (NYSE:FDX) is a beneficiary of Amazon (NASDAQ:AMZN) and online
shopping. They have been growing the dividend above 30 percent in recent
years.

And Boeing (NYSE:BA), even though it had sold off, and particularly because
it has sold off on trade worries, we are not concerned about the company.
And they have been growing the dividend in the mid 20s.

So, we like all those companies because the dividend growth shows
management`s confident about future earnings growth.

HERERA: Do you expect in the new quarter that the volatility we have seen
will continue? Or do you think the market is calming down a little bit?

TENGLER: Oh, that`s a great question, Sue. I think — I have been in this
business over 30 years. This feels more normal to me than last year did.
Volatility is not a bad thing if you are investing assets or investing
money. So, I would say it`s probably going to slow down a little bit
particularly if earnings come in strong and the Fed behaves.

But I think volatility is with us for the rest of this year. Midterm
election year usually very volatile.

HERERA: OK. Thank you, Nancy. Have a great long weekend.

TENGLER: Thank you both.

HERERA: Nancy Tengler with Heartland Financial.

GRIFFETH: Who clearly started in the business when she was in junior high.

HERERA: Absolutely.

GRIFFETH: President Trump is targeting taxes again, this time it is Amazon
(NASDAQ:AMZN). The president took to twitter this morning and renewed his
claims that the online retailing giant does not pay taxes and reportedly
wants to go after Amazon (NASDAQ:AMZN) as a result. But is there really
anything that the White House can do?

Ylan Mui takes a look for us tonight.

(BEGIN VIDEOTAPE)

YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: President Trump taking
aim at Amazon (NASDAQ:AMZN) over taxes. In a tweet, the president claimed
that Amazon (NASDAQ:AMZN) pays little or no taxes and that the online giant
puts other retailers out of business. It`s not the first time the
administration has gone after the company. The tough talk started on the
campaign trail.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: If I become president, oh,
do they have problems. They are going to have such problems.

MUI: And just last month, Treasury Secretary Steven Mnuchin doubled down
on Trump`s stance during a congressional hearing.

STEVEN MNUCHIN, TREASURY SECRETARY: He does feel strongly that the taxes
should be collected.

MUI: The only problem is, there is not much the administration can do
about it. Online and bricks and mortar retailers have been locked in a
battle for years over whether sites like Amazon (NASDAQ:AMZN) should be
forced to collect state taxes. It`s up to commerce to regulate interstate
commerce.

Representative Kristi Noem of South Dakota tried to rally support for a
bill that would explicitly give states that would require online retailers
to collect those state taxes. But that effort fizzled for now. Instead,
all eyes are on the Supreme Court. In just a few weeks, it`s set to hear a
case on this very issue, with a ruling expected in June. The Trump
administration weighed in supporting traditional retailers and asking for
time to argue before the Supreme Court.

JASON BREWER, RETAIL INDUSTRY LEADERS ASSOCIATION: That`s a big win for
us, that the solicitor general chose to get involved in this case. We are
cautiously optimistic.

MUI: Amazon (NASDAQ:AMZN) does collect state sales tax but many of the
third party merchants on its site do not, and ultimately, the final
decision is out of the president`s hands.

For NIGHTLY BUSINESS REPORT, Ylan Mui in Washington.

(END VIDEOTAPE)

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

Starbucks (NASDAQ:SBUX) is downgraded at Wedbush Securities to neutral from
outperform. The firm says the sales growth coming in below expectations,
particularly its targets in China. The price target is 56 bucks. Today,
Starbucks (NASDAQ:SBUX) was off a penny to 57.89.

Barclays has initiated coverage of Boeing (NYSE:BA) as overweight with the
firm saying it sees the company`s margins are poised to continue to expand.
The price target was set at $388 a share. Shares close at $327.88, up 2.5
percent.

Bill?

GRIFFETH: Well, Sue, Goldman Sachs (NYSE:GS) upgraded Exelon (NYSE:EXC) to
a neutral from sell. Goldman citing a better valuation for the energy
company, along with not many short-term catalysts. Price target was raised
$3 to $43 a share. Exelon (NYSE:EXC) finished at $39.01 today, up more
than 1 percent.

And following last night`s poor earnings report, Bank of America (NYSE:BAC)
downgraded GameStop today to underperform from neutral. B of A says that
the company`s earnings report shows it is facing multiple structural
headwinds that will continue to hit their bottom line. Price target was
cut from $19 down to $11. Today, GameStop closed at $12.62. That was down
11 percent.

