Transcript: Nightly Business Report b- April 6, 2018

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

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Doubling down. The U.S.
threatens $100 billion more in tariffs while China vows to fight back at
all costs. And stocks sink.

Winter woes. Nasty weather takes a bite out of the March jobs report. Is
it enough to keep the Fed at bay? And was it really as bad as it looks?

Office on go. How the busy schedule of two entrepreneurs helped them
create a mobile work space for modern times.

All that and much more tonight on NIGHTLY BUSINESS REPORT for this Friday,
April the 6th.

And we do bid you a good Friday evening, everybody. I`m Bill Griffeth.
Sue is off this evening.

Fears of a trade war, worries over rate hikes, a lackluster jobs report —
these three all rattled the investors today on this final trading day of
the week and stocks fell sharply as a result.

Here are the final numbers today. When all was said and done, the Dow was
down 572 points, back below 24,000. That`s its biggest decline in to weeks
by the way. The Nasdaq was down by 161. The S&P lost 58.

And as you can see, all the major afternoons were down more than 2 percent.
For the week, the Dow, the Nasdaq, and the S&P were lower as well for the
third week in the last four.

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

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Traders are eager to
change the conversation from trade wars and tariffs to the economy and
earnings, but it`s hard to do that when President Trump keeps upping the
ante as he did last night, saying he is exploring an additional $100
billion in tariffs.

Traders have been trying to convince themselves that the president`s
belligerent tone is a negotiating tactic. And that ultimately any damage
from the trade wars will be modest. But the president seems to be doubling
down and less concerned about markets.

The Treasury Secretary Steven Mnuchin appeared on CNBC midday and
acknowledged there was a potential for a trade war, though that was not the
intended outcome. Regardless, the markets drooped after that interview.
Traders have been eager to give Trump the benefit of the doubt, but that`s
beginning to fade. The stakes are going up and there is a rising
possibility of a real impact to GDP and the economy.

There is considerable collateral damage with industrials and materials down
notably and traders are now regularly complaining that there is no
visibility and the market may be becoming un-investable. That`s a bad
word.

OK. What comes next? Thankfully, earnings will start next week and they
will be outstanding with, the best overall earnings growth we have seen in
seven years, about 18 percent for the S&P 500.

Beyond that, traders can only hope that negotiations with China start
sooner rather than later. Some are hoping that the president`s trade
representatives talk a little bit list less since conflicting voices are
clearly causing some confusion.

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

(END VIDEOTAPE)

GRIFFETH: Now, the White House`s new $100 billion tariff threat that Bob
mentioned adds to the heightened tensions between the world`s two largest
economies.

Kayla Tausche is following the story for us tonight from Washington.

(BEGIN VIDEOTAPE)

KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: It started Monday
with China hitting back on steel and aluminum tariffs, escalating
throughout the week. U.S. and China matching each other`s $50 billion
tariff threats before President Trump added the potential for another $100
billion.

Treasury Secretary Steven Mnuchin said this isn`t a trade war yet.

STEVEN MNUCHIN, TREASURY SECRETARY: Right now, we have initiated a plan.
The tariffs will take some period of time to go into effect. There will be
public comments. So, while we are in the period before the tariffs go on,
we`ll continue to have discussions. But there is the potential of a trade
war.

TAUSCHE: Mnuchin says the trade war is not the objective but President
Trump has been clear with President Xi that he would defend the U.S.
interests for free and fair trade. The two leaders he said have a great
relationship. The two countries are still working on a resolution.

MNUCHIN: On the one hand, we absolutely are willing to negotiate and not
get into trade wars. But on the other hand, the president is perfectly
willing to defend interests. So, this is a very clear strategy.

TAUSCHE: But what`s clear to markets is that this is far from over. $150
billion represents a third of China`s exports to the U.S. Goldman Sachs
(NYSE:GS) told clients China could move past tariffs to something more
painful, devaluing its currency, selling treasuries, or further limiting
U.S. company access.

