Transcript: Nightly Business Report – August 16, 2018

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Stocks surged. The Dow has
its biggest one-day gain since April, thanks to upbeat earnings and renewed
trade talks between the U.S. and China.

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Walmart delivers. Amazon
(NASDAQ:AMZN) is put on notice as the world`s largest retailer reports a
surge in digital sales and posts its best revenue growth in more than a
decade.

HERERA: 401(k) millionaires. There are a record number of them, but what
happens if the market turns?

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
August 16th.

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

What difference a day makes. Stocks rallied across the board today on word
that the U.S. and China will restart their trade talks later this month.
Adding to the upbeat mood, those solid results from Dow components Walmart
this morning and from Cisco (NASDAQ:CSCO) which we told you about last
night. You mix it all together and you have a recipe for a big rally
today.

The Dow Industrials advanced 396 points, just off their highs of the day to
25,958, the Nasdaq gained 32, and the S&P added 22.

Bob Pisani has more on today`s big gains.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Turkey took a backseat
today as traders focused on China and on trade. The Dow surged nearly 400
points during the trading day. It was the best gain since April and
believe it or not, it was one of its worst days yesterday.

S&P futures rose overnight into Thursday morning on headlines that China
and the United States might renew trade talks. National Economic Council
Director Larry Kudlow later confirmed these headlines and the stocks saw an
additional boost in the middle of the day when it was confirmed that a
Chinese delegation was planning to head to Washington next week.

The market`s very strong reaction to these headlines indicate that concerns
over China slowing down is a big mover of stocks and anything that will
lessen those concerns like a removal of trade tensions will move stocks up.
Boeing (NYSE:BA) and Caterpillar (NYSE:CAT), two companies who get a large
share of revenues from outside the United States saw a boost during the
trading day. Boeing (NYSE:BA) also benefitted from an upgrade from broker
UBS.

Other Dow winners include Cisco (NASDAQ:CSCO) and Walmart, both were higher
on excellent earnings results. Walmart had its best trading day since
November of 2017 nearly a year ago.

(END VIDEOTAPE)

GRIFFETH: Bob joins us now from the New York Stock Exchange. Nice tie, by
the way.

You know, we started the week out with concerns about Turkey and the Turkey
financial crisis and the market sold off. And then there were concerns
about retailers, Macy`s (NYSE:M) and Home Depot (NYSE:HD), even though they
had good numbers and a sell-off. But today, a rally with talk of grade
with China.

This market has a very short-term memory, doesn`t it?

PISANI: It does, but there is an oval theme here and that is that the
market clearly moves the most whenever you`re dealing with strong dollar
issues and when you`re dealing with trade, and you`re dealing with weakness
in the global markets, particularly weakness in China. So, look at Monday,
down day, Tuesday, up day, Wednesday, down day, Thursday, up day.

What ties these days together is the market tends to be down on days when
there are global growth concerns, strong dollar issues and tends to rise
when the global growth concerns lessen, and when the dollar tends to move
down, that`s exactly what happened today. Now, this whole Turkey issue is
definitely, you mentioned that, it`s definitely out there. But so far,
with the exception of a few little sectors to the U.S. economy, it`s mostly
been an international event.

The China slowing stories is a big story and anything that ameliorates
China`s slowing like prospects for a trade agreement is going to lift the
markets like today.

GRIFFETH: Bob Pisani at the New York Stock Exchange.

PISANI: Thanks for staying late for us, Bob.

PISANI: Always good to be with you, Bill.

HERERA: As we just mentioned, the market got a lift on those hopes with a
trade truce between the U.S. and China. This follows a standoff between
the two countries that saw tariffs levied on billions of dollars worth of
goods. And today, the White House gave us a glimpse into the strategy for
those stocks.

Kayla Tausche picks up the story for us from Washington.

