Transcript: Nightly Business Report – June 22, 2018

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

investors can do, as the Dow managed to avoid its longest losing streak in
more than four decades. Now investors wonder, what`s next?

to pump more oil, kind of. But the deal sent energy shares spiking and oil
prices jumping.

MATHISEN: And pumping the brakes. The White House threatens tariffs on
all European cars and that could make your next BMW or Audi much more

All that and more on NIGHTLY BUSINESS REPORT for Friday, June 23rd.

Good evening, everyone, and welcome. I`m Tyler Mathisen, in for Bill

BREWER: And I`m Contessa Brewer, in tonight for Sue Herera. The broader
market rally today on Wall Street, the underpinning for that, energy shares

With ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) each up more than 2
percent after OPEC`s decision to raise output, but only moderately. That
in turn also sent oil up the most in one day since November 2016.

Brian Sullivan is in Vienna tonight.


President Trump wanted it to do, but likely didn`t get the result he was
looking for. Trump tweeting today, quote, hope OPEC will increase output
substantially. Need to keep prices down.

The group did agree to increase output by as much as one million barrels
per day, but oil prices rose instead.

Oil analyst Clay Seigle says it`s because the actual increase will be less
than the headline suggests.

CLAY SEIGLE, GENSCAPE MANAGING DIRECTOR: It`s going to be less than that
because they`ve already been in some of the countries have already been
producing more than agreed. The increase would be fractional.

SULLIVAN: The unusual way OPEC made the move may have contributed to the
price jump. Instead of coming out and saying it was raising output by a
specific number of barrels, OPEC instead is relying on a formula that
allows its 14-member nations plus 10 others to back off of earlier agreed
to cuts.

But that`s only a win for those countries who are able to pump more oil.
Some, like Venezuela and Mexico are facing big, long-term drops in output.

SEIGLE: There are going to be winners and losers. There are going to be
some guys that can step up their production and take advantage, and other
guys who won`t be able to participate.

SULLIVAN: Regardless, though, of who produces more oil and by how much,
President Trump can tout the fact that his pressure on OPEC may have worked
who, and OPEC nations that wanted to produce more oil get their wish as

But it`s more than just about the number of barrels of oil, because of
reaching unanimous deals today, OPEC reminded the world that it remains a
unified group at a time when many people are saying the cartel has lost its

For NIGHTLY BUSINESS REPORT, I`m Brian Sullivan, Vienna, Austria.


MATHISEN: And meantime, on Wall Street, the Dow, bruised and battered over
the past couple of weeks, snapped its eight-day losing strike. And as
Contessa mentioned at the top of the broadcast, that rise in energy shares
helped lift stocks overall. The Dow up 119 points to finish the day and
week at 24,580. The Nasdaq, though, went the other way, down 20, and the
S&P 500 tacked on five.

Bob Pisani has more on today`s action and what`s ahead next week.


Friday trading, but the Dow ended up triple digits managed to avoid its
longest losing streak in more than 40 years. Several key factors cropped
up stocks that started the day, stronger manufacturing data for Europe`s
health, optimism over OPEC`s production cut deals, positive results for the
banks from the Federal Reserve stress test and even some murmurs of U.S.
officials potentially wanting to restart trade talks with China.

But the sectors that led the charge early on, banks and retailers and
semiconductors, all lost steam later in the session, with tech stocks being
the first to roll over. The Nasdaq started the day higher, but quickly
went negative and closed down for a second straight day. Energy was a big
winner today. Crude oil prices surged about 5 percent, following OPEC`s
meeting in Vienna where major oil producing nations agreed to raise
production, but by much less than expected due to pumping constraints.

That`s a positive for oil prices and that means global supply will remain
more on the moderate side for now. Next week, trade issues will still hang
over the market, but the consumer will also be center stage, with the focus
shifting to earnings from home builders like Lennar (NYSE:LEN) and
retailers like Nike (NYSE:NKE). Plus, housing and consumer sentiment

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


BREWER: So, now, we`re into the summer season. What do we expect? More
choppiness or smooth sailing ahead?

