Transcript: Nightly Business Report – April 9, 2018


rally in the Dow loses steam late in the day as reports surface of a raid
by the FBI on the office of President Trump`s personal attorney.

Washington. CEO Mark Zuckerberg will tell lawmakers the company made a big
mistake as scrutiny on the social media firm intensifies.

GRIFFETH: Odds of an audit. Some very good news for tax filers tonight,
just days ahead of the deadline.

Those stories and much more tonight on NIGHTLY BUSINESS REPORT. It is
Monday, April the 9th.

HERERA: Good evening, everybody, and welcome.

Well, it appeared as if stocks would start the week with a strong rally,
but then late in the day that rally that propelled the market much of the
day disappeared. Many traders point to a “New York Times (NYSE:NYT)”
report of an FBI raid on the office of President Trump`s lawyer Michael
Cohen. Investors don`t like political uncertainty or any uncertainty for
that matter and stocks finished way off of their highs.

The Dow added just 46 points to 23,979, but it had been up more than 440
points. The Nasdaq was up 35 and the S&P 500 rose eight. Stocks are
clearly sensitive to headlines, be they political or trade related, making
this market particularly difficult to navigate and invest in.

Mike Santoli has more from the New York Stock Exchange.


year, stocks have been stuck in a box. The S&P 500 has been darting
rapidly day to day, but within a sharply defined range. The bad news is,
the index is now about 8 percent below its late January peak. The good
news, the S&P is 4 percent above the year`s lows set exactly two months ago
and has failed so far to breach that level despite several near misses.

The market remains caught in no man`s land by other measures as well. The
S&P is almost exactly halfway between its high and low points of the past
12 months and it`s scraped against its 200-day moving average a few times
which is essentially the line separating a continued up trend from a more
damaging downturn.

Valuation meantime is caught between expensive and cheap. The price to
earnings ratio of the S&P 500 based on forecast profits is down
significantly from the lofty January readings but is exactly at the five-
year average. And broader global economic conditions have gone from quite
hot in the wake of the tax cut law to somewhat lukewarm in the past couple
of months as Friday`s more subdued jobs report showed.

These mixed signals and jumpy volatility have understand bring weighed on
investor attitudes as readings of sentiment have gone from extreme optimism
to heightened caution. This newfound skepticism might be one factor, along
with oncoming reports of good earnings growth and a simple passage of time
that Wall Street strategists hope will ultimately allow the market to start
exceeding lowered expectations and rise toward of the top of its range or
beyond, especially if trade war rhetoric cools.



GRIFFETH: Let`s turn now to David Lebovitz for his take on the market.
David is the global chief market strategist at J.P. Morgan Asset

Good to see you again. Welcome back.


GRIFFETH: It`s still a very reflexive kind of a market. It must be
difficult to invest in this environment, yes?

LEBOVITZ: It is. I think that there`s a lot of headline risks. There`s a
lot of emotion. But as we look at what could catalyze the market higher
going forward, we`re really focused on the first quarter earnings season.
We think the profit growth is going to be pretty good across technology,
financials, energy, so on and so forth.

And in a world where the news has been pretty mixed as of late, we think
that profits could send a pretty positive signal as to the state of the
U.S. economy.

HERERA: And is it — is it a global phenomenon, David? I mean, the global
economy has been doing pretty very well, as well as the U.S. economy

LEBOVITZ: It very much is a global phenomenon. You know, the synchronized
global economic expansion we`ve been seeing here seems to be feeding
through into profits not only in the U.S. but also in Europe, Japan, the
emerging world as well. So, we think that again, this is really a global
phenomenon in support of taking risk in things like equities all around the

GRIFFETH: On earnings here in the U.S., who do you think will do well?
Give me sectors you think that will be performing well.

LEBOVITZ: So, we think the technology should benefit from a weaker dollar
and stronger global growth. We think financials should benefit from higher
interest rates, and we think that energy should benefit from higher oil
prices which are up almost 30 percent on a year over year basis.