HERERA: China is warning the U.S. not to open what it calls a Pandora`s
box by triggering a chain reaction of protectionist practices around the
world. It also warned if trade tensions continue to escalate, China could
slap tariffs on some U.S. imports. But the tough talk wasn`t limited to
just China`s side.

Eunice Yoon sat down with the U.S. ambassador today in Beijing.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: The U.S. ambassador
maintained the Trump administration`s tough line towards China. Earlier
today, Ambassador Terry Branstad outlined to me some of the areas which he
believed China needed to address and that are part of the ongoing
discussions with the Chinese.

TERRY BRANSTAD, U.S. AMBASSADOR TO CHINA: They need to reduce pollution
here, replace coal with liquid natural gas. We have an abundance of that.
That`s an area. Insurance and financial services, cloud computing, there`s
many areas where I think there`s opportunity to correct some of the
unfairness in the trade situation and open up new opportunities.

YOON: He also commented on reports that the U.S. Treasury was considering
using national security laws to block Chinese companies from investing in
American high-tech and suggested that it could be an option.

BRANSTAD: Obviously, China protects its national defense, and they have a
much stricter restrictions on who can invest here. And I think we have to
also make sure that our national defense and our technology advantages are
not stolen. And that`s what the administration is looking at to make sure
that we are protecting America`s interests in the technologies of the
future.

YOON: Today, the Chinese attacked what they described as the U.S.`s own
malicious practices. The commerce ministry said the U.S. was in danger of
opening up a Pandora`s box and, quote, triggering a chain reaction that
will spread the virus of trade protectionism across the globe.

Despite the war of words, the ambassador said the U.S. wanted to continue
to build the relationship with China on trade and other issues like North
Korea. He said he was encouraged by the recent visit here of the North
Korean Leader Kim Yong-un.

BRANSTAD: I think the conversations and the communications between the
President Xi and President Trump have been really good. And I think that
Kim Jong-un is now interested in willing to meet with these other leaders,
and that`s an encouraging sign and let`s hope it leads to a safer and more
peaceful world.

YOON: North Korea`s Kim Jong-un will hold a summit with South Korea`s
President Moon Jae-in on April 27th.

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

(END VIDEOTAPE)

GRIFFETH: Coming up, the switch to watching streaming video is starting to
take a toll on traditional television advertising. We will tell you how
much, and how big the shift is.

(MUSIC)

HERERA: Barclays will pay $2 billion to settle an investigation into the
bank`s role in the financial crisis. The penalty settles a lawsuit
alleging Barclays misled investors over the quality of the mortgages it
sold. Barclays`s CEO called it a, quote, fair and proportionate
settlement, end quote, but the Department of Justice was reportedly looking
for a fine of $5 billion.

GRIFFETH: Spending on television ads fell last year for the first time
since 2009, which I will point out we were in recession at that time.
Little more unanimous a billion few dollars were spent on TV advertising in
2017. That according to research firm eMarketer.

And the trend of falling dollars is expected to continue at least the next
two years. The shift to cord cut asking streaming video were the main
reasons for that decline.

HERERA: And, Bill, more and more of us are cutting the cord.

Steve Liesman decided to take a look at just how many are making that
switch.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: I stream, you
stream, we all appear to stream.

The CNBC All America Economic Survey finds that 57 percent of Americans
subscribe to one or more streaming service. That`s compared with 43
percent who do not. That means this relatively new technology or media has
gone from zero to just about 60 almost at the speed of light.

Among those who have both which remote button is pushed the most, the one
for cable or the one for streaming? Turns out it`s pretty well balanced
for now at least, with a slight edge toward those watching cable more than
streaming, as opposed to those who prefer streaming over cable. Just about
a third of the public say they watch both equally.

The data comes at a time of nervousness that the biggest media and cable
providers over the streaming competition. The survey of 800 Americans
nationwide finds some are even out there cutting the cord of their cable or
satellite provider, 36 percent have both, and 30 percent have only cable or
satellite. But 20 percent of Americans are streamers only.

And what are they watching? Well, no surprise here. Among those Americans
with a streaming service, 51 percent have Netflix (NASDAQ:NFLX), 33 have
Amazon (NASDAQ:AMZN) Prime, followed by Hulu. That is, the Netflix
(NASDAQ:NFLX)`s share is greater than its two main competitors combined.

