Transcript: Nightly Business Report – July 5, 2018

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Midnight deadline. The White
House is set to levy tariffs on billions of dollars on Chinese goods,
heightening tensions between the world`s two largest economies.

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Side effects. Fed
policymakers are increasingly concerned that the economy could hit a snag
as governments fight over trade.

HERERA: Gender divide. Men dominate the cryptocurrency world, but a new
movement wants to change that.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
July 5th.

GRIFFETH: And we bid you good evening, everybody.

Stocks rose sharply today in part on hopes for a trade deal with Germany
involving tariffs on cars. That helped lift the mood on Wall Street today.
The Dow gained 181 points, near the highs for the session at 24,356. The
Nasdaq added 83 and the S&P was up 23 points.

However, in just a few hours, the U.S. is still scheduled to slap billions
of dollars worth of tariff on goods imported from China. That deadline is
midnight tonight and China has promised swift retaliation which only, of
course, further escalates tensions between the world`s two economic
superpowers.

More on that right now from Eunice Yoon in Beijing.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: China is preparing for
a fight, even a public relations fight. The Chinese had originally planned
to impose tariffs at midnight in China on Friday to match the U.S.`s 12:01
a.m. start time. However, because of the time difference July 6th in China
comes before July 6th in the U.S., the Chinese said they would delay their
tariffs until after immediately the Americans imposed theirs.

China`s cabinet issued a statement saying China absolutely won`t fire the
first shot.

That means China will impose its tariffs at around noon local time, which
is unusual for the country and it also shows how sensitive Beijing is about
appearing as if it`s an aggressor. It wants to make sure that it`s seen as
the innocent party as the one who is a good guy in this fight against
President Trump.

Both countries will initiate tariffs up to 25 percent on $34 billion worth
of goods. The U.S. will punish Chinese made high tech, among other
products. China will strike back at farm goods targeting President Trump`s
political base.

What are the Chinese doing to gird themselves during this fight? There`s
speculation that China is purposely devaluing the currency to promote
China`s exports by making them cheaper. There are many who say that`s not
the case. Nevertheless, the Yuan hit its weakest level in almost a year
this week.

And there`s talk that the Chinese could loosen policy further. It`s
already done that as of today.

As for American companies, China warned that U.S. firms could suffer
because the tariffs would wreak havoc on global supply chains. The
commerce ministry pointed out today that foreign firms account for $20
billion, about two-thirds of the exports from China subject to the tariffs
with many of them American. The ministry said that the U.S. is, quote,
firing shots at the entire world including itself.

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

(END VIDEOTAPE)

HERERA: Federal Reserve policymakers are watching the trade fight very
closely. The potential for tariffs to ripple through the economy dominated
the central bank`s last meeting.

Diana Olick has more.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: There was a lot of
trade talk among members of the FOMC in the minutes. They expressed
concern over possible adverse effects over tariffs and other proposed trade
restrictions in the U.S. and abroad and how they could affect investment
activity. That uncertainty and risk, they said, were both intensifying.
They noted indications of a pullback in capital spending again because of
that uncertainty.

Specifically, steel and aluminum industries were seeing higher prices
without expansion. They also noted supply constraints in the construction
sector. Otherwise, members agreed the labor market in the U.S. continues
to strengthen with economic activity rising at a solid rate. They pointed
to favorable economic factors being supportive of above-trend GDP growth,
mainly a strong labor market, federal tax stimulus and accommodative
financial conditions, as well as high consumer confidence and a pickup in
household spending.

But some members raised concern that a prolonged period of the economy
cranking above its potential could increase the risk of inflation,
eventually leading to a significant economic downturn. There was
discussion of the labor shortage which we saw in the ADP jobs report
showing more job openings than eligible workers to fill them.

Finally, members revisited the idea of changing the language in these
statements on policy from accommodative to neutral. So, that one is likely
coming.

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

(END VIDEOTAPE)

GRIFFETH: As we mentioned earlier, stocks rose today led by technology and
there`s one group within tech that`s getting a lot of attention right now.
That would be the semiconductors.

Bob Pisani explains now why that sector, along with two others, are in
focus on Wall Street right now.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The stocks staged an
impressive comeback today though on very light trading volume, which is
what you might expect on a holiday-shortened week. But looking back over
the last couple of weeks, the markets overall take on a notably defensive
tone amid the rising trade tensions. The S&P has been really range-bound,
stuck in a range of 2,700 to 2,750. It`s not showing signs of breaking out
just yet though today was encouraging.