HERERA: You mentioned, I`m just checking my notes, that the key things
you`re going to be watching include how inflation reacts to all of the
fiscal stimulus that we`re going to get. And we did get some numbers from
the Congressional Budget Office that told us something about where the
deficit was going to be and all the spending.

So, weigh in on that if you would.

LEBOVITZ: Yes, debt and deficits are definitely headed higher here. We
think that could manifest itself in higher inflation. And the question is
really, how does the Federal Reserve respond to that?

Do they respond by hiking rates more aggressively and trying to slow down
the pace of economic growth or do they let inflation run a little bit hot?

I think they`ll err on the side of caution and likely push back against
this increase in government spending that we`re seeing materializing at the
current juncture.

GRIFFETH: We haven`t mentioned trade yet. You have to be mindful though
of the tit-for-tat that`s been going on between the United States and
China. How do you view that then? Is it an investment opportunity or not?

LEBOVITZ: You know, to us, we`re really focused on separating the signal
from the noise. We`re focused on those actual policy actions rather than,
you know, talk about the potential policy implementation. So we`re focused
on what the administration is saying — excuse me, doing rather than what
they`re saying as really a barometer of where the economy is headed.

HERERA: But that doesn`t mean and it certainly has proven in the last
couple of months or so that we still have an increase in volatility because
you see that disconnect, at least initially, between what is being said in
Washington and what is being done in Washington?

LEBOVITZ: Exactly. So focusing on the real economic impact is going to be
particularly important. At the current juncture, we don`t view that as
being terribly significant but obviously this is a situation very much in
flux. So we may just have to wait and see.

HERERA: By the way, speaking of inflation, you happen to think that the
CPI (NYSE:CPY) report now should be viewed more importantly than the jobs
report, right?

LEBOVITZ: Yes. I think the Fed is looking at the labor market. They see
the labor marked is at full employment. So, we`re really focused on what
is happening with inflation as that seems to be the missing piece of the


David, always good to see you. Thank you.

LEBOVITZ: Thanks for having me.

GRIFFETH: David Lebovitz with J.P. Morgan Asset Management.

HERERA: Well, as Bill mentioned, trade is still very much on the minds of
investors and today in Washington, the president`s chief economic advisor
made it clear that he thinks China is to blame for decades of trade


tariffs, you all know that. But I`ve also talked for years about how China
is getting away with stuff they shouldn`t get away with. So, this
president`s got the backbone, right? Others didn`t, and he`s raising the
issue in full public view, setting up the process that will include — it
may include tariffs, hopefully will mostly negotiations, but you can`t rule
any of that stuff out. I don`t think this is damaging the market at all.


HERERA: As we reported, the trade rhetoric, though, ratcheted up last week
with both sides threatening increased tariffs. Over the weekend, some
administration officials softened the tough White House stance saying there
is still time for a deal to be worked out.

GRIFFETH: However, China is not softening its stance. In fact, Beijing`s
trade talk is getting even tougher. Eunice Yoon picks up the story from
there for us tonight.


signaled a shift in its position on the ongoing trade dispute with the
United States. The foreign ministry today said under the current
circumstances, it`s even more impossible for both sides to negotiate, this
China/U.S. trade dispute was caused by the U.S., and the U.S. bears the
full responsibility for it. The U.S. side is carrying the big stick of
trade sanctions and at the same time, they claim to want to negotiate. Who
are they performing this for?

The spokesperson wasn`t specific about how the situation needed to change
in order for the Chinese to engage the U.S. in talks, but this is a much
harder line than what Chinese officials have been saying in the past few
weeks. Just a few days ago, the vice finance minister told me directly
that the Chinese are open for negotiations and that they would welcome U.S.
officials like Treasury Secretary Steven Mnuchin to China.

This is also a significantly different take than the Trump administration.
Just yesterday, President Trump himself tweeted, China will take down its
trade barriers because it is the right thing to do. Taxes will become
reciprocal and a deal will be made on intellectual property.

