Transcript: Nightly Business Report – April 11, 2018

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Crude climbs, oil prices rise
to their highest level in years as tensions escalate in the Middle East.

Running hot. Federal Reserve officials see the economy strengthening, and
that could mean hiking interest rates even faster.

Last-minute tax tips. In a rush to meet the deadline, you don`t want to
overlook some money-saving moves.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
April 11th.

Good evening, everyone and welcome. I`m Sue Herera. Bill Griffeth is off
tonight.

We begin with oil. The price of domestic crude climbing to a three-year
high as tensions rise in the Middle East, feeding concerns over potential
supply disruptions in the region.

Midday, there were reports that Saudi Arabia intercepted rebel missiles
over Riyadh. One missile reportedly targeted the Saudi defense ministry,
the other was headed to Najran, home of Saudi Aramco facility.

So, oil prices were also lifted by the potential for U.S. airstrikes on
Syria after the president criticized Moscow for standing by the Syrian
president. On Twitter, President Trump wrote, quote, get ready, Russia,
because they will be coming nice and new and smart — referring to
missiles. The White House says airstrikes are one option.

Crude rose 2 percent to settle above $66 a barrel. While the broader
market came under some pressure. The Dow Jones Industrial Average fell 218
points to 24,189, the Nasdaq was off 25 and the S&P 500 declined by 14.

So, what will those rising oil prices and rising tensions in the Middle
East mean for the stock market?

Joining us to discuss that are John Kilduff. He`s the founding partner at
Again Capital. And Jeff Kleintop, chief global market strategist at
Charles Schwab.

Gentlemen, welcome to both of you.

John, I`m going to start with you because there`s late word from the U.K.
that the prime minister there may call an emergency cabinet meeting and
that she has moved some submarines into position in case there is an
airstrike. What is that going to do to oil?

JOHN KILDUFF, AGAIN CAPITAL FOUNDING PARTNER: The winds of war, Sue, are
clearly blowing here. And you saw the price rise today on the president`s
tweet, on those missiles that were fired, as you mentioned by Iran-backed
Houthi rebels in Yemen, just lining up the players here. You can see that
the whole region is in play. The crux or the epicenter is Syria.

And this time it`s going down big. The French are also in the process of
being involved in this. It`s going to happen. It`s a matter of when and
not if.

What I`m hearing is it could come as early as tomorrow.

HERERA: So, Jeff, there are two schools of thought on this. One is that
if that type of military action did take place, that the stock market would
move smartly to the downside. The other is that the U.S. is a safe haven
play when there is turmoil in other parts of the world. How do you see it
playing out?

JEFF KLEINTOP, CHARLES SCHWAB CHIEF GLOBAL MARKET STRATEGIST: You know,
Sue, unfortunately, we have many, many years of history to look at when we
look at coalition and U.S. missile strikes. While the human toll is
immeasurable, historically, the market reaction is very brief. Overseas
stock markets, they all tend to pull back that day of the strike but within
five days more often than not have usually recovered those losses.

What tends to go up are oil and gold. We saw that reaction, of course, in
the markets today. But I think the stock market reaction may be brief and
short lived.

HERERA: So, if you`re a longer term investor and we do see some sort of
military action and we do see oil prices move, from what I`m hearing from
you is you shouldn`t change your overall game plan.

KLEINTOP: Yes, unfortunately, these types of events are an ever-present
part of investing. It`s why we diversify and why it is so important to
have a diversified portfolio to buffer the type of short-term volatility
that comes along with these types of events.

HERERA: So, John, if indeed this scenario plays out as many people are
forecasting it to, how much more upside is there to oil, do you think?

KILDUFF: Potentially quite a bit. Here`s my worry. And Jeff`s one of the
best on the street. It`s a privilege to be on with him tonight.

I just have to caution that the earlier instances of this we have mostly
are attacking on Saddam Hussein`s Iraq, alone, with overwhelming force
really both times. And those were episodic. He just had no defenses. He
lied about having anything in his power to fight back with.