The strength really stems from defensive groups, sectors like utilities and
telecom and real estate. That`s generally not the kind of leadership
investors want to see, but more crucial, cyclical sectors like industrials,
for example, are down 2 percent, and banks and semiconductors are down 4
percent in the last few weeks. And a lot of big chip stocks which were the
market leaders, they`re down even more. Micron, Nvidia, Broadcom
(NASDAQ:BRCM), AMD, they`ve fallen almost 10 percent in the last few weeks,
though, they did get a modest bounce today.

Now, what concerns traders is this notion that trade wars will translate
into a slowdown in global growth and a reduction in earnings. Many say the
markets need to get away from the defensive leadership we`ve seen and
rotate back into those more economically sensitive groups like industrials,
banks and semiconductors.

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

(END VIDEOTAPE)

GRIFFETH: Bob just mentioned Micron Technology (NASDAQ:MU). That
company`s been caught in a legal battle in China that has added to the
China-U.S. trade tensions. Today, a temporary ban was put in place that
prevents Micron from selling chips in that country, but the company did say
the decision will not have a big impact on its revenue and that sent shares
up more than 2 percent today.

HERERA: So, let`s focus more on those three key sectors, the banks, the
semis and the industrials with Jack Ablin. He`s the chief investment
officer at Cresset Wealth Advisers.

Always good to see you, Jack.

JACK ABLIN, CRESSET WEALTH ADVISORS CIO: Nice to see you, Sue.

HERERA: Let`s start with semiconductors. I mean, basically, they`re
caught in this trade issue and it doesn`t look like that`s going to go away
any time soon. What`s your attitude towards what the ultimate impact might
be on that particular sector?

ABLIN: You`re right, Sue. The semiconductors right now are collateral
damage in this tit for tat trade war with China. We have to keep in mind
that Micron, in particular, was an object of a Chinese takeover several
years ago that was denied. Since that time, of course, Micron has accused
their Chinese competitors of stealing their technology.

And so now to have a Chinese give way against Micron is sort of a slap that
goes against what we`ve done to China in the past.

GRIFFETH: Jack, many of these industrial multinationals were created as we
saw the rise of globalization around the world, but now, we`re going the
other direction and the pendulum is swinging the other way.

What happens to these multinationals now, do you think?

ABLIN: Well, I think, you know, two things. One is I think policy will
ultimately adjust. I don`t think we`re going to see necessarily 180-degree
reversal in policy. I think most economists, most policymakers realize we
do need global trade. In fact, in many respects, President Trump himself
said we want free trade, we just don`t want any impediments at all and if
we`re going to have any, then we`re going to impose some ourselves.

So, I do think that trend is still more toward free trade. But that said,
you`re right, Bill, these companies have optimized their business processes
on the reality that`s been the trend for the last 30 years and that`s
globalization and outsourcing, and now to try to turn a battleship like
that around over, you know, a two-quarter period is just very difficult.

HERERA: Now, the financials face other challenges, certainly and the
interest rate differential and the Fed, you know, and the ECB and its
decision on interest rates. How do you feel about that particular sector
and the headwind that they seem to be dealing with? Temporarily perhaps or
maybe a little bit longer term?

ABLIN: Well, I think it may be a little bit longer term, Sue, and this is
a puzzle because the financials are really the circulatory system of the
economy. What I have found is that the stock market does well when
financials do well. The stock market doesn`t do so well when financials
underperform.

So even if you`re an investor in other sectors you do want to see
financials outperform if they can. But that said, interest rates in the
intermediate part of the curve, in the ten-year are low just as the short
rates are rising, their net interest margins are really falling and so
that`s putting a lot of profit pressure on the large banks.

HERERA: Lots to ponder. Thanks, Jack. Appreciate it.

ABLIN: Thank you, Sue.

HERERA: Jack Ablin with Cresset Wealth Advisors.

Bill?

GRIFFETH: Elsewhere, the private sector added jobs in June, but not as
many as expected. First thing this morning, payroll processor ADP reported
a rise of 177,000 positions last month. Estimates were for a rise of
185,000, but this marks the fourth straight month of monthly job growth
below 200,000, and it`s one of the reasons that businesses are still
struggling to find enough new hires right now. Same old story.

By the way, in a separate report, new applications for unemployment
benefits last week increased by 3,000. Many economists cited seasonal
factors for that rise. And the government`s big monthly jobs report will
be released tomorrow morning, Sue.

HERERA: Bill, the services sector activity picked up in June, thanks to an
uptick in new orders. While the Institute for Supply Management`s index
showed expansion in the services sector, trade, tariffs and a shortage of
workers were starting to strain the supply chain and that could slow
momentum in the months ahead. The services sector accounts for more than
two-thirds of economic activity.

