ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Bill Griffeth and Sue
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Let`s talk Turkey. Turkey`s
currency plunges against the dollar, raising concerns that the country`s
fragile economy is on the brink of a financial crisis and sparking fears it
could spread, sending the Dow down almost 200 points.
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Cracks in the foundation?
Two new reads on the housing market suggests they may be pain ahead for the
HERERA: And a whole new ball game. How pro sports have found their next
best way of making money and it`s not on game day.
All that and more on NIGHTLY BUSINESS REPORT for Friday, August 10th.
GRIFFETH: And we do bid you good evening, everybody, and welcome on a
beautiful summer day here in New York.
The word on everyone`s lips today was Turkey, and not the Thanksgiving
kind, either. The country that straddles Europe and Asia sent shivers
throughout markets around the world. Turkey`s currency plunged about 20
percent in a single day, igniting fears of a financial crisis similar to
ones we`ve seen in the past in Greece and Cyprus, and that sent European
markets sharply lower and our stock market then felt the heat, as well.
Michelle Caruso-Cabrera tells us now why the Turkish currency matters.
MICHELLE CARUSO-CABRERA, NIGHTLY BUSINESS REPORT CORRESPONDENT: The leader
of Turkey, Recep Erdogan, has increasingly spooked investors since he
became leader of the country back in 2003. As a result, more and more
foreign investors have been leaving and when those investors leave, they
don`t need the Turkish currency anymore, so they sell it. Whenever you
have more sellers than buyers, prices fall.
That`s what`s been happening to the Turkish lira for months, even years.
But it`s gotten much worse more recently after the U.S. imposed sanctions
on Turkey after the country refused to release an evangelical pastor from
prison as President Trump has demanded. U.S. market was spooked today
because President Erdogan made a very defiant speech where he seemed to not
want to acknowledge things that needed to happen, like a hike in interest
And it`s led to fears of possible contagion from Turkey`s economic drama
perhaps than the rest of the world. That`s because Turkey and the
businesses in the country owe a lot of money to overseas banks which
they`ll have to pay back in dollars or euros. If Turkey owe can`t pay
those banks, those banks will suffer losses on those loans.
How bad those losses will be is the key question and could it lead to some
kind of banking crisis in places outside of Turkey. Few analysts think
right now that`s a probability, but the possibility was enough to get
investors to get a little risk out of their portfolio today.
For NIGHTLY BUSINESS REPORT, I`m Michelle Caruso-Cabrera.
HERERA: Exacerbating the lira`s drop, President Trump tweeting that he
would double steel and aluminum tariffs for Turkey alone. This followed
the Turkish president telling his people change their dollars, euros and
gold into lira.
Kayla Tausche has more.
KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The tweet from
President Trump sent shock waves through the market. The president
suggesting tariffs of 20 percent on aluminum and 50 percent on steel, just
for Turkey, calling relations not good. The informal order coming as
tensions between the two countries boiled over, causing a steep drop in
Turkey`s currency and a call from Turkey`s president that it would prevail
in what he called an economic war, hiking tariffs which Turkey says is
illegal and potentially salt in the wound.
ROBERT HORMATS, FORMER STATE DEPARTMENT OFFICIAL: This does create more
problem, and I think that`s what troubles the market so much. It`s not
just what`s happened. It`s the fact that the two leaders are now trying to
work out something to dampen down the problem. They`re, in fact, taking
measures to exacerbate it.
TAUSCHE: The company buying steel and aluminum from Turkey are now caught
in the middle of the mayhem.
Frank Bergren runs Metal Partners International which processes and
distributes rebar. We first spoke with him in July as he faced rising
bills from tariffs on European partners.
FRANK BERGREN, METAL PARTNERS INTERNATIONAL CEO: I would buy all my steel
from domestic mills if I had the option. The reality is, is that the
capacity isn`t the place to need it.
TAUSCHE: Today, Bergren has cargo from Turkey on its way to Houston. He
says his Turkish supplier is in an array of panic at the moment. Neither
side sure what that steel will cost when it gets there or what this
escalation means for future business.