This is different. You have a very determined Russia, an Iran that has a
point to prove and on the rise, you also have Saudi Arabia and Israel
teaming up who want to go after Iran especially in Syria.

There`s the potential this one doesn`t come and go with a few bombs and
missile strikes within Syria. It could last, it could be retaliation. Oil
goes easily over $70, $80, $85. It depends how the narrative plays out. I
can`t be sure this time that it`s going to be a pinprick operation.

HERERA: It feels different to you than others?

KILDUFF: Because there`s just too many other players involved, too many
substantial players on both sides of the issue, if you will.

HERERA: So, Jeff, if we see that type of a scenario play out, would you,
if you`re a longer term investor, try to hedge your portfolio a little bit
by maybe moving into some commodity plays or not?

KLEINTOP: That may be one of the more effective ways to think about
hedging some of the risk here, if indeed this is a very different type of
event and we see global supply chains disrupted for extended periods of
time. Anything economically sensitive to production may be hit, but there
are areas, gold, for example, other commodities that may benefit from this
type of thing.

So, if you don`t have any exposure to those types the of assets in your
portfolio, again, diversification is probably your best bet.

HERERA: And, John, very quickly, I`ve got under 30 seconds. This also
comes amid rising demand for gasoline, we`re going into the driving season
and consumer prices overall higher from this?

KILDUFF: There`s a geopolitical risk premium in energy prices right now.
The demand story can`t be ignored, though. Here in the U.S., our refiners
have been cranking out record amounts of gasoline products, exports it as
well, particular of gasoline, we`re a big supplier to Mexico all of a
sudden because they`ve been having problems. So, yes, there is underlying
support overall for energy prices. The situation with Syria right now is
just juicing those prices prematurely.

HERERA: All right. John Kilduff, thank you very much for joining us.
Jeff Kleintop, thank you as well.

Meantime, the market was also watching the Federal Reserve closely because
Federal Reserve officials plan to continue hiking interest rates.
According to the minutes of the last meeting, there`s a chance that those
increases could come at a slightly steeper pace since the central bank
views the economy as strengthening and inflation as firming.

Ylan Mui has more from Washington.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: A debate within the
Fed over whether officials will need to change their language, showing the
Central Bank moving from an accommodative monetary policy stance to one
that is neutral or perhaps even restraining economic growth. The Fed
minutes show that some participants argued the Fed will soon have to change
its statement some time in the future. It didn`t say when, but in light of
stronger economic growth and more solid inflation data. Several suggested
the Fed might also have to set the Fed funds rate above the long-run
estimate at least for a little while.

But all participants agree that the outlook for the economy is
strengthening and that it is more likely that the Fed will hit its 2
percent inflation target. A few participants even brought up the idea of
modestly overshooting that goal in order to anchor inflation expectations.
This idea of the Fed switching gears came amid a robust debate over the
impasse of fiscal policy. Fed officials agreed that the tax cuts and
spending bill are likely to boost economic growth but it`s unusual for the
economy to receive such a big fiscal stimulus at a time when it`s already
operating either at or near its potential. And some officials worried that
bigger deficits could pose a down side risk to the economy.

Another down side risk is tariffs. Federal officials said they`re hearing
from businesses in their districts that they`re worried about the impact of
these tariffs. Now, the tariffs alone are likely to hurt the economy, but
a strong majority of Fed officials said that the possibility of trade
retaliation and general uncertainty over the policy could wind up being
damaging.

Overall, however, Fed officials appeared bullish on the economy and talk of
tightening is at least on the table.

For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington.

(END VIDEOTAPE)

HERERA: The latest report on consumer prices supports the idea that
inflation is firming. Prices compared to a year ago are up nearly 2-1/2
percent. That`s the largest annual gain in a year and it comes despite a
monthly decline in the consumer price index. According to the Labor
Department, the CPI (NYSE:CPY) last month slipped 0.41 percent, its first
decline in 10 months.