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

And we begin with Facebook`s price target which was raised to $275 at BTIG.
The analyst there believes that consumers don`t really care about the
company`s privacy scandal. The firm is maintaining its buy rating on that
stock and shares of Facebook (NASDAQ:FB) rose nearly 3 percent today to
$198.45.

Clean tech company Advanced Energy was upgraded to outperform from market
perform at Raymond James. The analyst there cites the firm`s free cash
flow and its ability to make acquisitions while still maintaining steady
buybacks. The price target now $72. That stock rose more than 4 percent
to $60.27.

HERERA: Another under the radar name was upgraded. Brookfield
Infrastructure`s rating was raised to outperform from neutral at Credit
Suisse. The analyst cites its unusual acquisition of Enbridge (NYSE:ENB),
a Canadian natural gas business. The price target is $46. The stock rose
5-1/2 percent to $40.87.

Cosmos Energy is not a household name necessarily, but it did get an
upgrade to outperform from sector perform at RBC Capital Markets. The
analyst expects the company to benefit from higher oil prices among other
factors. The price target is $10 and stock was up 2 percent to $8.20.

GRIFFETH: Still ahead, how one couple turns social media posts into a
lucrative business.

(MUSIC)

HERERA: President Trump has accepted the resignation of EPA Administrator
Scott Pruitt. Pruitt`s exit comes amid alleged ethics and spending
violations. While at the EPA, Pruitt rolled back environmental regulations
and broadly supported the fossil fuel industry.

Deputy administrator Andrew Wheeler will become acting chief of the agency
on Monday.

GRIFFETH: Elsewhere, the president is expected to tell NATO nations at
next week`s summit that the U.S. cannot be the world`s piggy bank.
President Trump has pressured some NATO allies already to significantly
increase their military spending and according to the NATO secretary-
general, progress is being made.

(BEGIN VIDEO CLIP)

JENS STOLTENBERG, NATO SECRETARY GENERAL: All NATO allies agree that
European allies and Canada have to invest more in defense. They agree that
we need fair burden sharing. The good news is that we see that European
allies and Canada are stepping up. All allies have started to increase
defense spending and more allies spend 2 percent of GDP on the defense.
So, we still have a long way to go, but we have started to move in the
right direction.

(END VIDEO CLIP)

GRIFFETH: By the way, the Brussels` NATO summit takes place next week on
July 11th and 12th.

HERERA: The president plans to announce his Supreme Court nominee on
Monday at 9:00 p.m. Eastern Time.

NBC News says his choice is likely one of these three, Judge Brett
Kavanaugh, a former law clerk to retiring Justice Kennedy. He was
appointed to the U.S. Court of Appeals D.C. circuit by President George W.
Bush. Raymond Kethledge also clerked for Kennedy and was a George Bush
nominee or appointee, I should say. And Amy Coney Barrett, she has been a
federal judge for about a year and once clerked for the late Justice
Antonin Scalia.

GRIFFETH: Michael Jones joins us now to talk about what each nominee might
mean for business and federal regulation. Michael is chairman of
Riverfront Investments. He joins us tonight from Richmond.

Good to see you again. Welcome back.

MICHAEL JONES, RIVERFRONT INVESTMENTS CHAIRMAN: Good to be back.

GRIFFETH: You think all three are pro-business, so the business world
should welcome them.

Let`s start with Ms. Barrett. You call her the biggest question mark.
Why?

JONES: Well, when you look at Justice Barrett, I mean, she is fairly newly
arrived to the judicial arena from academia. She hasn`t had time to
compile much of a track record in the kind of cases and the areas that are
of interest to financial markets and most of her academic career involved
social issues that are going to be very much of interest in any
confirmation hearing and aren`t as central to what financial markets want
to know.

So, she would be the biggest question mark in terms of her approach towards
taxation, regulation and so forth, and therefore, markets don`t like
uncertainty and she would probably be the least favorite of the three
nominees from a financial market perspective.

HERERA: Let`s turn to Brett Kavanaugh. Justice Kavanaugh you say is a
solid appointment, perhaps. What is that based on and what is does his
track record tell us about how he might come down on issues important to
business?

JONES: So with respect to Kavanaugh. When you think about what financial
markets care about, you know, there`s a few areas. They want to know the
justice`s philosophy towards taxation, towards regulation, towards
lawsuits, towards labor market relations. Those are kind of big ones.

And when you look at Justice Kavanaugh, he has a very strong track record
in the area of regulation. He`s on record as being very skeptical of the
constitutionality, of the structure of the Consumer Financial Protection
Bureau, that the isolation of that bureau from congressional and
presidential oversight, the financial markets would really like that. Also
with respect to the EPA, he is on record as upholding requirements that the
EPA apply a cost-benefit analysis to any regulations.