For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche in Washington.
GRIFFETH: As we mentioned, the drama in Turkey rattled investors here in
the U.S. today. Adding to those jitters, inflation. Consumer prices rose
slightly last month, but the 12-month core reading rose nearly 2.5 percent.
That was the most we`ve seen in nearly a decade.
Stocks did come off their low, but it was still a Friday solidly in the
red. The Dow was down 196 points when the bell rang at 25,313. The Nasdaq
fell by 52, snapping its eight-day win streak, and the S&P was off by 20.
For the week, the Nasdaq was the only positive index.
Seema Mody has more on today`s action.
SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Financial affairs
swirling around Turkey shook up global markets today after the Turkish lira
plummeted 20 percent to a record low against the U.S. dollar. Financials
lag on the session, banking stocks like Goldman Sachs (NYSE:GS) and J.P.
Morgan took a hit on fears that Turkey`s financial crisis could spill over
into the global banking space. Bond yields also tumbled to session lows as
investors poured money into treasuries in a flight to safety play, and gold
prices got a bit, but ended lower on the week.
The big question on the trading floor is what international risks mean for
Fed policy. Today`s latest read on inflation looks like it would put the
Fed on course to continue raising rates. But that would push the dollar
even higher against the Turkish lira, further exacerbating Turkey`s
President Donald Trump added fuel to the fire, announcing he would double
Turkey`s metal tariffs as the lira remains in a free fall. Industrial
stocks took a hit on that news. Remember, manufacturing giants like Boeing
(NYSE:BA) and Caterpillar (NYSE:CAT) are often seen as classic proxies for
trade war concerns.
For NIGHTLY BUSINESS REPORT, I`m Seema Mody at the New York Stock Exchange.
HERERA: Let`s turn now to Art Hogan for more on Turkey and why we should
care about what`s happening in that part of the world. He is chief market
strategist at F — B. Riley FBR.
Good to see you again, Art. Welcome back.
ART HOGAN, CHIEF MARKET STRATEGIST, B. RILEY FBR: Thanks, Sue. Great to
HERERA: It`s good to see you.
Let`s talk about strategically how important Turkey is and there are those
who think that this maybe the beginning of a more of a global trade war,
including China and maybe Russia.
HOGAN: Yes. Unfortunately, the global trade war, or the trade tensions
that we`re having right now doesn`t seem to be going away any time soon and
this doesn`t help that.
So, to put this in perspective, first and foremost, it`s a Friday in the
summertime, so the market`s reaction to any news on the macro is going to
be larger. We`ve ended the reaction to the micro which is earnings, and
we`ve put a lot of the macro concerns behind us, but you can feel that
switch over today. You get some news out of Turkey, it escalates and the
market pays attention to it in the low-volume Friday.
I think the second thing, in terms of trade, it feels like there are spots
that are getting better like North America, Mexico and Canada in the
Eurozone in particular where we have escalated things. But China for sure
hasn`t seen de-escalation and I think that`s the biggest headwind for the
market right now is trade tensions and how bad they can get.
GRIFFETH: And the strengthening dollar. You know, when you talk so much
about how they`re trying to improve things for multinationals here in this
country when it comes to trade, but it doesn`t help when the dollar
continues to strengthen, right?
HOGAN: No, it sure doesn`t, Bill. And clearly that goes hand in glove.
Both our monetary policy and our trade policy clearly strengthening the
U.S. dollar and that adversely affects emerging markets and clearly, Turkey
is the poster child for who gets hurt with the stronger dollar.
But all emerging markets do, and, unfortunately, that`s the offshoot of
this. So, until we get to some point where there`s an exit ramp on the
trade war highway and start to get to the negotiations and see an easing
and strength of the dollar, we`re going to see more situations where that
strong dollar is adversely affecting emerging market countries and Turkey
just seems to be the one that`s in the hot spot right now.
