Transcript: Nightly Business Report – April 18, 2018

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

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Strong quarter. American
Express (NYSE:EXPR) (NYSE:AXP) surprises investors with a big profit,
adding to the number of major companies blowing past earnings expectations.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Rampant robocalling.
Lawmakers grill an alleged robocall kingpin about phone scams that cost
consumers billions.

GRIFFETH: Smile. You`re being watched. Your face is being analyzed and
it`s happening while you`re watching your favorite sports team play.

Those stories and much more tonight on NIGHTLY BUSINESS REPORT for this
Wednesday, April the 18th.

HERERA: Good evening, everyone, and welcome.

Wall Street gains were capped today as investors sent shares of IBM down
more than 7 percent. But late today, the script was flipped. American
Express (NYSE:EXPR) (NYSE:AXP) surprised shareholders with a blowout
quarter. The company reported a more than percent rise in profit, easily
topping analysts` estimates. Revenue rose double digits, thanks to a surge
in consumer spending. The CEO said he`s pleased with how the company has
performed so far this year, in the face of mounting competition.

Shares of American Express (NYSE:EXPR) (NYSE:AXP) popped in initial after-
hours trading.

GRIFFETH: Therefore, American Express`s results could set the tone for
trading tomorrow just as IBM did today, although maybe to the other side.
Today, though, the Dow finished lowered, down 38 points at 24,748, the
Nasdaq added 14, the S&P was up just two.

Now, today`s small moves notwithstanding, volatility certainly has returned
to the stock market and the CEO of Goldman Sachs (NYSE:GS) said today, that
just means the markets are behaving more normally.

(BEGIN VIDEO CLIP)

LLOYD BLANKFEIN, GOLDMAN SACHS CHAIRMAN & CEO: Conditions where interest
rates is zero, yield curves are flat, there`s no risk premium, where
central banks all around the world are buying all the risky assets which
then therefore put a damper on volatility and the opportunities to perform.
That`s not a natural state. We have not reversed all of that but we`re
walking that back and walking too.

So, at the first indications of withdrawal from what again is an unnatural
state, guess what? The market becomes a bit more volatility, people get
paid, compensated for the risk that they`re taking, our clients are doing
better, and consequently, we`re doing better with them.

(END VIDEO CLIP)

HERERA: And as volatility increases, some investors are looking for calm
in the form of dividends and buybacks. A company`s ability to deliver cash
in an unsettled environment is important for many shareholders.

Kristina Hooper is the chief global market strategist at Invesco, and she
joins us now to discuss.

I guess, Kristina, it just pretty much makes sense, if you can`t stomach
the volatility, go where there`s less volatility and more certainty, right?

KRISTINA HOOPER, INVESCO CHIEF GLOBAL MARKET STRATEGIST: Absolutely, and
historically what we`ve seen is significantly lower volatility from
dividend-paying stocks than the overall stock market.

GRIFFETH: I know you look to a sector like technology, for increasing
dividends. But, you know, there`s been a lot of criticism of a lot of tech
companies that they should could maybe find a different use for all that
cash they have, plowing it back into the company and innovating rather than
paying a dividend. What say you?

HOOPER: I say that you need to do both. In fact, those companies, what
studies have shown that actually pay a dividend are tend to be more careful
and thoughtful about their capital investments because they have less to
spend. So, there`s a happy medium where you can pay back some of your
earnings to your shareholders and then invest wisely that other portion.

HERERA: A number of big blue chip companies already, of course, offer
dividends. But as earnings come in, pretty so far anyway, on the strong
side, do you anticipate that some companies that have not previously paid
dividends might begin to do so, and do you have certain sectors that you`re
targeting?

HOOPER: Well, I expect companies that currently pay dividends to increase
their dividend payouts. I think that`s going to be the bigger trend. But
we should see some companies start to pay dividends as well. The reality
is that baby boomers are retiring and they`re looking out on extremely long
retirement periods.