So, all of the heavily regulated industries and the traditional smokestack
industries, they`re going to really like his track record there. He
doesn`t have as much of a track record particularly compared to Kethledge
in areas like labor market relations and lawsuits, so I would call him the
second best nominee from the financial markets perspective.

GRIFFETH: Which leads us to the one you think will get the nod and that is
Raymond Kethledge, right?

JONES: Well, I think — remember that the calculation is both the social
policy and the financial, and I`m really interested in is the impact on
markets. So, my favorite would be Kethledge, but that`s because his — he
aligns so much with what financial markets are going to want to see. He is
on record as upholding restrictions on labor unions collecting dues from
anyone, but their membership. The old smokestack, heavily unionized
industries, they will like that.

He is equally good on deregulation as Kavanaugh and has a strong track
record on that score. He has ruled against the IRS and in favor of the Tea
Party on areas of tax regulation. So, again, that`s very favorable for the
financial markets.

And then last, but not least, and this is a really important one — you
know, class action lawsuits have become a real plague for a lot of
industries, pretty much ranging from technology to transportation, almost
every industry has suffered from some degree of class action lawsuits and
Justice Kethledge is on record of being skeptical of the kinds of
settlements that award tens of millions to the lawyers and a $25 off coupon
to the actual litigants in the lawsuit.

So I think when you look at the broad track record of the three different
nominees, I think Justice Kethledge is the one that has the most track
record in the widest series of areas that are of interest to financial
markets.

GRIFFETH: All right.

JONES: And he`s going to be the one that markets will like best.

GRIFFETH: We will know Monday night.

Michael Jones of Riverfront Investments — always good to see you. Thanks
for joining us tonight.

JONES: Good to be here.

HERERA: Boeing (NYSE:BA) takes control of Embraer`s commercial business,
that`s where we begin tonight`s “Market Focus”.

The nearly $5 billion joint venture gives Boeing (NYSE:BA) greater access
to the markets for smaller passenger planes. Boeing (NYSE:BA) and Embraer
are making this deal at a time when competition is heating up with jet
makers from China Russia and Japan. Shares of Boeing (NYSE:BA) were up a
tick to $333.18. Meanwhile, shares of Embraer fell 10 percent to $23.50.

Industrial gas company Praxair (NYSE:PX) is one step closer to completing
its $45 billion merger with German rival Linde. Praxair (NYSE:PX) said it
plans to sell nearly $6 billion worth of European assets in an effort to
secure regulatory approval. Shares of Praxair (NYSE:PX) rose about 3
percent to finish the day at $161.88.

Barnes & Noble (NYSE:NE) (NYSE:BKS) has fired its CEO for violating company
policies. The company wouldn`t specify what the violation was, but did say
it was not related to finances. Barnes & Noble (NYSE:NE) (NYSE:BKS) shares
climbed to $5.90.

GRIFFETH: And after the bell tonight, discount retailer PriceSmart
(NASDAQ:PSMT) reported a rise in revenue that beat expectations but profits
did come in light. Shares initially traded lower in the extended session,
erasing a 2 percent gain from earlier when shares closed at $93.40.

HERERA: When you think of social media influencers, you often think of
celebrities with big followings, but that`s not always the case. Regular
people can also become influencers, all it takes is a niche, lots of posts
and a growing audience and the ad dollars can soon follow.

Kate Rogers (NYSE:ROG) has more in the “Small Business Matters” segment.

(BEGIN VIDEOTAPE)

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: The 2008 recession hit
Kelli and Daniel Segars hard. They lost their job, his in personal
training and hers as a youth counselor, within days of getting married and
closing on a home.

To make ends meet, they turned to their experience in the fitness world.

KELLI SEGARS, YOUTUBE INFLUENCER: We both had time to pick up extra job,
but in the meantime, I started writing online and I started to grasp the
concept of passive income. You work once and you create content that is
ideally evergreen and it brings both people and income to that content.

ROGERS: They used YouTube, uploading content directly to viewers from
workouts to commentary on living a healthy life with balance, joining the
company`s millions of content creator with their channel fitness blender.

LIAM COLLINS, YOUTUBE SPACES HEAD OF AMERICAS: A beautiful thing about
YouTube, one of my favorite things is that it costs nothing to fail. So,
you can try over and over again until you find that audience and find
something that works.

ROGERS: While start-up costs for would-be influencers, like the Segars are
low, advertisers are spending big bucks to partner with social media stars
in order to reach new audiences. $2 billion will be spent on Instagram
influencer marketing this year alone.