HERERA: The European banks which some have quite a bit of exposure to
Turkey, when will we know whether or not they`ll be hurt by this situation
HOGAN: Yes. I think you will know pretty quick and I would offer up that
we would probably hear from the three largest of those banks and they`re in
Italy, they`re in Spain and they`re in France and you know — so clearly,
those are the three large banks that had the most exposure and we`ll
probably get a statement out of them in terms of where they stand right
now, what their overall exposure is because their equities are starting to
get hit. You know, we know exactly where the players lie and I think that
that`s going to be next week`s business where they say, here`s our net
exposure and that probably doesn`t help them.
GRIFFETH: Quickly, Art, before we let you go. You know, the Fed has made
it clear they would like to raise rates two more times before the end of
this year. Do you think they might be rethinking that given what`s going
on right now?
HOGAN: That`s such a great question. You know, the Fed so far and Jay
Powell have certainly been ignoring a lot of the global events, and clearly
ignoring a flattening yield curve and plotting along, and leading against a
strong economy, trying to normalize rates.
I`m not sure that there`s going to be enough to get them to blink and
perhaps only go one more time this year. But that`s the question we heard
all day long.
HERERA: Art Hogan, as always. Thank you.
Art is with B. Riley FBR.
GRIFFETH: Oil prices, by the way, continue their slide, posting a six-
straight weekly decline. That market`s worst week in three years, by the
way. Today, domestic crude was able to rise 1 percent to settle above $67
a barrel, but the fear is that trade disputes could slow growth and
therefore dampen demand for oil.
But as Jackie DeAngelis tells us now, there is a lot more that people are
watching in the oil patch.
JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: With the national
average for a gallon of regular gasoline at $2.87 just under that $3 mark,
oil prices continue to be on everyone`s mind — global producers, consumers
and the president. The International Energy Agency issued its monthly
report today, saying the markets are calm, but that could change.
Iran is in focus now as a second round of sanctions will be put in place in
November. That could remove as much as a million barrels a day, a supply
offline and maybe more. If that were to happen, prices would go up, but
it`s unclear how U.S. allies and purchasers of Iran`s oil will respond to
the sanctions, and that`s why analysts believe Saudi Arabia has been
cautious about adding barrels back online.
Today, the IEA said OPEC`s outlook which flatten July even when the cartel
said in June it would add supply to make up for Iran.
What we know right now is that the glut that the market was worried about
has slowly worked itself out. Supply and demand are more balanced that in
a tight market, prices can move quickly, so a clear picture should emerge
in about three months time.
But for now, prices can dip as the summer driving season comes to a close.
For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis.
HERERA: It is time to take a look at some of today`s upgrades and
Intel (NASDAQ:INTC) is getting its second big downgrade of the week. This
time, Goldman Sachs (NYSE:GS) taking it from neutral to sell. The firm
cites manufacturing issues which it says could hamper Intel`s ability to
sustain margins and grow earnings. The price target was cut from $53 to
$44 a share. Today`s shares closed at $48.85, down 2.5 percent.
Oppenheimer thinks the trade fight with China could hit Tiffany (NYSE:TIF)
and the firm is downgrading the jeweler from outperform to perform. The
analyst still likes Tiffany`s long-term prospect, but is concerned about
short-term currency fluctuations, particularly a devaluation of the Yuan,
which could impact the buying power of Chinese tourists here in the U.S.
The price target was kept at $145. Tiffany (NYSE:TIF) finished at $134.34,
down 2 percent today.
GRIFFETH: J.P. Morgan is downgrading shares of Campbell`s Soup from
neutral to underweight. The analyst there sees a potential sale of the
company as an unlikely outcome. You may remember last week a report
surfaced saying that Kraft (NYSE:KFT) Heinz had started exploratory talks
about buying Campbell`s Soups. Price target there now $36. Campbell
closed at $41.35 off more than 2 percent today.
And SunTrust is initiating coverage of online personal shopping service
Stitch Fix. It`s got a buy rating now. The firm says Stitch Fix is the
leading pure play in the sector and should continue to outperform
expectations. Price target set at $38. In a down day, shares finished at
$33.31, up about 5 percent.