So, the sweet spot for them in terms of investing is income plus capital
appreciation and that`s dividend paying stocks. So I imagine that company
is from a wide variety of sectors want to attract that more long-term
investor. And so, they`re going to be much more inclined to pay out higher
dividends and in some cases initiate dividends. They certainly are seeing
improved earnings so they can do that.

HERERA: On that note, Kristina, thanks so much.

COOPER: Thank you.

HERERA: Kristina Cooper with Invesco.

Bill?

GRIFFETH: Elsewhere, the Federal Reserve today reported modest to moderate
economic activity across the country, in its latest Beige Book. That, of
course, is an anecdotal look at the economy. But the central bank also
noted some widespread concerns.

Ylan Mui is in Washington for us tonight.

(BEGIN VIDEOTAPE)

YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Federal Reserve
releasing its Beige Book today, with trade and tariff talks showing up and
nearly all 12 Federal Reserve districts.

Across the country, the Fed found that the manufacturing, agriculture and
transportation industries were particularly concerned about trade several
districts reported rising prices for steel and aluminum due to the new
tariffs. In Philadelphia, seven of 22 manufacturing companies brought up
the tariffs in their comments, and businesses in Cleveland and Virginia
said that they`re stockpiling materials to guard against higher prices in
the future. One architecture firm in Dallas said its clients are worried
about moving forward on construction because they`re concerned about the
cost. In Kansas City and Chicago, there are trade concerns particularly
strong in the agriculture industry.

On the flip side, however, two districts reported seeing at least some
benefit from these new tariffs. St. Louis saying that steel and aluminum
manufacturers are reopening plants and recalling workers. And in
Minneapolis, the mining sector is doing particularly well.

Outside of trade, the Fed found that economic activity is continuing to
expand at a modest to moderate pace, labor markets are still tight. Wage
growth remains generally modest and inflation is still moderate despite
those spikes and steel prices. Overall, the Fed found the outlook remains
positive.

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

(END VIDEOTAPE)

HERERA: Trade is, of course, a big issue for the economy and also the
stock market. Today, that was the focus of a working lunch between
President Trump and Japanese Prime Minister Shinzo Abe.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Reciprocal is the word that
I think we have to start using, with a lot of nations, not only with Japan.
So, when we say free, that`s good. Fair, that`s good. But I like to say
free, fair and reciprocal. And the word reciprocal is that when you have a
car come in, we charge you a tax. When we have a car go through Japan,
which aren`t allowed to go there, we have to take down the barriers.

(END VIDEO CLIP)

HERERA: And the president added that Japan is ordering a large number of
airplanes from U.S. companies.

GRIFFETH: A landmark antitrust case is entering a critical phase right
now. The CEO of Time Warner (NYSE:TWX) took the stand today in the Justice
Department`s case to block AT&T`s $85 billion acquisition of Time Warner
(NYSE:TWX) and Wall Street analysts are weighing in.

Julia Boorstin has details for us.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Department of
Justice`s suit against AT&T (NYSE:T) and Time Warner (NYSE:TWX) is nearing
its culmination, and today, Time Warner (NYSE:TWX) CEO Jeff Bewkes took the
stand, the highest-profile executive to testify yet. Bewkes rejected the
DOJ`s claims that the merger would be bad for consumers, saying the
government`s claim that the combined company would gain increased leverage
over distribution rivals is, quote, ridiculous. As to concerns that Time
Warner (NYSE:TWX) would use along blackouts for leverage, Bewkes dismissed
them is not in their best interest, saying that doing a blackout, quote,
makes no sense to us because they`re costly and ultimately would hurt their
bottom line.

Bewkes also explained the need for the merger because of new competition
from Internet streaming and targeted digital advertising, saying that the
changes to the business are, quote, really bad for TV companies and that,
quote, this combination gives us a good chance to compete effectively in
digital advertising and direct-to-consumer distribution.