The head of the International Monetary Fund is urging policymakers to avoid
protectionism. In a speech delivered ahead of that organization`s spring
meeting, Christine Lagarde said trade restrictions hurt everyone.

(BEGIN VIDEO CLIP)

CHRISTINE LAGARDE, IMF DIRECTOR: Remember, the multilateral system that
transformed our world over the past generation has created millions of new
jobs with higher wages. But that system of open trade based on rules and
shared responsibility is now in danger of being torn apart. And this
would, in our view, be an inexcusable collective policy failure.

(END VIDEO CLIP)

HERERA: Lagarde did not mention the U.S. and China by name.

Well, trade, geopolitics, rate hikes, those are just some of the stresses
being placed on this market resulting in severe volatility and now, some
investors are wondering if more choppiness is needed for the bull market to
continue.

Mike Santoli takes a look.

(BEGIN VIDEOTAPE)

MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT: At a quick glance, it
might seem the markets haven`t done much since stocks began to struggle
nine weeks ago. The S&P 500 sitting at almost exactly the same level it
did on February 5th. The ten-year treasury yield and value of the U.S.
dollar are both, likewise, nearly unchanged from that time. Yet stocks
have been extremely jumpy even as they`ve made no net progress, as swirling
hard to read issue on trade, tech regulation and a special prosecutor`s
investigation provide constant noise.

The S&P 500 has gained or lost at least 1 percent on nine of the past 13
trading days, an unusual cluster of big moves. The choppy action has
imparted plenty of pain to the average stock with the S&P 500 about 8
percent below its January record high, more than a fifth of the stocks
within the index have dropped at least 20 percent and two-thirds are off
more than 10 percent from their high.

The severe volatility has also frayed investors` nerves even though the
broad market index was where they were nine weeks ago. Surveys of investor
opinion show steep decline since then in bullish sentiment among
individuals and professionals alike. Such discounts on individual stocks
and more subdued investor optimism can be positives in forming a base for
the market, assuming the underlying fundamentals haven`t changed much.
This seems to be the case at the moment.

Corporate earnings forecast have continued to climb since the start of the
year which have made stocks in aggregate quite less expensive than they
were in late January. This is an interesting setup as they get rolling in
coming days. Stocks trading well under their recent highs just ahead of a
reporting period where profits are seen rising more than 15 percent. The
next few weeks will be a crucial test of whether a market that`s feeling
plenty of pain can turn good fundamental news into gains for investors.

For NIGHTLY BUSINESS REPORT, I`m Mike Santoli.

(END VIDEOTAPE)

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

Wall Street`s biggest bear on Mattel (NASDAQ:MAT) is raising his rating on
the stock to hold from underperform. The analysts at Jefferies says many
of the risks facing Mattel (NASDAQ:MAT) are now baked into the toy stocks
share price. The price target remains at $13. The stock rose 6.5 percent
to $14.41.

The iPhone supplier Synaptics (NASDAQ:SYNA) saw its rating raised to buy
from hold at Mizuho. The analyst there says a lot more of Apple`s new
iPhones will use the older LCD display technology. LCD models contained
Synaptics (NASDAQ:SYNA) chips. The price target was raised to $55. The
shares gains 8 percent to $47.68.

AeroVironment (NASDAQ:AVAV), which is a maker of unnamed aerial vehicles
was upgraded to buy from hold over at Stifel. The analyst cites strong
revenue growth in its core business. The price target is now $65. That`s
the highest on Wall Street. The shares were up 17 percent to $54.28.

Still ahead, investment advisory fees. They are changing and it could hit
your wallet.

(MUSIC)

HERERA: Facebook (NASDAQ:FB) CEO Mark Zuckerberg testified on Capitol Hill
for a second day. And it appeared as if today`s session was a bit more
difficult than yesterday`s.

Julia Boorstin is covering the story for us tonight.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Mark Zuckerberg
fielding questions from 55 members of the House Committee on Energy and
Commerce over a five-hour hearing that was far more contentious than
yesterday with today a number interrupting him and demanding yes or no
answers, like this exchange with Congressman Dave Loebsack that captures a
number of committee member`s concerns about Facebook`s data policy.