HERERA: Tesla is reportedly looking for a wide pool of investors to back
CEO Elon Musk`s plan to take that automaker private. Bloomberg says the
move would help Tesla avoid concentrating ownership among a few large
GRIFFETH: Well, Elon Musk has become certainly a celebrity CEO who is
closely tied to his company Tesla, just like the late Steve Jobs was to
Apple (NASDAQ:AAPL), the beloved Jack Welch to GE. But is it a good thing
for investors when the CEO becomes the brand?
J.J. Kinahan is chief strategist at TD Ameritrade (NASDAQ:AMTD). He joins
us now to talk about this.
J.J. KINAHAN, TD AMERITRADE CHIEF STRATEGIST: Hey, Bill.
GRIFFETH: Hey, J.J. Welcome.
I know you keep a close tab on what your customers buy, you know, month to
month and so forth, and often Tesla comes up as one of their top holdings.
It`s called betting the jockey, when you want to buy the CEO or the face of
the company rather than just the company itself.
Is that a good idea or not, do you think?
KINAHAN: Well, I don`t think it`s a bad idea. You know, you talk about
Steve Jobs right there. Obviously, he as a CEO became sort of the brand to
people at some point. The pro — you know, you may start with the CEO
attracting you to the product, but then the product itself as long as it`s
a good product and people start to become loyal to it, it becomes a very
nice circle if you`re that company. You like the CEO. You like the
product and you keep being drawn one to the other.
So, there`s nothing wrong with doing that and, of course, as with any
investment you don`t want to do it blindly. But if you have a good
product, a good CEO who seems to be running things in a very good manner,
there is nothing wrong with that. The problem becomes when the CEO sort of
goes off the ranch, if you will, that`s when things can get a little bit
hairy for investors.
HERERA: You know, we purposely pointed out companies outside of the tech
arena like a GE, you know. Bill was mentioning earlier when we were
talking, you know, Martha Stewart, her brand. She was so closely
associated with it.
But is betting the CEO a phenomena that is more common in technology
because of the innovation side of things?
KINAHAN: I think, Sue, absolutely, it is because — you know, using Mr.
Musk as an example, he clearly thinks differently than other people do. He
sees opportunity where others may not see it and it`s amazing. You know,
you read his biography, you read things that he looks in terms of solar and
in terms of space travel, et cetera, he just sees things others don`t. So,
that`s amazing and I think people want to bet on the opportunity that he
sees because they see opportunity with it.
You know, but one of the things that we have seen in the tech space again,
probably more than anywhere else is because there are so many
entrepreneurs. Being a great entrepreneur does not necessarily always mean
you`re a great CEO.
GRIFFETH: Back to Jack Welch before we let you go, there was clearly a
Welch premium in General Electric`s stock when he retired and over the last
15 or 18 years or so, it has definitely come out at that point. So, there
is something of a danger there, isn`t there?
KINAHAN: Absolutely. When you have a CEO so closely associated with the
brand, and I will go back to Apple (NASDAQ:AAPL) example for a second. Tim
Cook had not only proved he was a CEO, he had to step in and take the place
of a beloved CEO. So, the test track for you is much higher and you have
to be the higher standard in order to take the company`s stock price
higher. And once you start doing that, all of a sudden, you can become a
beloved CEO also.
GRIFFETH: J.J. Kinahan with TD Ameritrade (NASDAQ:AMTD), always good to
see you. Thanks.
KINAHAN: Great to be here. Thanks, guys.
HERERA: Coming up, why the housing market might be in for a rough second
half of the year.
GRIFFETH: There may be cracks forming in the housing market. Two new
reads on the industry are not painting a rosy picture for the remainder of
Diana Olick explains why.
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: There are more of
these out today than there were a year ago, but homebuyers are still
pulling back. Last year, the problem was no supply. Now, the problem is
Affordability fell to the weakest level in a decade this past spring,
according to the National Association of Homebuilders. That was thanks to
higher home prices and higher mortgage rates, just 57 percent of the homes
sold were affordable to Americans making the median income. That`s down
from nearly 62 percent in the first three months of this year.