Up next, AT&T (NYSE:T) CEO Randall Stephenson. He`s expected to testify
tomorrow, rounding out the core of the media giant`s defense. The DOJ
which already rested his case relied on the testimony of two economists who
BTIG analyst Rich Greenfield said failed to prove the government theories
and New Street analyst Jonathan Chaplin said before Time Warner (NYSE:TWX)
rolled out its most high-profile witnesses, he said that unless they made a
major error, it would be difficult for the government to win.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.

(END VIDEOTAPE)

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

EBay`s shares were upgraded to overweight from underweight over at Morgan
Stanley (NYSE:MS). The analyst cites eBay`s shift towards its own payment
system and its move away from PayPal. The price target was raised to $58.
The stock rose nearly 3 percent to $41.75.

Norwegian Cruise Line saw its rating raised to buy from hold over at
Deutsche Bank. The analysts there cites the likely initiation of a
dividend and the anticipated appointment of a new CFO. The price target:
$66. The stock was up nearly 3 percent to $55.43.

And coverage of U.S. Steel was initiated with a sell rating over at UBS.
The analyst cites a possible fall in prices and a structural decline in
steel demand. The price target is $30. The stock closed at $37.50.

GRIFFETH: Coming up, zero — investigators zero in on what may have caused
that Southwest Airline engine to blow apart.

(MUSIC)

HERERA: If you couldn`t pay your taxes yesterday because the IRS Website
went down, you can now. The website is back up and running. And because
of the glitch yesterday, the deadline to file was extended to midnight
tonight.

The House is scheduled to vote on a bipartisan bill today making major
changes to that agency, including giving tax payers new rights and
protections.

GRIFFETH: As we reported yesterday, Starbucks (NASDAQ:SBUX) is going to
close its 8,000 stores here in the U.S. for one afternoon in May to conduct
employee antiracial bias training. One estimate puts the cost of that for
the company at about twelve million dollars in lost revenue. According to
MarketWatch, that`s about percent of their daily revenue.

HERERA: Investigators are now zeroing in on what caused a deadly engine
failure on a Southwest flight that had to make an emergency landing in
Philadelphia. The focus is on whether a fan blade in that engine broke due
to metal fatigue.

Phil LeBeau has more now on the engine and the questions about whether
others should be inspected again before they take off.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Just hours after a
Southwest Airlines (NYSE:LUV) plane was forced to land because its engine
exploded, investigators quickly figured out what went wrong.

ROBERT SUMWALT, NTSB CHAIRMAN: One of the fan blades, the number 13 fan
blade, was separated and missing.

LEBEAU: There are signs the engines fan blade may have suffered from metal
fatigue, allowing it to snap off in flight, creating shrapnel that shot out
of the engine and blew out a window. Forty-three-year-old Jennifer Riordan
died after a frantic fight by other passengers to keep her from being
sucked out of the plane.

TIM MCGINTY, SOUTHWEST PASSENGER: When we saw the window was gone somebody
saw the lady at the window. So, just tried to get her back in.

PEGGY PHILLIPS, SOUTHWEST PASSENGER: These two wonderful men, the MT and a
passenger, they managed to get her back inside the plane and we lay her
down and we started CPR.

LEBEAU: Passengers say the plane plunged almost 15,000 feet as the pilot
stabilized it after depressurization.

GARY KELLY, SOUTHWEST CEO: I do want to thank and commend our flight crew
for their swift action and for safely landing the aircraft.

LEBEAU: The CFM engine built by GE and a partner firm out of France is the
world`s most popular airplane engine, flown by more than 300 airlines. Two
years ago, another Southwest flight had a similar engine failure, which now
raises the question, is there a systemic issue with the CM 56 engine?

Following this most recent incident, Southwest is accelerating engine
inspections.

Other airlines are also stepping up their plans to inspect their CFM 56
engines. Meanwhile, investigators and regulators in Washington are
increasingly facing the question, is this engine safe?

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

GRIFFETH: Market volatility helps results at Morgan Stanley (NYSE:MS) and
that`s where we begin tonight`s “Market Focus”.