We`re joined by Nancy Tengler, chief financial officer at Heartland

Great to talk to you today, Nancy.

Where do you look for opportunity in all of this volatility?

Contessa. It`s good to be here.

Listen, there`s so much good news out there. You just heard that from Bob
and you can — we can recount all dozens of ways retail sales, the consumer
well-heeled, leading economic indicators high, business confidence. And
yet, the market doesn`t — it`s not translating into the market. And we
expect to see that continue during the summer.

The good news is — the good news is for investors that this is a great
time to upgrade the quality of your holdings. We`ve had much stronger
earnings than we`ve seen in decades, and yet, stocks have contracted. So,
you`re getting strong earnings and revenue growth at cheaper prices.

MATHISEN: Let me ask you two questions, Nancy. And I want to pick up on
that thought of upgrading your holdings and what that means.

But let me start by pointing out something you pointed out. Nasdaq is up
11.5 percent. The S&P so far this year up about 3 percent. Dow is roughly

Why does it feel so much worse than that?

TENGLER: Tyler, I actually am exhausted.


TENGLER: And yet — and yet, this is exactly what I`ve experienced through
most of my career. Markets don`t go straight up. They constantly are
climbing a wall of worry. And it`s trade, and it`s the Fed. Every time —
I mean, remember, in the short-term, the market is driven by the algorithms
on the floor, and so, they read trade tension or they read Fed Chairman
Powell thinks the economy is robust and they translate that in the short-

I want to encourage your viewers to be focused on the long-term and to use
this as an opportunity to buy high quality companies for the next three to
five years. Not for the next three to five months.

BREWER: All right. So, what are you looking at when you are looking for a
high quality company?

TENGLER: Yes. So, the industry leaders are a great place to start. If
you can have — if you can get the opportunity to buy stocks like Federal
Express (NYSE:EXPR) and Home Depot (NYSE:HD) and Amgen (NASDAQ:AMGN) in
health care and then many of the tech names like Microsoft (NASDAQ:MSFT)
and Intel (NASDAQ:INTC) and Cisco (NASDAQ:CSCO) at these levels. Even
Google (NASDAQ:GOOG) and Facebook (NASDAQ:FB), though we`ve been trimming
those stocks, are not overly expensive.

I`ve heard many argue that valuation doesn`t matter and that you should buy
what`s working. That`s absolutely not what I believe. Valuation, cheaper
stocks that are growing and have strong balance sheets are much better for
the long-term.

BREWER: Thank you so much for sharing your advice with us, Nancy. Good to
hear from you.

TENGLER: Thank you.

BREWER: Nancy Tengler with Heartland Financial.

MATHISEN: Meantime, trade tensions are an ongoing backdrop for the market,
as Nancy just mentioned. And today, the European Union began enforcing
their own tariffs on nearly $3.5 billion of American imports.

Kayla Tausche breaks it down for us.


aluminum imports for Europe went into effect three weeks ago. But today,
Europe is striking back, slapping tariffs on bourbon, peanut butter, orange
juice, motorcycles and playing cards. The total is just $3.2 billion in
U.S. exports, but it comes from politically sensitive states like Kentucky,
Wisconsin, and Florida.

The E.U. Commissioner for Trade Cecilia Malmstrom said this week, quote: We
did not want to be in this position. However, the unilateral and
unjustified decision of the U.S. to impose steel and aluminum tariffs on
the E.U. means we are left with no other choice. Needless to say, if the
U.S. removes its tariffs, our measures will also be removed.

The measures from Europe are just one arrow aimed at the U.S. in response
to its steel and aluminum strategy. China in May stood down on tariffs on
wine, nuts, and fruit as it struck a truce with the U.S., but that`s over
now. A counterpunch from Canada takes effect July 1st, and Mexico said it
would retaliate in early July after its elections.

President Trump has said in this tit-for-tat trade dispute, any country
that fights back with tariffs will just get even more from the U.S.