Commerce Secretary Wilbur Ross has also suggested that this trade dispute
would ultimately end in negotiations. We`re going to hear more from the
Chinese side when President Xi Jinping gives an address at a business forum
tomorrow. He`s expected to present himself as an international statesman,
a defender of globalization and also his speech is expected to be friendly
and about economic liberalization.

At the same time, most observers believe that President Xi Jinping won`t
want to present himself or China as one that is giving in to U.S. pressure.

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


HERERA: As China and the U.S. go back and forth, regional economies and
local businesses are trying to figure out just how much financial pain they
may have to endure if the threat of tariffs turns into a reality.

Brian Sullivan reports tonight from Charleston, South Carolina.


talking about trade is that it impacts every segment of the economy. In
fact, about 26 percent of the American economy at some point comes through
a U.S. seaport. Like this giant containership behind us probably carrying
$1 billion worth of goods just on one ship alone.

There`s so much volume going on here that the port of Charleston is
undergoing a $500 deepening project to accommodate the post-Panamax super
ships that carry goods to Asia.

industry is handling big container ships. We`re trying to raise our
cranes, deepen our harbors and straighten our wharves and deepen the
capacity because we do believe that trade is going to grow.

SULLIVAN: Savannah, Jacksonville, Florida, and the port of New York have
also invested more than $2 billion to make sure that the big ships can
reach them as well.

But trade and tariffs impact more than just infrastructure projects and

In nearby Holly (NYSE:HOC) Hill, South Carolina, Dean Hutto is a fifth
generation farmer. One hundred percent of his soybean crop ships out of
the port of Charleston and primarily goes to Asia. For him, the tariff
would not only hurt his bottom line but also his community.

DEAN HUTTO, FARMER: If we don`t have that 25 percent in our pocket, we
can`t put it in the next person`s pocket, and that`s the trickle down
effect on, you know, anything from hardware store or the grocery store, so
forth and so on. Twenty-five percent, I`m going to have to cut 25 percent
of my spending and I`m just going to pass that on down the line.

SULLIVAN: The Scoular Company which buys and exports agricultural
products, including Hutto`s soybeans, says clients are paying close
attention to the tariff tit-for-tat between the U.S. and China.

FRANK HEINDEL, THE SCOULAR COMPANY: Soybeans have been a bright spot in ag
here in the United States for the last five or 10 years. So, to have them
be cut would really hurt the profitability of farmers and companies like
ours. A bean is worth $10 a bushel delivered to the port here for the
fall. And you put a $2.50 tariff on that just going to get their
attention. That gives them cause for pause. It`s created a lot of anxiety
in the ag business.

SULLIVAN: For now, many here in South Carolina are a little weary but they
are not yet worried. It`s a complex topic, but whether you`re talking
about a five-person family farm or a billion dollars in goods on a giant
containership coming from Asia, one thing that`s not up for debate is the
size and magnitude of the discussion.

For NIGHTLY BUSINESS REPORT, in Charleston, South Carolina, I`m Brian


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

Morgan Stanley (NYSE:MS) is raising its rating on General Motors (NYSE:GM)
to overweight from equal weight. The analysts there cites the prospect for
an infrastructure bill which theoretically could increase sales of pickup
trucks and that in turn could lift earnings. Price target raised to $48.
The stock closed up a fraction today to $37.83.

Intel (NASDAQ:INTC) has been named Evercore`s best idea list. They analyst
there cites Intel`s valuation, dividend yield and risk/reward into
earnings. The price target was raised to $60. Shares of Intel
(NASDAQ:INTC) finished up 1-1/2 percent today to $49.55.

And Comerica (NYSE:CMA) saw its rating raised to outperform from neutral at
Wedbush. The analyst says that Comerica (NYSE:CMA) is the best positioned
bank in a rising interest rate environment. Price target was lifted to
$111 today. Shares were higher at $95.55.

