Transcript: Nightly Business Report – May 10, 2018

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Return to normal. The Dow has
rallied more than 1,000 points in a week, leading investors to wonder
whether the market is starting to stabilize.

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Historic summit. A date is
set, but North Korea is still evading sanctions, and the United Nations is
looking to traders and insurers to prevent that from happening.

HERERA: Timing is everything. The best day and time to list your house
for a fast sale at a higher price.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thursday, May
10th.

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

At today`s closing bell, the Dow found itself back in positive territory
for the year after recording a sixth consecutive gain. Its longest win
streak since February. Why is this happening?

Well, inflation fears are abating, volatility is fading. Today at least
bond yields fell back, small caps are at all time highs and technology
stocks, of course, a market leader, they appear to be on solid footing as
well.

So, today it all resulted in market gains across the board. The Dow
Industrial Average gained 196 points to 24,739, the Nasdaq was up by 65 and
the S&P added 25.

Mike Santoli takes a look now at whether the market is just returning to
normal.

(BEGIN VIDEOTAPE)

MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Investors thrown off
balance by swirling markets this year now face a new wrinkle, a sudden
outbreak of normalcy. This year stocks went from an unprecedented uphill
strength in January to a nasty stumble in February followed by months of
confused struggle.

But in the past couple of weeks, stocks have stabilized and recovered to a
seven-week high, as a rush of strong earnings provided support and stock
investors have made a tentative peace with somewhat higher interest rates.

This return to normalcy can be seen from a few different angles. The
widely tracked S&P 500 volatility index closed Wednesday at its lowest
level since January, indicating stocks and stock traders are no longer
particularly agitated or fearful. The market has also grown less sensitive
to potentially unnerving headlines.

When President Trump exited the Iran nuclear agreement and oil prices
crossed $70 a barrel, for instance, the major indexes paused briefly but
then resumed their gentle climb. And stocks in sectors are again moving
independently based on their own news and corporate results rather than
swinging around emotionally in unison. That`s typically a sign of a
calmer, more rational investing back drop.

The sectors driving the recent market bounce are also somewhat encouraging.
Technology, financials, industrials, and energy stocks have lately been
leaders, which suggests the market is comfortable with the underpinnings of
the economy.

None of this is to say the market has worked through the issues and
destined for a quick return to or beyond the old highs. This remains a
fairly prolonged set back and the S&P 500 remains more than 5 percent from
its January peek. And even in a more normal market, you can still very
well encounter the storminess ahead of the midterm elections.

Still, the steadier action and more logical interaction among various
market segments indicates investors no longer feel overexposed to stock and
the economic fundamentals can support them at current valuations at least
for now.

For NIGHTLY BUSINESS REPORT, I`m Mike Santoli.

(END VIDEOTAPE)

HERERA: As we mentioned, inflation fears diminished today after the
release of a key economic report. The consumer price index rose 0.2
percent in April. That was less than expected and it follows last week`s
employment report that showed wage growth remains stagnant. The report
showed that rising costs for gasoline were offset by a moderation in health
care prices.

GRIFFETH: Meanwhile, the rate of layoffs in the U.S. is holding steady,
near a 49-year low. The number of people who applied for unemployment
benefits last week was flat from the prior week but the average of new
claims over the past month has fallen by more than 5,000 to touch the
lowest level we`ve seen since 1969.

Economists say this latest report supports the idea that the labor market
is tight and companies may be reluctant to fire workers.

HERERA: And as we have reported, an unusually large number of positions
are going unfilled, an amount that almost matches the number of unemployed
workers. So, what does that mean for the job market and the economy and
which companies stand to benefit the most?

Joining us to discuss that are Mark Zandi, chief economist at Moody`s
(NYSE:MCO) Analytics, and Mark Hamrick, he`s the senior economic analyst
with BankRate.com.

Welcome, guys. Nice to have you here.

MARK ZANDI, CHIEF ECONOMIST, MOODY`S ANALYTICS: Thank you.

I`m going to start with you, Mark.