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


BREWER: Well, the war of words didn`t end there. Today, the president
threatened a massive tax on all European car imports, and as Phil LeBeau
tells us, that means the price of BMWs, Mercedes, and other European cars
could skyrocket.


selling European cars and SUVs, there is a growing concern about how much
more they may have to charge customers. That`s because President Trump is
once again targeting them, tweeting: Based on the tariffs and trade
barriers long-placed on the U.S. and its great companies and workers by the
European Union, if these tariffs and barriers are not soon broken down and
removed, we will be placing a 20 percent tariff on all their cars coming
into the U.S. Build them here.

Even though BMW, Mercedes, and Volkswagen all have U.S. plants that build
cars and SUVs sold in the United States, European made models accounted for
almost 7 percent of the vehicles Americans bought last year, almost 1.15
million altogether. And all of them coming in with a tariff of just 2.5
percent, ratcheting their tariff up to 20 percent, adding thousands to the
price of some models could kill sales.

The threat comes just days after the Swedish automaker Volvo opened its
first U.S. plant in South Carolina, and the CEO called for all countries to
lower auto tariffs.

HAKAN SAMUELSSON, VOLVO CARS CEO: We believe in free trade. That`s good
for the consumers. I think the harmonization (ph), of course, be on the
low level. I don`t understand why we need new duties (ph) at all.

LEBEAU: The increased trade tensions are not stopping automakers like
General Motors (NYSE:GM) from continuing to increase production in other
countries. In fact, the new Chevy Blazer will be built in Mexico and
imported to the U.S.

GM`s vehicle exports from Mexico are up 39 percent this year, with many of
them winding up north of the border, a clear indication automakers are not
slowing down plans to build vehicles in other countries despite threats
from President Trump to increase tariffs on those imported models.



MATHISEN: Time now to take a look at some of the today`s upgrades and
downgrades in the market.

For a second day, Nike (NYSE:NKE) was downgraded, this time at Buckingham
Research to neutral from buy. The analyst sees organizational changes and
inflation, bringing in some risk, but overall remains positive on the
company`s long-term fundamentals. As such, the price target was raised
from $75 a share to $80. Today, Nike (NYSE:NKE) shares closed at $73.43,
and that was down a fraction.

And Needham cut its rating on the chip maker KLA-Tencor (NASDAQ:KLAC) to
hold from buy. The analyst there concerned some customers may spend less
on equipment in the second half of the year. KLA fell more than 3 percent
on the day.

BREWER: Molina Healthcare (NYSE:MOH) was upgraded to buy from hold at
Jefferies, with a brokerage calling the company`s turnaround efforts,
quote, value enhancing. The price target was up to $124 a share from $86.
Molina`s shares closed at $101.48, up about 3 percent.

And United Rentals (NYSE:URI) was up to buy from neutral at UBS. The
analyst cited the stock`s valuation after pulling back 20 percent over the
last three months. He also sees better margin performance for the
equipment rental company. The firm has a price target of $196. Today,
shares closed at $154.95. That was up more than 1 percent.

MATHISEN: Coming up, if you have a big decision to make about your
portfolio, this week`s market monitor says your best bet may be to think


MATHISEN: The Supreme Court said the government generally needs a warrant
to use past cellphone location data as a way to track an individual. The
ruling said obtaining the data from wireless carriers without a warrant
amounts to unreasonable search and seizure. The court did grant exceptions
like pursuing a suspect or protecting someone who is in immediate danger.

BREWER: In that ruling, the court said cell phones are a pervasive part of
our daily life, so it`s no surprise that a lot of advertising money has
been moving away from traditional media and into digital. But that trend
is also facing a number of challenges. It was one of the topics of
conversation among ad executives this week at the Cannes Lion Festival in
Cannes, France.

And Julia Boorstin was there.


Instagram-ready video installation, and Google`s volleyball court and hat
making stand, to Twitter and Pinterest beach set up, and Snapchat`s museum
exhibit composed of snaps. All the digital ad platforms are here in Cannes
spending big to draw the attention and ad dollars of chief marketing

And this gathering of industry heavy hitters comes amid massive
consolidation. With AT&T (NYSE:T) just last week completing its
acquisition of Time Warner (NYSE:TWX), which ad industry veteran, Media
Link CEO Michael Kassan, says will drive innovation.