HERERA: Still ahead, why despite all of last year`s bad airline headlines,
the quality of service is soaring to new records.


HERERA: The country`s budget deficit will surpass $1 trillion by the year
2020, according to new estimates from the Congressional Budget Office. The
deficit this year will rise more than 20 percent from last year, and that
is partly because of the new tax law passed late last year and the funding
measure to increase military and domestic spending which was approved in

GRIFFETH: The Consumer Financial Protection Bureau may fine Wells Fargo
(NYSE:WFC) as much as $1 billion for alleged abuses that took place in its
auto insurance and mortgage lending units. According to “Reuters”, the
fine would be the first since Mick Mulvaney was named interim director of
the bureau. The CFPB fined Wells Fargo (NYSE:WFC) $100 million back in
September of 2016 to settle its fake account scandal.

HERERA: Facebook (NASDAQ:FB) CEO Mark Zuckerberg will testify on Capitol
Hill tomorrow and on Wednesday on the data mining and privacy scandal his
company is facing. He made his way to Washington a day early to meet
privately with lawmakers.

Kayla Tausche has more.


brought Facebook`s apology tour to Capitol Hill Monday, trading his
signature hoodie for a dark gray suit as he met one on one with the top
lawmakers on both sides of the aisle of the two Senate committees preparing
to grill him beginning Tuesday.

SEN. BILL NELSON (D), FLORIDA: The message I wanted to convey to him, that
if we don`t rein in the misuse of social media, none of us are going to
have any privacy anymore.

TAUSCHE: It`s the 33-year-old`s CEO`s first visit to Capitol Hill and it
comes as the company is under fire after revealing how susceptible its
platform is to breaches of customer data and trust.

Zuckerberg`s prepared testimony included a lengthy apology for its
oversights and a pledge to take tougher action going forward, even if it
means losing money, saying, quote, I`ve directed our teams to invest so
much in security on top of other investments we`re making that it will
significantly impact our profitability.

He said there would soon be 20,000 people at Facebook (NASDAQ:FB) working
on security alone, though this week all eyes will be on the man at the top
of it all.

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


GRIFFETH: Novartis continues to bet big on gene therapy. And that`s where
we begin tonight`s “Market Focus”.

In its second gene therapy deal this year, the Swiss drug maker said it
would buy biotech AveXis for $9 billion, adding a potential drug for spinal
muscular atrophy to its pipeline as a result. Novartis said that the
merger will put a damper, though, on core operating income this year and
next, but then, it does expect results to accelerate in the year 2020.
Novartis shares rose 1 percent to $81.07. Meanwhile, shares of AveXis
surged by 81 percent to $210.46.

Pharmaceutical giant Merck (NYSE:MRK) said that its key cancer drug
Keytruda helped patients with untreated lung cancer live longer during a
study, compared to those who received chemotherapy. The medication has
already been approved to treat a specific type of lung cancer. Shares rose
more than 5 percent on the news to $56.16.

And we continue with more upbeat drug news. Pharmaceutical company AbbVie
said that its experimental rheumatoid arthritis treatment met all of its
goals during a trial, including reducing the symptoms of the disorder
itself. Shares of AbbVie were up a fraction today to $90.48.


HERERA: Bill, Viacom (NYSE:VIA) has reportedly asked CBS (NYSE:CBS) to
raise its takeover offer by nearly $3 billion. “Reuters” says Viacom
(NYSE:VIA) has requested an amount that would value it at just under $15
billion. As we`ve told you, the Redstone family, which controls CBS
(NYSE:CBS) and Viacom (NYSE:VIA) separated those two companies back in 2005
and has been pushing for the companies to merge once again. CBS (NYSE:CBS)
shares were up a penny to $52.85. Shares of Viacom (NYSE:VIA) rose
fractionally to $30.97.

The conglomerate and investment holding company Leucadia said it was
selling the majority of its meat and auto dealer businesses and changing
its name to Jeffries Financial Group. The moves are meant to narrow the
business`s focuses to financial services. Leucadia also doubled its share
buyback to 25 million shares. Shares of Leucadia climbed more than 11
percent to $24.29.