Farmers and manufacturers worry their businesses will suffer while they
wait for a deal. Federal Reserve Chair J. Powell said that could change
economic outlook down the road.

JEROME POWELL, FEDERAL RESERVE CHAIRMAN: We did hear from, you know, a
number of business leaders from around the country that changes in trade
policy had become a risk to the medium-term outlook.

TAUSCHE: It`s hard for observers including former Commerce Secretary
Carlos Gutierrez to see the end game.

CARLOS GUTIERREZ, FORMER COMMERCE SECRETARY: This looks like a poker game,
I`ll see you 50 and I will raise you 100. It seems this is escalating at a
pace that no one expected. I don`t know how the president will declare
victory, which is so important to him, because taking on China has been one
of his signature issues.

TAUSCHE: President Trump`s economic adviser defends his willingness to
take action no prior president has. But in doing so, he`s also raised the
stakes higher than they have ever been.

For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche in Washington.

(END VIDEOTAPE)

GRIFFETH: Meanwhile, reaction from China was strong, and it was swift.

Eunice Yoon is in Beijing for us.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Secretary Mnuchin
might be playing down the idea that the U.S. and China are headed for a
trade war, but the Chinese are definitely gearing up for one.

The Commerce Ministry today scrambled together a last-minute press briefing
to say China is well prepared. If the U.S. releases its new list of $100
billion in products, we will immediately fight back without any hesitation.
We won`t rule out any options.

The ministry also countered talk out of Washington that the two sides are
having private discussions about trade, saying China has no dissimilar
information about negotiations from various American officials. But this
is not what has happened. Recently, U.S. and Chinese economic and trade
officials haven`t had any negotiations on trade issues.

The government has been messaging to the public here that China is the
victim in all of this, which plays right into the way President Xi Jinping
likes to present himself, as a defender of China from Western aggression.
And the messaging is having an effect. On Chinese social media, two of the
top trending hashtags are #fightbackthetradewar, and #Chinaisnotafraid.

And we are just starting to see online calls for boycotts for American
goods. Here are some examples. Boycott American products starting from
today. No iPhones and no American cars. After Japanese and Korean, it`s
time to boycott American goods.

Right now, this is just talk on social media, but the government here can
and has encouraged boycotts in the past when it`s been upset with another
country like Japan or South Korea. It`s fanned nationalism and anti-
foreign sentiment and the danger for American companies is that these types
of boycotts could actually affect not just imports but also the seal of
their locally made product. So, this is just another tool that China could
use in its tool box to retaliate.

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

(END VIDEOTAPE)

GRIFFETH: More now on that monthly jobs report that was released first
thing this modern. It shows employers hired fewer workers than expected in
March. Non-farm payrolls grew by 103,000, almost double than expected.
The unemployment rate held at 4.1 percent with a slight uptick in wages.

But as Hampton Pearson reports now, as so often happens, the headline
numbers don`t tell the whole story.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Weather was a key
factor at the jobs slowdown in March. Late spring snowstorms in the
Northeast triggered dramatic downturns in key sectors, including
construction, which lost 15,000 workers after adding 65,000 in February.
Retail suffered a similar downturn, 4,000 fewer hires last month versus an
increase of 47,000 in February. It all combined to produce the lowest
monthly headline job growth since the hurricanes last fall.

DAVID KELLY, JPMORGAN CHIEF GLOBAL STRATEGIST: The jobs numbers today is a
little bit like snowfall in April. It`s, you know, unpleasant but probably
not a harbinger of things to come. As I do think the payroll numbers will
improve over the next months.

PEARSON: The unemployment rate at 4.1 percent remains at a 17-year low.
And wages actually increased, up 0.3 percent for the month and 2.7 percent
year over year to just under $27 an hour on average.

JASON FURMAN, FORMER WHITE HOUSE CEA CHAIR: The question is what types of
pay raises they got. The wage number here was decent. If you look at the
production and non-supervisory side, throwing out the managers, we continue
to have slower wage growth for that. That might be sort of a little bit
closer to what your typical worker is than the other series.