ZANDI: Which Mark?

MARK HAMRICK, SENIOR ECONOMIC ANALYST, BANKRATE.COM: There are two Marks?

HERERA: I know, that`s true. Mark Zandi I was going to say.

ZANDI: There you go.

HERERA: How unusual is this phenomenon where it`s almost a one to one?
And is it sustainable?

ZANDI: It is very unusual. I don`t think it`s ever happened in history.
I mean, we`ve got data back into the early 2000s and we`ve never seen
anything like it. It`s consistent with all of the other labor market data,
3.9 percent unemployment, very low under employment rate.

Quit rates are high. People are quitting their jobs and they don`t do that
unless they think they can find another one pretty quickly. So, this is
very, very unusual. Something we haven`t seen historically.

GRIFFETH: Mark Hamrick, then, who`s benefitting? Obviously employees,
theoretically they should have some pricing power here even though we`re
not seeing wages go up. Are there sectors benefitting from this very tight
labor market now?

HAMRICK: Well, in this latest data I think we saw professional and
business services, construction and transportation sort of leading the way.
But the other part of course is that we really do have in some ways a
divided America between the healthy, larger cities and rural America which
is suffering. So, if by some accident, of birth or having moved or you`re
in one of those locations, or you`re willing to move in obviously in one of
those healthier sectors, you`re going to do better.

And, you know, there are many parts of the country where workers are not
benefitting from this real ascension in the job market that we`ve been
seeing. It`s really almost incumbent on those individuals to attain skills
and move where the jobs are available.

HERERA: You know, Mr. Zandi, I`ll turn back to you if I can to pick up on
what Bill was mentioned. You would think there would be some pricing
power. Wages although they`re starting to move up a little bit really have
lagged behind. Why is that?

ZANDI: Well, first of all, wage growth is accelerating. I mean, if you
look at the best wage data, you go back three years ago wage growth was
1.5, 2 percent each year. Now, it`s closing in on 3. So, it is picking
up.

And I feel very confident it`s going to accelerate quite substantively. We
collect data based on payroll records from ADP and based on that data we
can see wage growth across lots of different demographics. The one
fascinating thing that`s happened recently is wage gains for new entrants
into the workforce is surging. So, that`s a good leading indicator.

So, I`m confident that wage growth will pick up going forward and this —
the benefit of this strong labor market will become more evident to more
people across the country.

GRIFFETH: Mark Zandi, where is this going? How long can we have this kind
of a tight labor market when you do have these companies, especially I
guess in manufacturing and construction, that are scrambling to find
workers right now?

ZANDI: Yes, this is not sustainable. So the one thing I worry about, and
I think markets will eventually worry about this, you know, next month, the
month after, is that the economy will overheat. That is, you get to a
place where businesses just can`t find workers and we`re getting to that
place — you know, construction, transportation, parts and manufacturing,
financial services, professional services.

You start to see wages rising. We will see inflation pick up in higher
interest rates and ultimately, you know, it`s a problem. It would be much
better, I think for everybody, including workers, if we saw some moderation
in growth and unemployment`s kind of hung around where it is now because
lower, we`re going to have a problem. This is just not sustainable.

HERERA: Mr. Hamrick, does that go to the tight labor market or does that
go to the skills gap that everybody is talking about or maybe a combination
of both?

HAMRICK: Well, yes, I do think we need to remember as Mark sort of ran
down the list of positive metrics in this job market and the economy, there
are some things that are quite remarkable at this point in time which are
not seen as positive. For example, the low labor force participation rate
and the sort of unanswerable question at this moment is, who can be brought
back into the job market? How many of those people actually are capable of
being trained? Do they even have the minimum soft skills to enter the job
market?

Ands the other part is that I know Mark is along the lines of thinking, and
I totally agree, that we could see this unemployment rate get down into the
mid 3 percent range. We`ve been consistently lowering that as this job
market has gotten tighter and yet we continue to see, you know, on the
order of nearly 200,000 jobs being added a month. So, a lot of this is a
work in progress.