The Wall Street firm repeated what we have been hearing from other banks
this quarter, namely, that investors made changes to their portfolio is
more often and that helps end trading revenues higher. Overall results
topped expectations, but Morgan Stanley (NYSE:MS) did say the performance
for the rest of the year may lose some steam if geopolitical tensions and
trade conflicts remain at the forefront of investor concern. Shares are
though were up a tick today to $53.26.

Textron (NYSE:TXT) said that rising demand for its jets helped result top
expectations. The company also reaffirmed its outlook for the year and so
that it plans to sell its tools and test equipment business to Emerson
Electric (NYSE:EMR) for more than $800 million. Shares rose nearly 7
percent today to $63.99.

And a day after Tesla said that it was just going to suspend production of
its Model 3 vehicle for a week to fix manufacturing bottlenecks. Now, the
automaker said today it`s aiming to make 6,000 Model 3s a week by the end
of June. And to hit that ambitious target, Tesla said that its assembly
plant will soon be running 24/7. Shares were higher by nearly 2 percent to
$293.35.

Sue?

HERERA: Bill, Wynn Resorts (NASDAQ:WYNN) has added three new faces to its
board. Elaine Wynn, the casino operator`s largest shareholder and the ex-
wife of the former CEO Steve Wynn, has been pushing to add new directors in
an effort to restore the company`s reputation as regulators investigate
allegations of sexual misconduct against her former husband. The two
settled a six-year legal fight earlier this week. Shares of Wynn finished
up 1 percent to $192.91.

And after the bell, aluminum products maker Alcoa (NYSE:AA) said it is
seeing demand strengthened following the Trump administration`s tariffs on
imported metals. Both earnings and revenue were ahead of estimates. The
company also raised its profit forecast for the year. The shares were
initially higher in after-hours. They ended the regular session up 4
percent to $59.40.

And Amazon (NASDAQ:AMZN) revealed for the first time the number of prime
members. In a letter to shareholders, the company says it has million paid
prime members globally. The news sent shares higher in initial after-hours
trading.

GRIFFETH: Robocalls, we all get them and we seem to be getting a lot more
of them. So, the Senate Commerce Committee is looking into this issue and
today members heard testimony from among others a Florida man who allegedly
made almost million robocalls over a three-month period, and he denied any
wrongdoing.

(BEGIN VIDEO CLIP)

ADRIAN ABRAMOVICH, ALLEGED ROBOCALL MASTERMIND: The extent of my
activities has been significantly overstated. I`m not the kingpin of
robocalling that is alleged.

(END VIDEO CLIP)

GRIFFETH: In June, the FCC called Adrian Abramovich the perpetrator of one
of the largest and most dangerous illegal robocalling campaigns ever
investigated. He was fined $120 million as a result. It is a fine that he
is fighting.

So, why are there so many robocalls and what is being done to rein them in.

Joining us tonight, Herb Weisbaum. He`s a consumer expert with
consumerman.com.

Herb, thanks for joining us tonight.

HERB WEISBAUM, CONSUMERMAN.COM CONSUMER EXPERT: Very welcome.

GRIFFETH: My question is — I mean, they wouldn`t make these calls if they
weren`t making money doing it. How much money are we talking about do you
think?

WEISBAUM: Absolutely. There are two reasons why robocalls still happened.
They work and they make a lot of money. No one is really tracking the
losses. I called the Federal Communications Commission and the Federal
Trade Commission today, and they don`t have numbers.

The best number I can give you is one put together by consumers union and
they say that people in America lost $350 million last year and every year
to telemarketing telephone scams, a vast majority that is probably starting
with a robocall. So, we`re talking about probably hundreds of millions of
dollars a year and remember most people don`t report the scam, so it`s
probably significantly higher than that.

HERERA: And it seems — correct me if I`m wrong but to follow up on what
Bill was saying — obviously, they`re making money on it and is that why it
seems that we`re getting exponentially more robocalls?