MICHAEL KASSAN, MEDIA LINK CEO: The idea of the advanced advertising
platforms in the investments that AT&T (NYSE:T) in that case will make I
think will go a long way to driving better contextual and targeted
advertising, which I think is a positive for all of us.

BOORSTIN: But this year`s Cannes Lion coming on the heels of the
Facebook`s data privacy scandal, hears the social media giant is owning up
to its mistakes and talking to marketers about the changes it`s making to
insure brand safety and encouraging ad executives to do a privacy checkup
on their Facebook (NASDAQ:FB) account.

The chief marketing officer of Unilever (NYSE:UN), one of the world`s
largest advertisers, explains why he is sticking with the platform.

KEITH WEED, UNILEVER CEO: I`m satisfied with the progress they`re making.
We`re not where we need to be yet. They know that. I know that. You know
that. And it`s a big company, and it`s making some big changes.

BOORSTIN: Ad executives saying there`s an industry-wide focus on improving
the platforms and the content on them. With Facebook (NASDAQ:FB) investing
a professionally created shows for its new launch platform, which is a
boost for the media brand such as Discovery backed Group Nine that
distributed through them.

BEN LERER, GROUP NINE MEDIA CEO: Facebook (NASDAQ:FB) is moving towards
more premium. I think they`re valuing brand. I think they`re valuing
content more than they have before for people like us. It`s a great thing.
It means that the cream rises. It strengthens our relationship with them.

BOORSTIN: And traditional media companies are using the upheaval as an
opportunity to highlight their premium content combined with new digital

Take Kargo, which sells mobile ads for 70 media properties. From the “New
York Times (NYSE:NYT)” to NBC Universal (NYSE:UVV), to advertisers looking
for alternatives.

HARRY KARGMAN, KARGO CEO: What they`re looking for is ways to spend their
money, both on Facebook (NASDAQ:FB) and Google (NASDAQ:GOOG), but also find
alternatives where they can find brand safety, quality places, and actually
can reach consumers where they have diversification of their media

BOORSTIN: With so many options showcased here at Cannes and the digital
giant`s focus on safety and quality, analysts just now boosting their
estimates, saying the global ad industry will grow by over 6 percent this

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Cannes, France.


MATHISEN: UPS avoids an employee strike for now with a new labor contract,
and that is where we begin tonight`s “Market Focus”.

The delivery giant reached a tentative agreement with the Teamsters union
on a five-year labor deal that includes improved benefits and higher wages
for existing employees. The deal still needs to be approved by the union,
but it covers about 260,000 workers. Shares of UPS up a quarter of a
percent to $113.70.

BlackBerry topped expectations, thanks to strong performance in its
license, software and services business. But the company said that
strength is expected to peter out as BlackBerry moves to a subscription-
based model. And that disappointing growth outlook seemed to catch
investors off guard. Shares were off 8 percent on the session to $10.68.

And the medical device maker Medtronic (NYSE:MDT) will hike its dividend 9
percent to 60 cents a share. Separately, the FDA expanded its approval for
one of Medtronic (NYSE:MDT) diabetes devices to a younger age group.
Medtronic (NYSE:MDT) Shares are up a fraction to $86.81.

BREWER: Despite reporting a drop in same store sales, used car retailer
CarMax (NYSE:KMX) reported stronger than expected revenue. Earnings also
edged higher and topped estimates. Shares soared nearly 13 percent to an
all-time high to finish the day at $80.19.

Netflix`s longtime communications spokesman Jonathan Friedland is leaving
the company after making insensitive comments to team members. In a tweet,
Friedland said he was leaving the company after seven years. A replacement
for Friedland has yet to be named. Shares were a little change in
afterhours. They finished the regular day down 1 percent to $411.09.