GRIFFETH: Mark Hamrick, so, OK, construction and manufacturing are
suffering. They can`t find those workers. What about the areas where they
are benefitting from this tight labor market, like technology? I mean, are
there companies out there that you can think of that are flourishing
because of this right now?

HAMRICK: Well, obviously it`s some of the same FANG stocks that we have
talked about, for example, in the publicly traded sector — the Facebooks,
the Amazons, the Googles, the Netflixes. Some that aren`t quite as public
facing. Those technology giants just continue to gain traction in the
marketplace and that`s why they`ve been a favorite among investors for
quite some time.

HERERA: All right. Gentlemen, we will leave it there. Mark Zandi with
Moody`s (NYSE:MCO) Analytics and Mark Hamrick with BankRate.com, thank you
both.

ZANDI: Thank you.

HERERA: Bill?

GRIFFETH: The Treasury Department said it levied sanctions against several
Iranian individuals and firms. Treasury officials said that the sanctions
target an illegal currency exchange network in the United Arab Emirates.
It also accused the Iranian Central Bank of being complicit in those
operations. The action is the first since the U.S. pulled out of the
Iranian nuclear deal this month.

HERERA: President Trump will meet with North Korean leader Kim Jong-un on
June 12th. The president tweeted that that summit will take place in
Singapore. The U.S. will use that summit to try and persuade Pyongyang to
give up its nuclear weapons. This will be the first ever meeting between a
sitting U.S. president and the leader of North Korea.

GRIFFETH: And even as North Korea and the U.S. plan out this high level
summit, CNBC has learned that North Korea is still evading sanctions with
covert actions. Michelle Caruso-Cabrera spoke exclusively with the chief
United Nations sanctions investigator. He detailed how the North Koreans
are violating U.N. sanctions to illegally import vital oil and he wants
international insurance and trading companies to help put a stop to it.

(BEGIN VIDEOTAPE)

MICHELLE CARUSO-CABRERA, NIGHTLY BUSINESS REPORT CORRESPONDENT: This
highly secure and nondescript office in New York is the headquarters of the
U.N. panel of experts led by Hugh Griffiths.

Griffiths and his team of investigators monitor compliance with U.N.
sanctions imposed on North Korea, sanctions meant to convince North Korean
leader Kim Jong-un to abandon his nuclear weapons program.

Recently as North Korea has agreed to talks with the United States, it has
stopped nuclear tests and ballistic missile launches, the most obvious
sanctioned activity.

But Griffiths says don`t be fooled, North Korea is still trying to outsmart
the U.N.

HUGH GRIFFITHS, U.N. PANEL OF EXPERTS: So while both are clearly not
occurring, we have other sanctions violations that are ongoing.

CARUSO-CABRERA: Such as?

GRIFFITHS: Such as ship-to-ship transfers of petroleum product.

CARUSO-CABRERA: That`s when they buy desperately needed but prohibited oil
from other ships at sea like this ship-to-ship transfer caught by aerial
surveillance photos.

GRIFFITHS: One vessel, the cote, transporting it to this North Korean
tanker.

CARUSO-CABRERA: A key trick the ships used to avoid detection, shutting
off their AIS signal. That`s short for Automated Identification System.
It`s a maritime version of GPS intended for search and rescue purposes.

GRIFFITHS: So you know down to the second when that vessel was
transmitting and when they went dark.

CARUSO-CABRERA: The ship`s signal was off for a week when it was very
close to North Korea.

GRIFFITHS: Exactly. In every case of illicit North Korean petroleum
diversion we`ve seen, the vessels switch off their AIS just before they
meet at sea, meaning that they cannot be tracked any longer, so that`s an
immediate risk indicator.

CARUSO-CABRERA: What is the legitimate reason, if ever, to turn off the
AIS?

GRIFFITHS: The only real legitimate reason for turning off the AIS signal
is if you`re traveling through the pirate infested regions such as the Gulf
of Aden, or off the coast of Somalia, and you don`t want to give away your
position to the pirates. I don`t see any other legitimate reason.