But all is not lost for the competition. About a third of the American
public say they have two streaming services or more. They are, we all are,
living the American stream.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

GRIFFETH: Oh, Steve.

Consternation Brands raises a glass to rising beer sales and that`s where
we begin tonight`s “Market Focus”.

Customers purchased more Corona beer and premium wine this quarter, helping
to push reference and profits above expectations. The company also said
that it would invest nearly $1 billion in its Mexican operations to keep up
with demand. Constellation also increased its quarterly dividend to 74
cents a share. And shares rose by 3 percent to $227.92.

Meantime, strong international growth helped Movado post earnings and sales
that easily topped expectations. The watch maker also raised its quarterly
dividend to 20 cents a share. Movado shares jumped by 15 percent to
$38.40.

HERERA: The proposed $2 billion merger between Energizer and Spectrum
Brands has been approved by the FTC. We recently told you that Energizer
was interested in such a deal so that it could expand its presence and grow
its product line up. Energizer shares rose 12 percent to $59.58. Shares
of Spectrum Brands popped 15 percent to $103.70.

Microsoft (NASDAQ:MSFT) is making a bigger push into the cloud. The tech
giant said it`s planning a large scale reorganization that will result in
one unit that focuses on software and hardware for enterprises and another
division that incorporates the Windows platform into cloud operations. The
move places less emphasis on the company`s flagship Windows operating
system and it highlights Microsoft (NASDAQ:MSFT)`s commitment to grow is
cloud and AI business. Shares rose 2 percent to $91.27.

GRIFFETH: Time now to talk to our market monitor who has names of stocks
that he likes heading into the second quarter and beyond and this is his
first time on the program.

We welcome Kyle Brownlee, who`s CEO of Wymer Brownlee.

Kyle, good to see you. Thanks for joining us tonight.

KYLE BROWNLEE, WYMER BROWNLEE CEO: Thank you so much for having me, Bill.
Appreciate it.

GRIFFETH: Let`s jump into your picks here. You liked Travelers. We
talked earlier with money manager Nancy Tengler. She likes the dividend-
payers. This is why you like Travelers as well, right?

BROWNLEE: It really is. You know, I think with the recent pullback of
Travelers in stock price and the really cash heavy position that they have
and the current dividend yield it is a good place to be during this
volatile period.

HERERA: Let`s move on to Paycom, which, you know, I was shocked at this
one statistic. You like it for many reasons but they have a client
retention rate of just under 100 percent. That`s exceptional.

BROWNLEE: Yes, Sue, that`s an amazing statistic. I think any time you
have 91 percent client retention, that absolutely speaks to the quality of
your tool, your product, and the team behind it. Paycom is a great, kind
of mid-market HR space play. They have great growth and they do it without
taking on a lot of debt. I really do like Paycom.

GRIFFETH: OK. And number three for us tonight is Raytheon (NYSE:RTN).
Why that one?

BROWNLEE: You know, Raytheon (NYSE:RTN) right now, I think it`s two
things. One, again, the dividend and the cash position. They have
recently been awarded some large government contracts. I`m really bullish
on just the defense sector right now, especially with the current
administration, and kind of the way the world is moving.

I think all three of those are good positions but Raytheon (NYSE:RTN)
primarily for defense and secondarily for the dividend pay as well.

HERERA: You know, we hear a lot about the overall market with valuations
being a little rich in certain sectors. You gave us these three names.
But are you finding other opportunities in the market? How do you view it
overall?

BROWNLEE: Yes, I really am. I think as volatility increases — you know,
volatility creates opportunities for investors. So, it also creates the
need to be more diligent in the research and the reviews that we perform.

So, I see it as volatility continues in this next quarter as I expect, Q2,
we are going to see more opportunity. But they may be harder to find,
which just means we have to work a little harder to come up with good
advice.

GRIFFETH: And there is every expectation that the fed is going to continue
raising rates, maybe as many as three more times this year. Do you see
that with these dividend payers as you like as a threat to them or does it
make them more attractive to you?

BROWNLEE: Great question. In my opinion, I really see it as an advantage
to the dividend payers, assuming the we see the fed continue to raise in
Q2. I very much expect investors are going to be looking for an
alternative position to bonds for income and risk mitigation. Those high
quality large cash holding dividend paying equities will be a great place
to be. So, they very well may benefit from that Fed move.