Also after the bell, the Pentagon said Lockheed Martin (NYSE:LMT) and two
of its units have won a contract to produce F-16 fighter jets for Bahrain.
The contract is worth $1.1 billion. Shares of Lockheed were unchanged
following the news, but closed down a fraction today at $299.38.

MATHISEN: Well, small caps are on a bit of a tear and this week`s market
monitor bets they will continue to lead the market, along with tech.

Last time he was on last November, he picked SPDR Dow Jones Industrial
Average ETF, up 4 percent, the IShares Edge MSCI (NYSE:MSCI) USA Momentum
EFT — say that ten times fast, folks — and that is higher by 12 percent,
and Vanguard Europe EFT lower by 1 percent.

Jason Browne is chief investment strategist at FundX.

Jason, you are picking a couple of areas here, small caps and tech, that
have momentum behind them. Sometimes that`s something to worry about.
You`re changing what`s been working.


MATHISEN: Tell me why you think this is a smart play now.

BROWNE: Sure. At FundX what we`ve observed over time is that most trends
when it comes to large cap versus small, value versus growth, foreign
versus domestic, they actually last years, at least several months. The
small cap trend in particular is relatively new. You mentioned the
technology. That`s had some momentum behind it for some time now.

The other thing that we`ve observed is that because these trends last some
time, you have some time to adjust as things change as long as you stay
alert to those changes, and that`s really what our strategy is all about.

BREWER: And your first pick as an Internet index fund is up 30 percent
just this year alone.

BROWNE: Amazing, right? Although it`s up 50 percent or so for the 12
months, you might have had a similar argument or concern, you know, at the
beginning of the year. And sure enough, it`s up another 30 percent since.

It`s an aggressive play for a small part of the portfolio.

BREWER: You`ve got a lot of tech in it, right, 30 percent in FANG stocks?

BROWNE: It`s about 30 percent in specifically the FANG stocks, Facebook
(NASDAQ:FB), Amazon (NASDAQ:AMZN) and so forth. It`s really entirely
Internet-based. So, even though it`s not all technology, e-trade and
others, the whole reason why they invest in anything is because these are
companies that are basically tech-focused.

MATHISEN: Second pick is IShares Russell 2,000 Growth ETF. I believe the
ticker is IWO.

BROWNE: That is correct. And this is a great low cost way to add small
caps to your portfolio. Again, still focused on growth because in the
current market environment, growth is absolutely what`s leading.

BREWER: What`s different about IShares Edge MSCI (NYSE:MSCI) USA Momentum
Factor ETF, MTUM? What makes it different from the other two picks?

BROWNE: Other than the fact that of my first set of picks, this is the one
that sort of survived to now, and we continue to own.

MATHISEN: This is a repeat, his is a repeat.

BROWNE: This one is a repeat, is a factor-based ETF that`s actually
somewhat more active. It actually adjusts its portfolio over time. So, a
couple of years ago when high dividend paying stocks were in favor, that
was largely what this fund actually owned.

Now, you only can invest in U.S. stocks and only large and mid cap
companies, but it`s done a really good job over the last few years actually
migrating between, you know, sort of different things like what`s working
and it`s still at a very low operating expense ratio, 15 basis points. So,
it`s a really nice way to have something in the portfolio that`s doing well
today but can also help you adapt as leadership changes. We know it will.

MATHISEN: So, I want to come back to that idea that I sort of begun with.
You said that one of the funds I believe is the first you mentioned, FDN,
Internet Index Fund, up 50 percent. Don`t you worry a little bit that
you`re coming late to the party?

BROWNE: Well, again, I`m not going to put everything I have here. You
know, imagine if you are going out and trying — you are seeing everybody
making money in this area, and that`s what has been happening for some
time, whether it`s Amazon (NASDAQ:AMZN) or Facebook (NASDAQ:FB) or so

If you want to add these stocks to your portfolio, at least there`s a
relatively diversified way to get exposure there. These stocks were down
today, for example. They`ve gone — this thing happened through fits and
starts. It`s something we feel like we can add to, but until the trend
changes, we feel like —

MATHISEN: It will last a good long time.