CARUSO-CABRERA: And this is where the insurance and trading companies come
in.

GRIFFITHS: We just have to get these guys and them on board.

CARUSO-CABRERA: The investigators can`t force the ships directly to turn
on AIS. So, instead, they`re trying to hit them through their wallets via
the insurers and trading companies based in countries that they know will
comply. So, they`ve asked them to insert clauses that demand the ship`s
AIS signal stay on at all times or else the ship`s insurance will become
null and void.

For NIGHTLY BUSINESS REPORT, Michelle Caruso-Cabrera.

(END VIDEOTAPE)

GRIFFETH: And you can read more about enforcing North Korean sanctions on
our Website at NBR.com.

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

Macy`s (NYSE:M) rating was cut to under weight from equal weight at Morgan
Stanley (NYSE:MS). The analyst cites the company`s sluggish sales and says
it needs to do more to get rid of underperforming stores. The price is
$25. Shares fell more than 2 percent to $29.42.

AIG`s rating was upgraded to buy from neutral at Goldman Sachs (NYSE:GS).
The analyst there cites the company`s strategy and effective execution.
The price target is $64. The stocks fell fractionally to $52.75.

GRIFFETH: Anheuser-Busch was given an outperform rating and new coverage
at Macquarie Research. The analyst there cites the potential for organic
sales and profit growth. Price target, $113, but the stock did fall today
by 2.5 percent to $95.40.

And Tinder owner Match Group saw its rating raise to buy from neutral at
UBS. The analyst does not think that Facebook`s entry into the online
dating business will have a material impact on Match`s future growth
potential. UBS also said the stock`s recent selloff presented a good value
opportunity. They have a $48 price target right now. Shares rose more
than 5 percent today to $38.91.

HERERA: Still ahead, the road ahead. What Ford`s chairman said just hours
after halting production of its most profitable vehicle.

(MUSIC)

HERERA: Apple (NASDAQ:AAPL) shares closed at an all-time high, rising for
nine straight sessions as the company`s market value closes in on $1
trillion. The stock has been fueled by Apple`s $100 billion buyback plan
that was unveiled last week. Today, the stock rose more than 1 percent to
$190.04. It has to close at $203.45 to hit the 1 trillion mark. Its
market cap is currently $934 billion followed by Amazon (NASDAQ:AMZN) at
$780 billion and Alphabet at $765 billion.

GRIFFETH: Getting closer.

Meanwhile, Apple (NASDAQ:AAPL) and Goldman Sachs (NYSE:GS) are teaming up
for a new credit card. “The Wall Street Journal” says the agreement would
expand Apple (NASDAQ:AAPL) services businesses, broadening Apple
(NASDAQ:AAPL) Pay`s reach. It will also mark Goldman`s first move into
credit cards as it pushes further into consumer banking.

HERERA: Wells Fargo (NYSE:WFC) improperly collected fee rebates that
should have been given to a public pension fund. The bank said it was the
result of a system error and that it returned $15,000 to a Tennessee fire
and police fund. This follows a number of setbacks for the bank including
its fake account scandal that surfaced in 2016. Shares rose today on a
separate report that the bank`s earnings won`t get hit as hard by
regulatory caps as originally thought.

GRIFFETH: Lawmakers today released thousands of Facebook (NASDAQ:FB) ads
created by Russian entities before and after the 2016 presidential
election.

As Julia Boorstin reports now, the ads point to the size and scope of
Russian manipulation on that platform.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: House Intelligence
Committee Democrats have published some 3,500 plus ads, events, and pieces
of content that the Russian Internet Research Agency ran on Facebook
(NASDAQ:FB) and Instagram between 2015 and 2017, in an effort to manipulate
the 2016 elections. Some of the events are legitimate events such as
rallies and protests that were organized by Americans but promoted by the
Russians.