And the proposed $60 billion merger between Bayer and Monsanto (NYSE:MON)
were reportedly be blessed by the Justice Department on the grounds that
Bayer sell additional assets. “The Wall Street Journal” said Bayer has
agreed to sell additional seed assets and to make concessions related to
its digital agricultural business in order to satisfy those antitrust
concerns. Shares of Monsanto (NYSE:MON) finished up 6 percent to $125.15.

And Verifone Systems (NYSE:PAY) is being taken private. The payments
technology company is being acquired by private equity firm Francisco
Partners for about $2.5 billion. Shares of Verifone soared about 50
percent in late day trading. They fell in the regular trading session to
$15 even.

GRIFFETH: In case you hadn`t noticed, gasoline prices are on the rise.
According to industry analyst Lundberg, the average price of regular
unleaded is up 8 cents a gallon for the past two weeks. The increase was
driven primarily by rising oil prices. The highest price in the contiguous
United States, $3.63 in San Francisco. The lowest in Baton Rouge at $2.37.

HERERA: Well, in a year marked by a string of high profile airline
incidents, it may come as a bit of a surprise that a new survey found
service across the industry soared to a record high in 2017. So, which
airlines flew highest in quality rankings?

Phil LeBeau has the results.


of people flying in the U.S., a new study says those travelers are getting
treated better than ever. Baggage handling mistakes hit a record low last
year. So, did the number of people bumped from oversold flights.

DEAN HEADLEY, WICHITA STATE UNIVERSITY: I would have to say overall that
the airline experience is getting better for most people although there are
still people that are disappointed.

LEBEAU: Frustration that boiled over leading to passengers clashing with
flight crews. Last year, there were several high profile incidents
including a passenger being dragged off a united flight in Chicago. Add in
more complex fees for where to sit and what service to receive in flight,
and you see why many people think flying is a miserable experience.

DR. BRENT BOWEN, U.S. AIRLINE QUALITY RATING: A lot of the complaints we
get from consumers are about the pricing structures. You know, keep in
mind, most people don`t travel all that often on the airlines, and the
occasional traveler is very frustrated by all of this.

LEBEAU: The top airline for a second year in a row was Alaska, edging out
Delta and JetBlue. By comparison, Express (NYSE:EXPR) Jet, Frontier, and
Spirit were the worst in the airline quality rating.

One reason Spirit was last is because its complaint rate with the federal
government is higher than other airlines. Spirits says its complaint rate
is actually improving and it also believes that this study fails to give
the airline credit for offering low fares which are popular with spirit



GRIFFETH: Coming up, why having a conversation with your kids about money
could really pay off.


GRIFFETH: So, have you filed your taxes yet? Well, if the answer is no,
you have a few more days to get those done, and the good news is that the
odds of getting audited are the lowest they`ve been in years.

Robert Frank has details.


over 130 million tax returns this year. The good news for taxpayers, fewer
of them will be audited. Cuts to the IRS staff have meant fewer auditors,
so your chances of being audited have dropped dramatically, especially for
the wealthy.

In 2011, the IRS audited 13 percent of returns for those filers who earned
$1 million or more. Last year, that figure dropped to just 4 percent.
Those who make more than $200,000 have seen their audit chances drop from 4
percent to 1 percent.

This marks a sharp reversal from the IRS under the Obama administration
when the group formed a special global high wealth group to target the
wealthy who used companies and complicated structures to avoid taxes. Now,
between 2008 and 2012, audits to the top earners jumped 50 percent. Now,
it`s at the lowest level in recent history.

Now, part of the reason is because of cuts to the IRS budget, which has
cost the agency between $4 billion to $8 billion in uncollected taxes. But
the wealthy still pay the vast majority of taxes. In 2018, the top 20
percent of earners are expected to earn about half of the nation`s income
but will pay 87 percent of the income taxes. The bottom 60 percent of
Americans will pay no net federal income taxes.