PEARSON: Professional and business sectors led the way in job creation
adding 33,000 workers. Despite concerns about a trade war including higher
steel tariffs, manufacturing was a leading job growth sector with 22,000
new workers finding jobs. And even with downward revisions for January and
February, average monthly job gains for the first quarter of this year are
above 200,000.

UNIDENTIFIED MALE: I think the labor market is still quite strong. If you
look at the last three months we saw it basically getting 200,000 new jobs
per month on average. And that probably washes out a lot of the weather
effect.

PEARSON: In the coming months, it will not be the weather but storm clouds
over trade policy that may impact job growth and add another concern for
the Fed when it come to monetary policy.

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

(END VIDEOTAPE)

GRIFFETH: Well, let`s bring in Brad McMillan now. He is going to talk
more about today`s jobs report, the economy, the stock market.

We have a lot to talk about here, Brad. You are chief investment officer
at Commonwealth Financial Network. Thanks for joining us tonight.

BRAD MCMILLAN, COMMONWEALTH FINANCIAL NETWORK CIO: Glad to be here.

GRIFFETH: First of all, the jobs. Herky-jerky kind of — maybe we
attribute it to the winter weather? What do you see going on right now?

MCMILLAN: I think this is really noise. I mean, on the one hand, it was
the lowest number in the past six months. But on the other hand in
February we had the strongest number in the past two and a half years.

GRIFFETH: Right.

MCMILLAN: Just because things around as good as February they are not as
bad as March. On average, we are actually doing better than we were in
2017 and I`m not worried about that.

GRIFFETH: The Feds said after their last meeting, they could see the
unemployment rate dropping maybe to 3.8 percent by the end of the year. Do
you see that as well?

MCMILLAN: I do. Right now, you are seeing employers desperate for
workers. They are going out, they are hiring people. They need to get
people just to fill the spaces.

So, because of that, they are going to be hiring people that maybe they
wouldn`t like to hire and that`s going to push the unemployment rate down
to levels we maybe have never seen before.

GRIFFETH: And we heard from Chairman Powell today, we`ve heard from John
Williams and some of the others on the Fed. They are talking still about
three, maybe three more rate increases this year. How do you see that?

MCMILLAN: I think it`s at least three. And I think the bias is for four
or maybe five. When you see unemployment actually better than what the Fed
would like to see — we are at better than full employment. And when you
see inflation and wage growth starting to heat up — and Chair Powell was
quite clear about that — they have to act and they have to get ahead of
it. I think that`s what I took away from Chair Powell`s speech today.

GRIFFETH: Now, trade. Is that a lot of noise as well? I mean, the market
seems to act — you know, the U.S. officials say that these are negotiating
tactics that we are witnessing right now with the threat of tariffs. But
the market seems to be taking it more real. What do you think?

MCMILLAN: Well, I think the first time it happened we indeed saw the
market get upset because this was different. But then the negotiating
tactics, the market bought into that. And the second time, that also
happened. Three times — it`s starting to get a little bit tougher to say
this is just a negotiating tactic and the question here is, is it three
strikes, you`re out?

I don`t think so but we are getting closer to that. I think the market is
getting closer to a point where it really going to react.

GRIFFETH: Meaning what? Do you see this as an opportunity to invest on
those stocks that have been beaten down over fears of tariffs or do you
just stand aside for a while.

MCMILLAN: I think at this point, you need to take a step back. It`s not
to say that anybody needs to panic. It`s certainly not.

In fact, right now, the market has actually stayed above its long term
trend line. But at the same time, there is a potential as we heard from
Secretary Mnuchin today that things could get worse. If that`s the case,
the markets could certainly be impacted.

GRIFFETH: Brad, thank you. Have a good weekend.

MCMILLAN: You too. Thank you.