Well, that is a national picture. In some markets, the situation is worse.
Most of the least affordable markets are in pricey California, but in
Boston, Seattle, Miami, Portland, Oregon and Reno, less than 40 percent of
the residents making the median income can afford the median-priced home.
UNIDENTIFIED FEMALE: Well, when I want to buy in the neighborhood I want
to be in, I just can`t afford. So, it`s going to be to rent.
UNIDENTIFIED FEMALE: You can enter the lottery and — you know, but that`s
honestly, that`s the only way I can see myself buying within the city.
OLICK: Affordability is likely behind a drop in housing sentiment among
consumers. A new report from Fannie Mae shows fewer Americans think now is
a time to either buy or sell a home. Fewer also said they felt sure about
keeping their jobs in the coming year. For the largest generation,
millennials, that means waiting.
DOUG DUNCAN, FANNIE MAE CHIEF ECONOMIST: What they`re telling us is we
have to have a good job. That job has to have a good growing income. We
have to have our credit in shape and we`re probably going to get married
and have a baby before we`re in a position to buy that house.
OLICK: None of this bodes well for home sales in the second half of this
year, especially if mortgage rates move any higher, which they could
potentially do, weakening affordability even further.
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.
HERERA: General Electric (NYSE:GE) will reportedly sell its power
conversion business for much less than what it paid for it. That`s where
we begin tonight`s “Market Focus”.
Bloomberg says GE is, working with Credit Suisse bankers to sell the unit
for $1.5 billion. GE bought the division back in 2011 for more than $3
billion. The sale process could begin as soon as next month. Shares of GE
fell 1 percent to finish at $12.77.
Alnylam said the FDA has approved its first drug which is intended to treat
a rare and often fatal hereditary disease. It is also the first approved
treatment in a new class of drugs that use what`s called gene silencing
technology. The method targets, a specific area to keep genes from
producing a harmful protein. Shares of Alnylam rose 3 percent to finish
the session at $97.38.
GRIFFETH: Nike (NYSE:NKE) is being sued by a group of former female
employees who allege that the athletic apparel maker fostered a hostile
work environment and discriminated against women. The suits says that Nike
(NYSE:NKE) was unfair when it came to pay, promotions and conditions of
employment. It also alleges the company tolerated and at times ignored
sexual assaults. Nike (NYSE:NKE) shares were off a fraction today to
And VF Corp is reportedly considering selling or spinning off its denim
business, which includes the Wrangler and Lee brands. “The Wall Street
Journal” says VF faces weak demand for its jeans amid increased
competition. Shares rose a fraction to $96.29.
HERERA: Time now for our weekly market monitor who has names of stocks he
says you may want to own in an uncertain environment. The last time he was
on in August of 2017, he picked Valero which is up 71 percent, Accenture
which is up 25 percent, and Digital Realty which is 3 percent higher.
He is Bob Phillips. He is the managing principal at Spectrum Management
Good to have you back. Welcome back.
BOB PHILLIPS, SPECTRUM MGMT GROUP MANAGING PRINCIPAL: Thank you, Sue.
HERERA: Let`s start with our picks today and this is Master Limited
Partnership Fund. The symbol is AMLPX and its main gate. Why do you like
PHILLIPS: I think the energy pipeline companies have been misunderstood
for the last couple of years. So, at its essence they`re trading at 7-1/2
times cash flow and it`s growing 8 to 13 percent a year. So, you can get a
7-1/2 percent dividend right now, you got great underlying growth and that
dividend should be growing along with price appreciation over the next
GRIFFETH: Avery Dennison (NYSE:AVY), boy, I think of Avery office supplies
and now, Dennison, they`ve gone high tech with these smart labels they have
out there. How do you see that as a defensive play in an uncertain
PHILLIPS: Well, Bill, it gets back to — they`ve got great positioning in
emerging markets, for one. So, their product makes global supply chain
management and inventory management so much more efficient that that
segment is growing by 20 percent a year. And I think it can do that for
quite some time. I think they are immune from trade wars and tariffs
because they produce around the world and I think we`ve got a nice, long
growth trend ahead of them. They`re playing about a 2 percent dividend. I
think they`ll keep growing that dividend by 10 percent a year.