REP. DAVE LOEBSACK (D), IOWA: Is it possible for Facebook (NASDAQ:FB) to
exist without collecting and selling our data? Is it possible to exist?

MARK ZUCKERBERG, FACEBOOK CEO: Congressman, we don`t sell people`s data.
So I think that`s an important thing to clarify up front. And then in
terms of collecting data, the whole purpose of the service is that you can
share the things that you want with the people around you, and your
friends.

BOORSTIN: Questions weren`t as limited to issues of data and privacy with
a number of committee members pressing Zuckerberg on concerns of content
censorship, fake news, as well as the illegal sale of opioids on the
platform. Zuckerberg saying better artificial intelligence is key to
solving these issues.

REP. DAVID MCKINLEY (R), WEST VIRGINIA: When are you going to start to
take down these posts that are done with illegal digital pharmacies? When
are you going to take them down?

ZUCKERBERG: Congressman, right now when people report the posts to us, we
will take them down. And have people —

MCKINLEY: Why do they have to — if you`ve got all these 20,000 people,
you know that they`re up there. Where is your requirement — where is your
accountability to allow this to be occurring ravaging this country?

ZUCKERBERG: Congressman, I agree that this is a terrible issue and,
respectfully, when there are tens of billions or 100 billion pieces of
content that are shared every day, even 20,000 people reviewing it can`t
look at everything. What we need to do is build more A.I. tools.

BOORSTIN: Investors seemed satisfied with Zuckerberg`s responses based on
that the stock moved up nearly 1 percent today, after gaining 4-1/2 percent
yesterday.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin, Washington.

(END VIDEOTAPE)

HERERA: A Dow component hikes its dividend, that`s where we begin
tonight`s “Market Focus”.

Procter & Gamble (NYSE:PG) is raising its quarterly dividend by 4 percent
to almost 72 cents a share. It is 62nd year the consumer giant has
increased its payout to shareholders. The shares were off ten cents to
finish the day at $78.27.

Carnival (NYSE:CCL) cruise line also increased its dividend by 11 percent
to 50 cents a share. In addition, the company said it was launching a $1
billion share buyback program. Shares of Carnival (NYSE:CCL) rose nearly 1
percent to $63.64.

JetBlue reported improved operating metrics for the month of March. The
airline also forecast an upbeat first quarter, saying a key measure of
revenue would rise more than previously expected. Shares fell fractionally
to $19.33.

And after the bell, Bed, Bath & Beyond reported a smaller than expected
drop in same-store sales. The home goods retailer also delivered an
earnings beat and increase its dividend to 16 a share. Those results,
though, were overshadowed by the company`s weak 2018 earnings guidance.
Shares initially fell in after-hours but they finished the regular day up
more than 1 percent to $21.50.

Well, Fidelity is overhauling the way that it charges you for financial
advice. According to “The Wall Street Journal,” the company is simplifying
its fee structure. But that could result in some people paying more and
others paying less.

We`re joined now “The Wall Street Journal`s” Sarah Krouse who authored that
article.

Good to see you again, Sarah. Welcome back.

SARAH KROUSE, WALL STREET JOURNAL REPORTER: Nice to see you. Thank you
for having me.

HERERA: So, Fidelity joins a number of big Wall Street firms and small
firms for that matter that are try to kind of rejigger their fee structure.
Why are they doing that?

KROUSE: That`s right. So, a number of firms large and small have made
changes to their fee structure in part of fiduciary rule this was a rule
crafted by the Obama administration and came into effect last April. The
Trump administration has challenged it. It may be repealed in the end, but
it`s already triggered a number of fee changes across the industry.

That rule was targeted at retirement accounts and required brokers to act
in their clients` best interests rather than their own. But the impact of
that rule has brought greater changes across Wall Street. And actually,
the FEC has said that it may explore a similar rule across all types of
accounts, not just retirement accounts.