GRIFFETH: Brad McMillan with Commonwealth Financial Network joining us
tonight.

And up next, all the talk of trade may be wreaking havoc on stocks. But
imagine being a small business owner caught in the middle between the spat
of the super powers.

(MUSIC)

GRIFFETH: California`s wine industry for one has become a target of
China`s retaliatory tariffs. Now if the tariffs were actually imposed, it
would be a big blow to wine makers in that state because they do ship a lot
of wine to the Chinese.

Aditi Roy is at a winery in Napa Valley that views China as a very big
market.

(BEGIN VIDEOTAPE)

STEPHANIE HOLIDAY, CO-OWNER: This is our flagship Cabernet Sauvignon.

ADITI ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Stephanie Honig co-owns
Honig Vineyard and Winery in Napa Valley. For the last decade, she`s
worked hard at growing the wineries business in China.

STEPHANIE HONIG, HONIG VINEYARD AND WINERY: We go once a year, work with
our importer, and meet with people. Education is key.

ROY: They sell about 1,000 cases a year to China. Each bottle sells for
about $100 there. But now, China`s announced a 15 percent tariff on U.S.
wine imports. Honig worries that will drive away their Chinese customers.

HONIG: They`re a huge concern. They`re a huge concern because we`ve been
working really hard for over ten years in growing our market and growing
our consumer base in China. And this will have an impact on us and on our
importers and our partnership.

ROY: She`s not the only one. China is the fastest growing wine market in
the world, according to trade group, the Wine Institute. Last year alone,
greater China brought in $210 million worth of wine from the U.S.

DAVID PEARCE, OPUS ONE CEO: It is what we call the first year barrel room.

ROY: David Pearce is a CEO of high end brand Opus One. He says their
relationship with Chinese customers is so critical, the winery even offers
tours in mandarin.

PEARCE: Emerging markets are critical to the health of the larger market.
And China is one of the most dynamic emerging markets.

ROY: But he isn`t as concerned about the tariffs. A bottle of Opus One
costs about $600. And many experts say at that price level, customers are
willing to pay more for the brand.

PEARCE: I think it is very fair and not surprising to understand that
luxury priced products are less elastic in terms of the impact of price
changes and the demand for them I think will be less impacted.

ROY: Stephanie Honig says while the tariffs may cut into Chinese sales in
the short-term, they`ll continue to invest in the relationship for the long
run.

HONIG: You know, keep going, keep building our relationships, keep telling
our story, keep selling our wines. And the wines we feel speak for
themselves. And at NAPA Valley we will continue to succeed in China. It
might take a little longer now, but we will continue to grow.

ROY: Experts say countries like Australia and New Zealand may benefit from
the tariffs. Wines from those countries don`t face the extra tariffs so
Chinese customers may turn to those brand instead.

For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, Rutherford, California.

(END VIDEOTAPE)

GRIFFETH: A promising cancer drug fails in a closely watched clinical
trial. That`s where we begin tonight`s “Market Focus”.

Bio pharma company Incyte (NASDAQ:INCY) said its immunotherapy used in
combination with one of Merck`s key cancer drugs did not help stop the
progression of a type of skin cancer and as a result, that study has been
halted. Merck (NYSE:MRK) shares fell by 2 percent on that news to $53.36.
And Incyte`s shares plunged nearly 23 percent to $64.02.

Meanwhile, grocery retailer Supervalu is reportedly exploring a potential
sale. Reports say that the company is working with an adviser to consider
all of its options following calls from activist investors. Supervalu
shares popped by 9 percent on that news at $16.75.

And Ford is recalling about 350,000 trucks and SUVs with the automaker
saying that a gear shift issue could cause the vehicle to continue to move
even after it`s been put in park. The recall applies to the various
vehicles you see here including the bestselling F-150 pickup truck. Ford
said dealers will inspect and make the necessary repairs for free. Shares
of the company were down 1.5 percent today to $11.18.