(BEGIN VIDEOTAPE)

KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: More than two months
since their last face to face, economic officials from Beijing head to
Washington next week with more tariffs on taps soon as Thursday unless
talks reach another truce. China`s vice ministers of commerce and finance
accepting a U.S. invitation to meet with the undersecretary of the
treasury, signaling lower-level talks than the two nations held before.

White House economic adviser Larry Kudlow suggested the U.S. would have the
upper hand.

LARRY KUDLOW, NATIONAL ECONOMIC COUNCIL DIRECTOR: Business investment is
collapsing in China according to the numbers. Industrial product has
fallen and now it`s plateauing at a low level. People are selling the
currency.

There may be some manipulation but mostly, I think, investors are moving
out of China because they don`t like the economy and they`re coming to the
USA because they like our economy. I`m not a China expert, although I`m
boning up as fast as I can. I would just say right now, their economy
looks terrible.

TAUSCHE: It`s unclear what prompted the U.S. to re-engage China. Treasury
is expected to update its list of demands for China. But Secretary Steven
Mnuchin said previously China would need to make a serious proposal of its
own.

STEVEN MNUCHIN, TREASURY SECRETARY: I`ve made perfectly clear that any
time China is willing to seriously negotiate and we`re talking about a
commitment to reduce the bilateral trade deficit, as well as the deal with
technology issues forced venture, we`re available any time.

TAUSCHE: Part of the White House` strategy, notch deals with allies and
have them join the fight against China`s unfair trade practices. Officials
from Mexico are in town hammering out NAFTA details.

ILDEFONSO GUAJARDO, MEXICAN ECONOMY MINISTER: What we commend is they keep
engaging and trying to do things. We cannot guarantee, the effort is being
made.

TAUSCHE: And after a broad deal with the E.U.`s chief in July, the U.S.
and Europe will hold detailed talks beginning Monday.

Progress with any major trading partner has provided a market boost, but
there`s no threat as formidable as China, which has signaled it would drag
out a trade war past the midterm elections. Investors on edge hoping for,
if not a deal, at least a temporary delay.

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

(END VIDEOTAPE)

GRIFFETH: We mentioned Boeing`s strong performance today, but the best
performer among the Dow components was Walmart. The world`s largest
retailer saw sales rise sharply as consumers spent more on just about
everything. Walmart also upped its profit and revenue outlook and shares
soared more than 9 percent.

Courtney Reagan takes a look now at what`s driving Walmart`s growth.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Walmart`s
multibillion-dollar, multi-year investments into its stores, website and
employees is paying off.

The big box retailer is reporting another strong quarter, marking the 16th
straight quarter of U.S. comparable sales gains and 15th straight quarter
of increasing store traffic. U.S. comparable sales are the strongest in
more than a decade, thanks to the big rise in grocery sales. U.S. e-
commerce sales also grew 40 percent.

But the cost of running the business is high. Walmart says this year`s
losses will be higher than last year.

BEN BIENVENU, STEPHENS RETAIL ANALYST: They spend a lot of money to
reinvent this business, to reinvent the way the customer thinks about this
business and their place in the e-commerce landscape. Obviously, Amazon
(NASDAQ:AMZN) is a leader in the space. I think Walmart is increasingly
solidifying their position in the industry.

Forty percent growth is fantastic. It`s below what we saw late last year,
but against difficult comparisons.

REAGAN: Walmart`s U.S. CEO says expanded online grocery options like order
online, pick up in store and delivery is a attracting new shoppers and
increasing the receipts for current shoppers.

OLIVER CHEN, COWEN & CO. RETAIL ANALYST: The real story here is bricks
plus clicks. The seismic shifts in retail and Walmart using physical
assets to their advantage, in terms of curbside pickup, the delivery to —
40 percent of the country in grocery, and adding a lot of convenience.

REAGAN: While investors cheered today`s result, there are some cost
headwinds that Walmart will have to battle the rest of the year. Higher
fuel prices are increasing the retailer`s transportation costs, and
suppliers like toilet paper and paper towel maker Kimberly-Clark (NYSE:KMB)
are raising their prices to offset higher raw material costs.