HERERA: So, how in Fidelity`s case does the fee structure change for
people — I assume it kind of depends on how much money they have with
Fidelity under management.

KROUSE: That`s right. It`s pretty much across the board. So, new
customers will not pay more. They`ll be granted waivers that keep their
pricing either at the same or if the new pay structure results in a lower
cost. They`ll receive that lower cost.

But for new customers coming in the door, it sort of depends on — well, it
would be based solely on their assets under management, whereas before, it
depended on their assets under management, their investing style,
preference, their tax needs. So, where there are a lot of variables
before, now, we`re shifting sort from an a la carte menu to a more fixed
price type pricing structure.

HERERA: Does it matter what type of investment us you have Fidelity
deploying your cash into?

KROUSE: No, it won`t at this point. So, that`s one of the things that the
new fee structure sort of simplifies. So, where previously it did matter
if you were holding all Fidelity funds or a mixture of index funds and
actively managed funds, now, regardless of what you`re investing in, you
come in the door, you have a conversation about your sort of needs, your
long-term goals, et cetera, and a wealth manager sort of puts you in the
funds that they deem appropriate for you.

HERERA: All right. Sarah, thank you so much.

KROUSE: Thanks for having me.

HERERA: Sarah Krouse with “The Wall Street Journal.”

Hate to tell you, but it`s tax time. And that means hackers are out in
force and they have a new target. We`ll tell you about it.

(MUSIC)

HERERA: Well, the deadline to file your taxes is quickly approaching. You
have until April 17th to submit that return. And if you`ve been
procrastinating — that would be me — we have some last-minute tips that
could help you avoid costly mistakes.

We`re joined by Sharon Epperson.

It`s always good to see you. Both you and I are always working. We`re
always the last ones to file our taxes.

SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: I know. We are.
But we can still tell people what they should do.

HERERA: Absolutely. So, what are the biggest mistakes that people make if
they procrastinate? What are they missing?

EPPERSON: Well, one of the reasons why people procrastinate I think is
because they`re kind of afraid. It`s a scary time for a lot of people.

And one of the biggest Tax Day fears according to a new survey by Wallet
Hub is making a math mistake on your return. Thirty percent of people say
that`s their biggest fear come Tax Day.

HERERA: Really?

EPPERSON: And it`s actually one of the most common problems, making an
error in calculations. But there are others from putting in a misspelled
name, to a wrong Social Security number or even the wrong filing status.
So, there are a lot of mistakes that people are making out there.

HERERA: I also see from your graphic there that a lot of people may owe,
but they can`t afford to pay. And that`s the big issue. What is their
recourse?

EPPERSON: Well, the recourse is you have to understand that you can file
for an extension if you cannot prepare your return in time. But that is
not an extension to pay. And that every moment that you wait, you are
going to likely suffer a penalty or perhaps have to pay something in terms
of interest for your debt. So that`s important to keep in mind.

The other thing to keep in mind is that you can set up a payment agreement
with the IRS. Contact them, try to negotiate something. If you can pay it
within 120 days, you can set up a payment agreement. If you think it`s a
bigger sum, it`s going to take more than 120 days look at an installment
plan.

And as a last resort, you know I hate credit card debt.

HERERA: You do.

EPPERSON: I do hate credit card debit, but you could put on a credit card

HERERA: But the IRS you hate more.

EPPERSON: Right. So, you want to pay that bill and you use your credit
card, but know that fees will apply and it could be 2 percent or more of
the balance due.

HERERA: What — you know, if you`re waiting to the last minute, sometimes
you may not have the time or you may not know where to look for some things
that really could put you at an advantage rather than the disadvantage.

EPPERSON: Exactly.

HERERA: What should they look for?

EPPERSON: Well, keep in mind, you kind of do get a do-over. You can do an
amended return. You have until three years after the tax filing deadline,
the original one, to file that amended return.