Now to our weekly market monitor who has a list of names that he says will
benefit from a strengthening economy.

Now, last time he was with us, it was back in September, he recommended
shares of the iShares U.S. Homebuilder ETF which since then has been up 18
percent. He recommended the WisdomTree Europe ETF which is up 3 percent
over that time, and shares of Legg Mason (NYSE:LM), which are up 8 percent.

Mark Luschini is back with us. He`s chief investment strategist at Janney
Montgomery Scott.

Mark, always good to see you. Thanks for joining us.

MARK LUSCHINI, CHIEF INVESTMENT STRATEGIST, JANNEY MONTGOMERY SCOTT:
Thanks, Bill.

GRIFFETH: Your premise is that all the noise, all the talk about trade
problems, all the worries about Fed raising rates — when all is said and
done, you think this economy is just going to continue to get stronger and
you should invest accordingly. Is that the idea?

LUSCHINI: It is ours, Bill. We think that to be the case. We see,
obviously, sturdy economic activity coming into this year. We think the
fiscal impulse from the corporate tax reform, along with the budget act,
putting an additional $300 billion into the economy over the next couple of
years, is likely to boost economic activity over 2018.

Now, I think there`s some risk here that this trade tariff skirmish
metastasizes into a war.

GRIFFETH: OK.

LUSCHINI: I don`t think it`s necessarily better than a 50 percent concern
at this juncture, but it`s non-trivial nonetheless. So, it`s a risk that
we`re monitoring very, very closely, but our base case remains the U.S.
economy is in good shape and I think should provide a fertile climate for
the stocks we like at the moment.

GRIFFETH: And you`re recommending three ETFs for us tonight. The first
one in the financial services area, KCE. Tell us about that.

LUSCHINI: Sure. Well, all three will be cyclically disposed, being the
benefit from the a stronger demand in the economy. KCE is an ETF that`s
primarily comprised of asset managers and custodian banks, both of which
stand to benefit from better improving financial markets, which we`ve had,
and we think we will again, and then secondly, rising short-term interest
rates.

GRIFFETH: This one, you are recommending XAR in aerospace and defense.
But interestingly, Boeing (NYSE:BA) is not a major component of this,
because they do have a problem with the trade issues, don`t they?

LUSCHINI: They do, Bill. Deliberately so. I mean, while once again, we
think trade risks will ultimately recede, nonetheless, if you look at the
other aerospace and defense related ETFs, they have a disproportionate
weighting in Boeing (NYSE:BA). So, it`s a big bet on what Boeing (NYSE:BA)
does directionally, one way or the other, trade tariff or not.

XAR levels the playing field of its components that comprise the ETF and we
think obviously spending primarily on defense is obviously going in one
direction. That`s up from here not only domestically but globally.

GRIFFETH: And finally and quickly if we can, IGV, a tech ETF, primarily on
software, right?

LUSCHINI: It is. Business spending is going up. Businesses spend
disproportionately on technology. And within technology, mostly on
software. So, a software ETF, the Microsoft (NASDAQ:MSFT), the
Salesforces, the Oracle (NASDAQ:ORCL).com, fits that bill.

GRIFFETH: Mark, always good to see you. Thanks. Have a great weekend.

LUSCHINI: Thanks, Bill.

GRIFFETH: Mark Luschini with Janney Montgomery Scott.

And the read more about Mark`s picks, you can head to our Website at
NBR.com.

Coming up, need a quiet place to get some work down? Two entrepreneurs had
the brightest idea to bring privacy to public spaces.

(MUSIC)

GRIFFETH: We have all been there. You`ve got a little time to kill but
you can`t find a place to charge your phone or jump on a phone call. We
are mobile these days, but it seems that our infrastructure doesn`t always
accommodate that mobility.

That`s why two New York City entrepreneurs got the bright idea to create a
modern workspace for people on the go.

(BEGIN VIDEOTAPE)

GRIFFETH: When Brian Hackathorn found himself between meetings in New York
City five years ago, he settled into a public space.