BRENT THILL, JEFFERIES: This is a problem with an open platform with 2.1
billion people on the system and 6 million advertisers. It`s really hard
to police and, again, I think that, you know, this just shows you the
complexity of what they`ve created.

BOORSTIN: The ads, which were seen by over 33 million Facebook (NASDAQ:FB)
users, target a range of divisive issues, ranging from anti-Hillary Clinton
messages, to debate around immigration, to anti-gun control ads. Facebook
(NASDAQ:FB) says that they gave these ads to Congress so they could better
understand the extent of Russian interference in the last U.S. presidential
election, explaining that in the run up to the election, Facebook
(NASDAQ:FB) was more focused on typical cyber security attacks and that
they were slow to spot this type of information interference.

Facebook (NASDAQ:FB) saying, quote, since then, we`ve made important
changes to protect bad actors from using misinformation to undermine the
democratic process.

THILL: It`s going to take more money and time to fix this. And we think
they`ve laid out a pretty aggressive strategy to put the company ahead of
shareholders and ahead of profits. Our belief it won`t be a material
impact given that some of the technology can actually do this at a very low
cost.

BOORSTIN: Facebook (NASDAQ:FB) outlining ten big changes that the company
has made to prevent this kind of manipulation from ever happening again,
including ad`s transparency, verification and labeling of any ads around
issues or political candidates and better technology to disable fake
accounts and crack down on fake news.

Facebook (NASDAQ:FB) says it understands that the company needs to take a
broader view of its responsibilities and that this will be a battle it
always will be fighting.

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

(END VIDEOTAPE)

HERERA: Eli Lily makes a push into immunotherapy. And that`s where we
begin tonight`s “Market Focus”.

Eli Lily is buying immunotherapy-focused biotech Armo Sciences for more
than $1.5 billion. The merger signals Eli Lily`s desire to invest in
therapy that uses a patient`s immune system to fight cancer cells. Shares
of Eli Lilly (NYSE:LLY) rose 2 percent to $80.86. Meanwhile, shares of
Armo Biosciences skyrocketed 67 percent to $49.80.

Higher distribution revenues helped AMC network grow overall earnings and
sales at a faster than expected clip. The owner of networks AMC, BBC and
Sundance said viewership remains strong for many of its shows. Shares
popped 8 percent to $57.51.

And the French insurance giant AXA sold its U.S. business in an initial
public hearing. Shares of AXA Equitable Holdings debuted on the New York
Stock Exchange at $20 a share. That was below the initial range of $24 to
$27.

While the company didn`t raise as much as had been expected, the CEO told
Sara Eisen that he believes the value of the business will be reflected in
the stock price in the long term.

(BEGIN VIDEO CLIP)

MARK PEARSON, AXA EQUITABLE HOLDINGS CEO: I think markets go up and down
and pricing is set by markets. We can`t control that. Really, what we
know we have to do is run our business well, develop good solutions for
clients and give good service. And over the long term, I think the markets
will recognize that.

(END VIDEO CLIP)

HERERA: The shares finished up nearly 2 percent to $20.34.

GRIFFETH: After the bell, chip maker Nvidia reported a stronger than
expected rise in profits and revenue as demand continued to grow for its
graphics chips. The company also gave revenue guidance for the current
quarter that was above estimates. Shares were initially volatile after
hours, they ended the regular session up 1.5 percent at $260.13.

And software company Semantic reported improved earnings after the bell,
but the reports still came up shy of estimates. The company also warned
that an ongoing internal investigation gave annual results and guidance.
And shares, as you might imagined, fell in the extended session. They
ended the regular session up 1.5 at $29.18.

HERERA: Shares of Ford moved slightly higher today after the company`s
chairman told investors that he wants to kick start the stock. The
automaker`s annual meeting happened just hours after the company shut down
production of its most popular model, the F-150 pickup.

Phil LeBeau has more on the trying times facing Ford.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: With production of
Ford`s F-150 now stopped, the question for customers and investors is how
long it will take to get assembly lines running once again. Ford is
working with the supplier whose plant in central Michigan was knocked out
by an explosion and fire last week.