What you have to keep in mind, though, it`s not another 1040 that you`re
submitting. It`s called a 1040X and you have to mail that amended return.
You can`t e-file an amended return. So, keep that in mind. Make sure to
go to IRS.gov to find out where to mail that exactly.

And know this, too, your 2014 return, if you find something there that you
should have changed or done something so you can get that tax break, you
only have until April 17th to get that one. You still have time, though.

HERERA: Now I`m under pressure again. But thank you, Sharon. As always,
we really appreciate it.

EPPERSON: Sure.

HERERA: Sharon Epperson.

Well, speaking of the IRS, it has been working to make it more difficult
for cyber criminals to file fraudulent tax returns but the criminals have
upped their game. Instead of just stealing your personal data, they`re now
targeting tax professionals.

Andrea Day has more on this new form of tax fraud.

(BEGIN VIDEOTAPE)

ROMAN SANNIKOV, FLASHPOINT DIRECTOR: Here we have an individual who is
looking for tax I.D.s.

ANDREA DAY, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is the dark web
where cyber criminals go to buy and sell loads of stolen data.

SANNIKOV: Here we have another individual selling tax I.D.s.

DAY: One of the hottest tickets right now your tax pro`s I.D. number used
to file returns online.

Cybersecurity firm Flashpoint`s Roman Sannikov.

SANNIKOV: The tax prep professionals are the new vector of an attack.

DAY: He says the I.D. numbers are a virtual crime kit for thieves where
they can file fake returns by the thousands.

How easy is it for the criminals to get this information?

SANNIKOV: It`s quite easy. There are thousands, probably hundreds of
thousands of services that are selling this information on the deep and
dark web.

DAY: And using that trusted number could make the return seem legit to the
IRS. That according to IBM security`s Caleb Barlow.

CALEB BARLOW, IBM SECURITY VICE PRESIDENT: Oh, well, it`s an I.P. address
that we`ve seen before. It`s a signature of a computer we`ve seen before.
We know that`s a tax professional, so they`re going to be submitting lots
of returns.

DAY: At IBM Security, they`ve been watching closely as these new attacks
unfold.

BARLOW: And remember, this is a $445 billion annual industry of organized
crime, and tax fraud is one of the primary areas they focus.

DAY: So how do they steal pro I.D.s in first place? According to experts,
usually by sending malicious e-mail links and attachments that someone
clicks on by mistake.

LARRY GRAY, NATP GOVERNMENT RELATIONS LIAISON: Once we`ve clicked on it,
the thief is inside.

DAY: Larry Gray is a CPA and with the National Association of Tax Pros or
NATP.

GRAY: It`s kind of like breaking into the bank. It`s a gold mine.

DAY: And he says with new tax laws in place, his fellow CPAs are searching
for info and could be more likely to open an attachment.

BARLOW: This perfect storm is created by a more sophisticated adversary
and an environment where we have lots of confusion and lots of questions.

DAY: What does that spell for tax season 2018?

SANNIKOV: I think there`s going to be some chaos.

DAY: And the tax pro?

BARLOW: They may have absolutely no idea that their computer has been
compromised and a criminal is actively harvesting that information.

DAY: The IRS now warning accountants.

CECILIA BARREDA, IRS SPOKESWOMAN: We had about 75 tax professionals report
that they had been victims of some sort of a taxpayer breach. So that,
unfortunately, is a 60 percent increase for the same period of time last
year.

DAY: And experts say the best tip for pros is to educate everyone in the
firm to never, ever open an attachment they didn`t request. And for the
rest of us U.S. taxpayers, only use someone you trust and ask them how they
store and protect your data, because once the pro`s computer is
compromised, your private info is also at risk.

For NIGHTLY BUSINESS REPORT, I`m Andrea Day.

(END VIDEOTAPE)

HERERA: Before we go this evening, here`s another look at the day on Wall
Street. The Dow fell 218, the Nasdaq was off 25, and the S&P 500 declined
by 14.

And on that note, that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue
Herera. Thanks so much for joining us. Have a great evening, everybody,
and we`ll see you right back here tomorrow.

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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