BRIAN HACKATHORN, JABBRRBOX CO-FOUNDER AND CEO: Pulled out my computer and
I was trying to work, and it wasn`t productive. Security was ushering
people out e trying to plug into power. People are eating, communicating.

So, the idea at that time was we need something new to solve part of this
problem.

GRIFFETH: Ironically, it is a problem he helped create. At the time,
Hackathorn and his business partner Jeremy Jennings were selling office
furniture for open spaces, the type of spaces that Hackathorn had been
designing since 2001.

HACKATHORN: I`m thinking we need like the modern day phone booth.

GRIFFETH: Yes. Remember the phone booth? Jennings instantly shared the
vision.

JEREMY JENNINGS, JABBRRBOX: Just that week, I got a text and I needed to
jump on a phone call. So, my question to you is, where do you go?

GRIFFETH: Jennings and Hackathorn thought they would try their modern
phone booths in places like Central Park.

HACKATHORN: The problem with Central Park is landmarks.

GRIFFETH: Another problem was the product didn`t actually exist. So, they
designed the Jabbrrbox themselves and then pivoted away from public spaces
when a New Jersey company, Audible, saw their drawings and wanted to buy
them for their open office. So Hackathorn and Jennings worked with a
manufacturer to build and install the first five Jabbrrboxes in 2016.

HACKATHORN: We had just completed our very first installation and had a
call. And we are like, this is the perfect place to do it from.

GRIFFETH: There are now about 200 Jabbrrboxes in offices as far away as
Berlin, Germany, Dublin, Ireland, and London. A single seat model runs
$13,500. The two-seater is $24,000.

Revenues are already close to $2.5 million, and they expect to sell more
than 200 Jabbrrboxes this year.

HACKATHORN: You are always on go. You are always in front of a screen.
You are being spoken to. You are being asked questions.

To have a little time to yourself, to think, to relax, to breathe, it`s
priceless.

GRIFFETH: After tweaking them for public spaces, seven Jabbrrboxes debuted
in Terminal B at New York`s LaGuardia Airport in February.

HACKATHORN: Slide in your chip card. Approved. And then we have the
ability to unlock the door.

GRIFFETH: Starting at $10 for 15 minutes, you can plug in and access the
encrypted Jabbrrbox Wi-Fi network. You can track your flight, even adjust
the lighting.

HACKATHORN: We have also a little playful photo booth app where you can go
through and actually take photos of yourself.

GRIFFETH: Ed Baklor is working on the redevelopment of Terminal B at
LaGuardia.

ED BAKLOR, LAGUARDIA GATEWAY PARTNERS: Early indications are that it does
seem to be very well-received. How often do a wind up at a gate or on a
conference call as you are about to board. The challenge is you can`t be
back at the lounge, you can`t find a quiet spot. Now, we have brought the
quiet spot to the gate.

GRIFFETH: As Jennings like to say, Superman might have had a phone booth,
but you can have a Jabbrrbox.

JENNINGS: This isn`t a phone. This is a super computer. It allows you to
work where when how you want. So, a Jabbrrbox really is not a phone booth.
It`s a work booth.

(END VIDEOTAPE)

GRIFFETH: And Hackathorn and Jennings expect their Jabbrrbox to appear in
more airports later this year, you might be seeing them elsewhere, hotels,
hospitals, malls, conference sites and convention centers, even theaters
and sports venues, maybe even your own office as well.

Before we go, another look at the day on Wall Street. Another big down
day. The Dow dropped 572 points, back below 24,000. The Nasdaq was off by
161. The S&P down 58. All the major averages down more than 2 percent
today and all three were lower for the week as well.

That is NIGHTLY BUSINESS REPORT for tonight. I`m Bill Griffeth. Thanks so
much for joining us. Have a wonderful weekend. We`ll see you again on
Monday.

END

Nightly Business Report transcripts and video are available on-line post
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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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