GRIFFETH: Kyle, good job. Thank you. Hope to see you again soon.

BROWNLEE: Thank you. I appreciate it, guys. Thank you.

GRIFFETH: You got it. Kyle Brownlee with Wymer Brownlee. And to read
more about Kyle`s picks, you can head to our Website at NBR.com.

GRIFFETH: Coming up, it`s time to play ball for big bucks.

(BEGIN VIDEO CLIP)

ERIC CHEMI, NIGHTLY BUSINESS REPORT CORRESPONDENT: I`m Eric Chemi at
opening day. The business of baseball is bigger than ever. We break it
down, coming up next on NIGHTLY BUSINESS REPORT.

(END VIDEO CLIP)

(MUSIC)

HERERA: It may be March 29th on the calendar but spring is in full bloom
on the diamond, because believe it or not, it is opening day for Major
League Baseball, a time of optimism not just for the 30 teams but for the
$10 billion business of professional baseball. Eric Chemi takes a swing at
the story from one of the home fields for the Mets at Citi Field in New
York.

(BEGIN VIDEOTAPE)

CHEMI: It`s opening day in America as another season of baseball begins.
For fans, this is the most hopeful time of year. As every team is still
undefeated and many can consider themselves World Series contenders.

UNIDENTIFIED MALE: My heart is jumping out of my chest. I can`t even
explain it. Can`t explain it. Geez. We are going to opening day.

UNIDENTIFIED FEMALE: This is my third year in a row going to Mets opening
day. So, I`m thrilled to be here.

UNIDENTIFIED MALE: My first opening day since the `70s.

CROWD: 2018 World Series champs.

CHEMI: It`s also true at MLB headquarters. The commissioner and his staff
are looking at 2018 to continue the momentum they have built over the last
couple of seasons when World Series TV ratings have been the best of the
entire decades. Baseball now has record revenues over $10 billion, new
sponsorship deals and a new streaming deal with Facebook (NASDAQ:FB). That
makes Major League Baseball the first of the big four U.S. sports leagues
to granting exclusive digital rights package for regular season games.

Yet, it`s not all home runs for the league. League-wide attendance has
four in the last five years. Local TV ratings were down and almost half of
the clubs and Major League Baseball`s advanced media division recently laid
off 50 employees as part of a broader reorganization.

LEE IGEL, NYU TISCH INSTITUTE FOR GLOBAL SPORT: Baseball is going through
a reimaging of thing and updating itself for the 21st century in a pretty
impressive way. It should see sunnier times ahead, for sure, for the
league, for the franchises, and for the players. But it`s going to take
some time as things flesh themselves out.

CHEMI: Part of the attendance and ratings declines are because some teams
are embracing the rebuilding process, focusing on developing young talent.
The Royals, Cubs, and Astros all did the same thing, having several losing
seasons before finally winning it all.

On opening day, every team is still tied for the best record in the league
and America`s pastime is looking to grow into the future.

For NIGHTLY BUSINESS REPORT, I`m Eric Chemi in Queens, New York.

(END VIDEOTAPE)

GRIFFETH: And apparently, Eric was good luck for the Mets because they
beat the Cardinals today in that home opener at Citi Field.

Before we go, one more look at how the markets finished this last trading
day of the first quarter of 2018. A strong day for the bulls. The Dow
rising by 254 points, back before 24,000. Dow component Intel
(NASDAQ:INTC) helped out there, rising by 5 percent on the day. The Nasdaq
climbed by 114 in a resurgence for technology. And the S&P added 35.

For the quarter, the Dow was the big loser, down more than 2 percent. And
even with tech`s recent problems, if you joined us late, that is not a
misprint. The Nasdaq climbed by 2 percent in this art and the S&P was down
1.2 percent as we head into the second quarter.

HERERA: It`s hard to believe, right?

GRIFFETH: Yes.

HERERA: Wow. That will do it for NIGHTLY BUSINESS REPORT for tonight.
I`m Sue Herera. Thanks so much for joining us.

GRIFFETH: I`m Bill Griffeth. We will see you tomorrow with a special
edition of NBR. In he meantime, if we don`t see you then, have a great
long weekend.

We`ll see you on Monday.

END

Nightly Business Report transcripts and video are available on-line post
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Business Report is not and should not be considered as investment advice.
(c) 2018 CNBC, Inc.

 

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