HERERA: And we finish up with J.P. Morgan Chase, a large, stable blue
PHILLIPS: Yes, a large stable blue chip. The last quarter, the bank grew
the revenue by 9 percent from investment banking, from their trading
services and asset management, as well as just core loan growth. So, about
80 percent of their business is in the U.S. We think they`ve got a great
chance to expand — keep expanding internationally as other international
banks predominantly European banks, have to pull back, and management just
announced they`re going to raise the dividend 40 percent in the third
quarter of this year, and we believe they`ll keep doing that.
I think Bloomberg`s projecting they`ll grow the dividend 20 percent a year
for the next three years so if you buy it today, you got a 2.7 percent
dividend. If you hold it for three years, you will probably be getting 5
percent on your investment.
HERERA: All right. We`ll keep track of it. Thanks, Bob. Appreciate it.
PHILLIPS: Thank you.
HERERA: Bob Phillips with Spectrum Management Group.
And to read more about Bob`s picks, head to our Website, NBR.com.
GRIFFETH: Coming up, how sports teams are leveraging their brands to bring
in more fans.
HERERA: And finally tonight, a number of sports teams are expanding into
entertainment businesses in the hopes of creating a new revenue stream.
They`re adding their brands to almost everything from hotels to amusement
Eric Chemi has the details.
ERIC CHEMI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It used to be take me
out to the ball game, take me out with the crowd. But not anymore, today`s
professional sports teams are now looking off the field for their next big
way of making money.
The Texas Rangers this weekend opening a brand-new entertainment complex
outside their stadium called Texas Live and features dining, bars, music
and entertainment venues. Soon to come is a Loews (NYSE:L) Hotel. The
Rangers are the latest team to use land next to their stadium for bigger
entertainment goals, joining recent development projects in Sacramento, St.
Louis and Philadelphia.
Part of the trend shift is the fact that the teams are taking ownership
stakes in these development projects.
NEIL LEIBMAN, TEXAS RANGERS CHAIRMAN: There`s only so many dollars that
you can generate from ticket sales and TV revenue. So, this is just an
added revenue source. It comes down to one thing, making money.
With media rights fees and ticket sales, seeing a lot more challenging
environments recently, teams are trying anything they can to take advantage
of the value of their fans to bring in fans even when it`s not a game day.
DAVID CORDISH, THE CORDISH COMPANIES CEO: What you see today opening is
mammoth. It`s a couple of billion dollars of investment, but it`s just the
tip of the iceberg and it will become where people will come for the
weekend. So maybe now you used to drive to a Ranger game and go back home
and now you come for the weekend because of all of the things you can do
and the hotel connected to the ballpark, you stay in. It`s going to be a
CHEMI: Baseball teams have about 80 home games a year, football teams only
have eight, that leaves the vast majority of the calendar open as an
opportunity to make more money on the same land. In many ways, modern
sports ownership groups see their teams and stadiums as just one part of
the broader portfolio, featuring, real estate, media and entertainment and
one, two, three different options at the new ball game.
For NIGHTLY BUSINESS REPORT, I`m Eric Chemi.
GRIFFETH: Before we go, one last look at the day on Wall Street. The
Turkish financial crisis took a toll on the European markets this morning
and ours as well. The Dow down 196 points, the Nasdaq dropped by 52,
snapping its eight-day win streak, by the way, and the S&P was off by 20.
For the week, the Nasdaq was the lone gainer.
That is NIGHTLY BUSINESS REPORT for tonight for a Friday.
GRIFFETH: I`m Bill Griffith. Thanks for watching.
HERERA: Have a good weekend. I`m Sue Herera. Thanks for joining us. See
you on Monday.
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