For now, Ford has plenty of trucks in stock, but the pickup business is
highly competitive. Ford may be the leader, but GM is nipping at its heels
and Ram has been steadily picking up market share. While Ford says second
quarter results will be impacted by the shutdown, it`s reaffirming full
year earnings guidance. The bigger question for investors is what it will
take to get the stock moving higher.

Bill Ford, chairman of the automaker, understands the frustration.

BILL FORD, FORD MOTOR COMPANY EXECUTIVE CHAIRMAN: This business can get
fitter and it will get fitter and we have more actions to come that will
show that.

LEBEAU: CEO Jim Hackett`s turnaround plan calls for developing autonomous
vehicles and mobility services that will create new revenue streams for the
automaker.

JIM HACKETT, FORD MOTOR COMPANY CEO: We`ll drive new what we call sticky
revenue, revenue that stays during good times and bad times and then
creates profit streams for us. We see ourselves not just as a provider of
mobile solutions but also as an orchestrator of digital connections from
vehicle to street to business to home.

LEBEAU: But until Ford develops those future revenue streams, it will lean
heavily on its truck business and right now, that business is under
pressure with production of the F-series being stopped.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

GRIFFETH: Coming up, the best day to list your house to sell it faster and
for more money.

(MUSIC)

HERERA: Huge demand and lean supply makes this spring a seller`s market in
housing, but that doesn`t mean every house will sell quickly or for top
dollar.

As Diana Olick reports, there are some strategies every seller should know.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Even in a housing
market with next to nothing for sale, timing is everything. Listing your
home on a certain day and even a certain time of day may make it sell
faster and for more money.

UNIDENTIFIED FEMALE: Thursday.

UNIDENTIFIED FEMALE: Thursdays.

UNIDENTIFIED MALE: Our market is programmed to look at houses Thursday.

OLICK: Yes, most agents agree, if you list your house on Thursday, it will
sell faster, and real estate brokerage Redfin ran the numbers on each day
of the week also finding Thursday is best.

Why?

UNIDENTIFIED MALE: You really want to have the most eyes on your property
and Thursday seems to be the day to do that.

OLICK: Most buyers today shop online first and then decide which homes to
visit and most do that just before the weekend planning on Sunday open
houses. Some agents though think Friday gets you more buzz and urgency at
the open house.

PEGGY FERRIS, COMPASS: Tons of people all excited whispering to each other
so that, you know, they don`t tell the other people that they`re really
interested in it.

OLICK: Timing the debut for your listing is vital because a listing will
get five times more views on the first day than the next few. That`s
because most listing sites offer alerts to potentially buyers when
something new comes on. But even the timing of that alert can make a
difference.

JENNIFER MYERS, DWELL: The afternoon is better because on Thursdays, all
of us are listing. If you list in the morning, you end up actually on page
two.

OLICK: Myers likes to put her listing online at 5:00 p.m., just when
people get off work and head home to search for a new home.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.

(END VIDEOTAPE)

HERERA: Now you know. You can find more home buying strategies on our
Website at NBR.com.

GRIFFETH: Finally tonight, the ongoing Rockefeller auction at Christie`s,
so far, has raised more than $760 million and it`s not over yet. Last
night marked the close of the art portion of the sale which saw 14 records
and included the highest total ever for a sale of American art.

Tonight, sales are devoted more to furniture and porcelain. And as we`ve
been reporting, all proceeds from this historic auction of the Rockefeller
estate will be going to charity.

HERERA: And before we go, here`s another look at the day on Wall Street.
The Dow advanced 196 points to 24,739. The Nasdaq is up 65 and the S&P 500
added 25.

And that does it for us tonight. I`m Sue Herera. Thanks for joining us.

GRIFFETH: Indeed. I`m Bill Griffeth. Thanks so much for joining us.
Have a great evening. We`ll see you tomorrow.

END

Nightly Business Report transcripts and video are available on-line post
broadcast at http://nbr.com. The program is transcribed by ASC Services II
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
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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