Obviously, an influencer marketing company works with 150 brands,
connecting them to more than 450,000 influencers in its network.

UNIDENTIFIED FEMALE: Great content.

UNIDENTIFIED FEMALE: Companies care about influence and marketing because
it`s really an evolution of celebrity marketing. We`re seeing their
budgets triple, quadruple and sometimes 10x just from last year to this
year.

ROGERS: While many start out working as influencers on the side, it is
possible to make it a full-time job with the dedication and the unique
aesthetic.

After three years and hundred of videos, the Segars committed to fitness
blender full time. They started with zero subscribers and today have more
than 5 million, with thousands signing up each day. They make money on the
advertisements that are shown on their YouTube channel.

SEGARS: If you`re going to make it on an online business, you want to make
sure you pick something that you`re passionate about because you will spend
time on it and you need to be excited about it, and you should also pick
something that you`re knowledgeable on, so you`re actually bringing
something to the people with the way you have something to offer.

ROGERS: Kelli says all it took was the first deposit in the couple`s
advertising account to make the Segars realize this might actually be a
viable career. Today, their company is worth more than $10 million.

For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG).

(END VIDEOTAPE)

HERERA: Coming up, a financial feminist movement in bitcoin.

(MUSIC)

HERERA: They are the new crypto force, women diving into the world of
digital currency where men currently make up more than 90 percent of that
industry. They`re hoping to make a difference and inspire the next
generation of women.

Andrea Day has more.

(BEGIN VIDEOTAPE)

ANDREA DAY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Is crypto sexy?

SHANAH WALTON, CRYPTO COACH & CONSULTANT: It`s sexy to me.

DAY: Meet Shanah Walton, aka, the “Bitcoin Bombshell”.

WALTON: The profits can be very sexy.

DAY: She`s part of a growing group of women jumping head first into a
world dominated by men like Meredith (NYSE:MDP) Davis.

MEREDITH DAVIS, CRED GENERAL MANAGER OF ENTEPRISE: Seven months` pregnant.

DAY: Nyla Rodgers.

NYLA RODGERS, MAMA HOPE CEO & FOUNDER: We are moving into a new feminist
movement and it is financial.

DAY: And Erica Mouynes.

ERIKA MOUYNES, PIXBAE PARTNER: My whole point is to get more women
interested.

DAY: We were invited to join them at a meet up in New York City, a monthly
forum to share ideas and get advice, on everything from trading to block
chain.

WALTON: I`m doing my part, my small part to bring in as many women as I
can, just to let them know, like, don`t be intimidated.

DAY: And she says a history of intimidation has kept some women out of the
game.

DAVIS: A lot of the barriers to entry that I thought existed were either
remembered from times that don`t really apply anymore.

DAY: No barriers for this group, who come from all walks of life. And for
many, a first step into the financial arena.

WALTON: I`m in the hospitality industry and that`s my background for the
past 12 years.

DAVIS: I was a U.S. marine and then I worked in the government space for a
long time. Most people, I think, that I`ve interacted with are working
from home or a coffee shop or wherever is most expedient. So, for moms,
that`s a huge opportunity.

DAY: An opportunity Marilyn DeLucenay saw four years ago when she started
a website targeting stay-at-home moms, cryptomoms.com.

MARILYN DELUCENAY, CRYPTO MOMS FOUNDER: Ninety percent to 95 percent of
the people that were involved or have been involved in the cryptocurrency
have been men, and it`s time that women started showing up to the table.

DAY: And showing up they are. She says the site recently shot up 25
percent.

WALTON: It`s the global market. It`s 24 hours. So, after the kids go to
bed, you can get on your computer and do anything that you can do at —
between 9:00 to 5:00.

DAY: Do you feel you have anything to prove to men?

DAVIS: No. Absolutely not.

WALTON: We are definitely at the beginning of what`s going to be like a
major game changer.

DAVIS: Are you here to stay in the game?

WALTON: Absolutely. Why would I go?

DAY: And they all say the most important advice is to do tons of research
before you jump in. That`s one reason why they meet every month to share
the very latest information.

For NIGHTLY BUSINESS REPORT, I`m Andrea Day.

(END VIDEOTAPE)

GRIFFETH: And before we go, a look at the final numbers on Wall Street
today. The Dow advanced by 181 points, the Nasdaq added 83, the S&P was up
23.

We have the big jobs report first thing tomorrow morning.

HERERA: Yes, we do. So, you want to join us tomorrow night for some
analysis. That will do it for NIGHTLY BUSINESS REPORT. I`m Sue Herera.
Thanks for joining us.

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

END

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