HERERA: And finally tonight, did you know that having money conversations
with your kids or grandkids at a young age can help prepare them to make
informed financial decisions when they`re older?

Well, a new study found that the money lessons that young adults learned
from their parents may be more beneficial than what they learned in their
school`s personal finance classes.

Sharon Epperson joins us with some tips on how to approach that subject.

Good to see you.

Good to be here.

GRIFFETH: Sounds easier said than done.


EPPERSON: It is easier said than done.

You know, a lot of us want to have a conversation with our kids. We don`t
know where to start. We don`t know what to share with them or whatnot to
share with them. And we say, they`ll get it in school.

And some schools are good and they are offering them some financial lessons
or even a personal finance class requiring that for high school graduation,
but it varies so dramatically from state to state. And only 17 states
actually require a high school graduate to have taken a personal finance
class. So, there`s a lot that needs to be done at home. We can`t just
leave it to the schools.

GRIFFETH: What are they likely to learn in a personal finance class? What
are the goals they`re trying to achieve there?

EPPERSON: They`re trying to help them figure out how to create a budget,
how to save efficiently, how to make sure have a retirement account. And
when they have this financial education class in school, they are much more
likely to do that, to have an emergency fund, to put that money aside or
know that they should for retirement.

But the numbers increase even further when they`ve actually learned that
from their parents, when they`ve seen their parents do it or talked to
their parents about it.

HERERA: Right.

EPPERSON: They`re more likely to have a budget or to have emergency
savings or know to put money in a retirement account.

HERERA: And, you know, I think after the 2008 financial crisis, when a lot
of families were struggling, you know, when the stock market portfolios
went down, when the value of a house went down, I know personally, several
people who had conversation — to have hard conversations with their kids
and that I think would be almost more valuable than what you learn from the
school book.

EPPERSON: It`s absolutely. And what this recent survey from T. Rowe Price
has shown is that these conversations should not be done at the very last
minute. Right before they go to college, we`re going to sit down. We`re
going to tell them how to manage their money and then we`re going to send
them on their way.

It has to be something that happens along the way and that it`s talked
about from your perspective. And so, whether that`s going over your pay
stub so they understand how all of that works when they eventually get
their paycheck or whether it`s having a conversation with them about having
to not have it right now, but you`ll get it a little bit later, delayed
gratification, you know, it`s one of the most important lessons —


HERERA: Working hard.

GRIFFETH: Difference between what you need and what you want, right?

EPPERSON: What you need and what you want. Exactly.

GRIFFETH: But I think it`s important that they see how you manage money,
not what you tell them to do about managing money, right?

EPPERSON: Exactly. Exactly. And as kids are becoming, of course, much
more technologically savvy, show them the apps that they can download or
the Websites they can go to. One of my son`s favorite ones is a coupon
site, because then he knows if he tells his mother that there`s a coupon
for it, he`s more likely to get it.


GRIFFETH: Yes, in my house, the kids have to show me where the apps are.


GRIFFETH: I`m going to find those.

HERERA: I`m with you on that.

Sharon, it`s always great to have you.

EPPERSON: Great to be here.

HERERA: Thanks so much.

Sharon Epperson.

GRIFFETH: Before we go, a look at another day on Wall Street. A lot of
volatility. The Dow was up more than 400 points until word got out about
that FBI raid of Attorney Michael Cohen`s office and the Dow finished up
just 46. The Nasdaq gained 35, the S&P up just over eight.

HERERA: And that will do it for us tonight on NBR. I`m Sue Herera.
Thanks for joining us.

GRIFFETH: Welcome back, by the way. I missed you last week.

HERERA: Thank you so much. Great to be back.

GRIFFETH: I`m Bill Griffeth. Have a great evening. See you tomorrow.


Nightly Business Report transcripts and video are available on-line post
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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
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Business Report is not and should not be considered as investment advice.
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