WEISBAUM: Well, there`s a number of — every robocall is not bad and every
robocall is not illegal. About 60 percent of the robocalls are perfectly
legal and sometimes things we want. I want to know if my plane is too
late. I want to know prescription is ready at the pharmacy.

Political calls and — a lot of political robocalls and charitable
robocalls are all legal to landline telephones, but yes, the reason why
we`re getting so money is that the technology makes it so easy for the bad
guys to use these things, the scammers, or companies that aren`t following
the rules — some big companies recently have been fined for this — and
they work. People do respond to them.

They get a call that says it`s the IRS calling, you owe us money, and they
actually pay the money, when the IRS doesn`t make telephone calls. So,
yes, we have to get a whole lot smarter and not fall for these things.

GRIFFETH: So, what`s the government trying to do about all this? This
Senate committee hearing and so forth — I mean, we can block the calls but
why can`t they stop the calls from coming?

WEISBAUM: Well, we can`t even block the calls in every case. Just today,
a bill was introduced in Congress called the Robocop Act which would try to
help the situation — remember, the phone company started out by saying
they couldn`t block these calls at all. The Federal Communications
Commission said yes, you can. Then they fought doing it, and now there`s
technology to do it.

I have a service called Nomorobo introduced 2013, it blocks all the
robocalls on my VOIP, my internet telephone that I have at home. I have an
app on my cell phone, it blocks those apps, but there`s nothing for
landline phones. And the landline companies have made it very clear to me
they`re not about to do what is necessary to block these calls because
they`re switching over to computer technology and don`t want to invest in
the old copper lines.

Congress or the FCC, someone is going to have to force them to do
something. That`s what this Robocop Act would do.

GRIFFETH: That is for sure. Herb, thanks for joining us tonight again.
Appreciate it.

WEISBAUM: Very welcome.

GRIFFETH: Herb Weisbaum with consumerman.com.

HERERA: Coming up, time is money but so is data, especially data about
your face.

(MUSIC)

GRIFFETH: Puerto Rico has suffered another island-wide power outage. This
blackout comes nearly seven months after hurricane Maria destroyed much of
the islands electrical grid and infrastructure. The outage is being
attributed to a line failure at its largest power plant. It`s estimated
that power will be restored in 24 to 36 hours. The Army Corps of Engineers
has spent more than $2 billion on restoring powers since the hurricane.

HERERA: One hundred twelve years ago today, the great quake hit San
Francisco, devastating that city. While technological advances have made
the city`s building stronger, some experts worry the new skyscrapers might
not hold up in the event of another catastrophic earthquake.

Aditi Roy has more.

(BEGIN VIDEOTAPE)

ADITI ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT: San Francisco skyline is
moving up, seven out of the ten tallest buildings in San Francisco were
built in the last decade, because real estate in the city is limited, so as
tech companies like Salesforce expand, they`re building vertically.

But with eight fault lines cutting through the Bay Area, some earthquake
experts worry the explosion of tall buildings could make the city more
unsafe during a catastrophic quake.

KEITH PORTER, UNIVERSITY OF COLORADO: There are numbers of very credible
studies that suggest that the collapse of high-rise building is not — is
possible.

ROY: Earthquake experts like professor Keith Porter from the University of
Colorado say a big quake in the Bay Area will likely happen during our
lifetimes. That rattles the nerves of people like Justin Pratt who works
at Salesforce.

JUSTIN PRATT, SALESFORCE: It`s a pretty scary concept. I mean, it doesn`t
necessarily keep me up at night, but it`s something that`s always kind of
in the back of your mind.

ROY: It`s happened before. The Great Quake of 1906 killed more than 3,000
people and destroyed 28,000 buildings. This newly discovered footage of
the devastation following the quake shows rubble lining main arteries like
market street.

PORTER: It`s a costly solution there and there are unknowns. We don`t
really know precisely probability of collapse for new buildings. It`s very
difficult to estimate without an awful lot of data.

ROY: Porter says older buildings are those built before 1994, the year of
Southern (NYSE:SO) California`s Northridge Quake are more insecure. He
adds it is possible to make them safer, but that would also make them more
expensive.