BROWNE: They can last a good long time, and I think you can continue to
make good arguments where this one could last longer.

MATHISEN: All right. Jason, thanks very much. Continued good fortune to

BROWNE: Thank you so much.

MATHISEN: Jason Browne with FundX and to read more about his picks, you
can head to our website,

Thanks, Jason.

BREWER: Up next, companies are always looking to improve the bottom line.
One move some are looking at could save tens of millions of dollars. You
might call it the last straw. Can you guess what I`m talking about? We`ll


BREWER: As more and more cities work to become environmentally friendly,
more and more companies are working to do the same with an eye on the
bottom line. The latest issue to take center stage: drinking straws.

And as Aditi Roy tells us, it gives a whole new meaning to the question,
paper or plastic?


restaurant in San Francisco, servers only hand out paper straws. Company
officials say they wanted to give customers an option that`s better for the

plan for us.

ROY: And Lakshmi Sarah (ph) likes the compostable plastic straw that comes
with her blue bottle iced coffee.

UNIDENTIFIED FEMALE: I think banning plastic straws is a tiny thing in
stopping the wave of plastic garbage that might hit us.

ROY: They`re not alone. Consumers, cities, and companies across the
nation and the world are yielding to calls to replace plastic straws with
more eco-friendly options. Bans on plastic straws are either already in
place or being debated in states like California and cities from New York,
to Seattle, where a ban will take effect July 1st.

the companies based here in Seattle, like Starbucks (NASDAQ:SBUX) and
Costco (NASDAQ:COST), will follow the city`s example and start rapidly
reducing their plastic footprint, because activists across the country and
city will continue to demand it.

ROY: Earlier this year, nearly one-third of shareholders from Starbucks
(NASDAQ:SBUX) which uses an estimated 2 billion plastic straws a year,
voted to replace plastic straws.

McDonald`s recently announced it`s phasing out plastic straws in the U.K.
and Ireland.

STEVE EASTERBROOK, MCDONALD`S CEO: Whatever we can do around waste and
recycling, it is a very visible part of our business.

ROY: In the U.S. food service company Bon Appetit has banned plastic
straws at more than 1,000 locations. As plastic straws fall out of favor,
the top contenders to replace plastic are compostable plastic, paper, and
even metal and glass straws. The three biggest producers of compostable
plastic straws are PT Strawland, Eco Straws and Eco Products which sells to
restaurants chains, stadiums, and companies.

Paper straws are another top alternative contender. Indiana-based Aardvark
Straws says its sales have gone up 5,000 percent in the last two years.
And glass straws, which are sold by companies like Strawesome, Hummingbird,
Simply Straws and Glass Dharma. Simply Straws says it has quadruple its
business since January.

But these eco-friendly options cost more to make. One plastic straw costs
less than a penny. Compare that to 4 cents per compostable plastic straw,
6 cents per paper straw, and 50 cents to 60 cents per glass straw. Making
the switch from plastic could cost big restaurant chains an extra tens of
millions of dollars each year. But some companies and consumers say
they`ll swallow the extra costs because it`s the right thing to do.

ADKINS: We`re more than happy to pay the costs just for the good.

ROY: For now, it appears that compostable plastic straws and paper straws
are the most common alternative to plastic. The paper straw company
Aardvark says they are so busy, they can`t keep up with demand.

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


MATHISEN: We were told today by our producer Heather that there are even
people who are using pasta straws.

BREWER: And I have stainless steel ones. But remember the old days when
we just drank out of the cup?

MATHISEN: Yes, yes. Very interesting story there. Paper straws making a
big comeback.

Before we go, let`s take a final look at the numbers on Wall Street today.
The Dow rose 119 to 24,580. The Nasdaq fell 20. The S&P 500 tacked on

For the week, though, all three indexes were lower. The Dow was the big
loser, down 2 percent. The other is down less than one.

And that`s NIGHTLY BUSINESS REPORT for tonight.

BREWER: Have a great night, everybody. Be back here next week.


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


This entry was posted in Transcripts. Bookmark the permalink.

Leave a Reply