PORTER: With fairly modest investment and higher cost of construction, we
can make them safer, stronger, better able to resist big earthquakes.

ROY: The city`s current building code allows for a remote chance that a
building could collapse during a catastrophic quake, while Porter says it
is possible to make the city`s current skyscrapers more earthquake safe,
it`s impossible to make them completely earthquake proof.

Officials with the city`s building inspection unit tell us that engineering
is not a perfect science and that these buildings are being built as well
as modern engineering permits.

For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, San Francisco.

(END VIDEOTAPE)

GRIFFETH: Facebook (NASDAQ:FB) is bringing its controversial facial
recognition technology to Europe now. The company yesterday says it`s
rolling out that feature in compliance with a strict new E.U. data law.
But it`s not just Facebook (NASDAQ:FB) that`s getting into this type of
data, it`s happening everywhere, even at sporting events.

Eric Chemi explains.

(BEGIN VIDEOTAPE)

ERIC CHEMI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Data collection for
advertising isn`t just happening on the Internet, it`s happening when you
walk into your favorite sporting events. The next time you walk through
that turnstile, it`s likely your photo will be taken and used to sell an ad
back to you. It`s all fair game, the fine print on the back of your ticket
has a disclaimer saying they have the right to use your photo. High-res
photos are now snapping away, capturing shots of every person in every seat
nearly every minute.

It starts with technology advancements, high-resolution cameras, facial
recognition software, fast data analytics, almost unlimited storage, all
these factors have led several data companies get into the business —
turning your photo into profits. The main goal how much data can they
extract from your face.

Fancam is one of these up-and-coming firms. It started originally as a fan
engagement tool. Other companies began more on the security side but now
much of the photo analysis has morphed into making money. Data analytics
helped team sell more ads and figure out who is sitting in which seat. The
algorithms can quickly give overall demographics for an entire stadium
worth of fans.

MICHAEL PROMAN, FANCAM MANAGING DIRECTOR NORTH KOREA: Gender of their
fans, how do different days of the week or start times affect those
numbers, and then being able to go back and say, how do we optimize and
create a better fan experience. That`s really what we`re all about right
now on the data side, it`s about being problem solvers.

CHEMI: Fancam sells this data to teams who use that to sell more effective
sponsorships.

PROMAN: We`re also taking a number of pictures that aren`t published and
some of those are to help team solve problems. They have problems in many
different respects and some of those are just being able to tell an
accurate incredible narrative to their fans and business partners.

CHEMI: For example, one team might know they have more young women coming
to games on Tuesday nights. That data could affect what ads appear on the
JumboTron that day or what music gets played between innings. While the
data is being used for these big picture decisions, individual privacy is
still a sensitive subject.

PROMAN: There`s always a notion of privacy. Well, legally, we can
absolutely take images, the purposes of those images are again for
anonymized data extraction.

CHEMI: Be on the lookout for the growth of this business going forward and
the next time you`re at a game, don`t forget to smile.

For NIGHTLY BUSINESS REPORT, I`m Eric Chemi.

(END VIDEOTAPE)

HERERA: Here`s another look at the day on Wall Street. The Dow finished
the session down 28 points, the Nasdaq added 14, and the S&P 500 rose two.

GRIFFETH: We leave you tonight with a look at the life of First Lady
Barbara Bush. As you know, she passed away yesterday at the age of 92.
This matriarch of a Republican dynasty was known as being both tough and
loving and for having a sense of humor. Her husband of 73 years was at her
side when she passed. Her son George W. Bush called it the end of a
beautiful life. And granddaughter Jenna Bush Hager wrote that her
grandmother taught her to use her voice but also to value the opinions of
others.

She, of course, was only the second woman in American tree to have a
husband and a son elected president the United States.

HERERA: We fondly remember.

GRIFFETH: Absolutely.

HERERA: That is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera.
Thank you for joining us.

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

END

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