But Walmart says it will continue to work with its suppliers to keep prices
low for shoppers, part of its plan to keep returns high for investors.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan.

(END VIDEOTAPE)

HERERA: Cisco (NASDAQ:CSCO) was also a top gainer today following its
earnings which we told you about last night. Today, Cisco`s CEO said the
company was benefitting from innovation and the growing global economy.

(BEGIN VIDEO CLIP)

CHUCK ROBBINS, CISCO CEO: It`s a combination of two things I said on the
call yesterday when I was asked about this. We clearly have created a
great deal of innovation and momentum with the solutions that our customers
are looking for and at the same time, we have the benefit of what we`ve
seen from a very strong economy around the world.

(END VIDEO CLIP)

HERERA: The stock saw gains today of nearly 3 percent.

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

And we begin tonight with Lululemon which was upgraded to buy from hold at
Argus. The analyst cites strong brand recognition and opportunity to
expand overseas especially in China. The price target now $150. Shares
rose 2 percent to $129.47 today.

Courtney mentioned Kimberly-Clark (NYSE:KMB). They were upgraded to
neutral from underweight at Morgan Stanley (NYSE:MS). The analyst cited
the potential for the recent price increases to take hold which we reported
on yesterday. The price target $114. That stock gained 1.5 percent to
$118.26.

HERERA: Embraer was upgraded to overweight from equal weight at Morgan
Stanley (NYSE:MS). The analyst expects improved results and says the
recent sell-off in the stock makes it attractive. The price target is
$23.50. U.S. listed shares of Embraer rose nearly 4 percent to $19.38.

AstraZeneca was downgraded to hold from buy at Jefferies. The analyst
there cites the recent run-up in the stock and says it`s now fairly valued.
The price target is $39.46. The stock closed just below that level at
$37.96.

GRIFFETH: Is the housing market starting to favor buyers? Some areas just
might be showing signs of it. We`ll tell you where coming up.

(MUSIC)

GRIFFETH: President Trump is calling on the Justice Department to sue the
makers of opioids. During a cabinet meeting in Washington today, Mr. Trump
asked Attorney General Jeff Sessions to bring a federal lawsuit against
certain companies that supply opioids to hospitals. Several states already
have filed similar lawsuits which the Justice Department has backed, but
the thought is that a separate federal suit would escalate the government`s
efforts to combat the growing drug epidemic. Separately, the Trump
administration is also proposing that the pharmaceutical industry cut
production of the six most abused opioids by 10 percent next year.

HERERA: Home construction in July was significantly weaker than expected.
Housing starts rose 0.9 percent from the prior month, but economists were
looking for growth of more than 8 percent. Some say the myth could signal
fewer homes on the market in the coming months potentially exacerbating the
limited supply of homes already available for sale.

GRIFFETH: And softness in the housing market may finally be giving buyers
the edge over sellers.

Diana Olick explains.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s not quite a
buyer`s market yet, but the tide is finally turning. Home price gains are
shrinking and sellers are starting to come back down to earth. Fourteen
percent of all listings in June had seen a price cut and that`s up from a
recent low of just under 12 percent at the end of 2016, according to a new
report from Zillow.

In addition, price growth is flowing in nearly half of the 35 largest
metropolitan markets. Rising mortgage rates combined with several years of
a price jump hit affordability hard despite very strong demand especially
from millennials. There is just a limit to what people can pay especially
with a still tight lending environment.

All real estate is, of course, local. In San Diego, 20 percent of all
listings had a price cut in June, up from 12 percent a year ago. In
Seattle, which continues to be the hottest market in the nation, 12 percent
of all listings had a cut, the largest share in nearly four years. L.A.,
Chicago and even New York City are also seeing jumps in the share of
sellers cutting prices.

Cities that were not as hot in the last couple of years, however, are
seeing fewer price cuts, those include San Antonio, Phoenix, Philadelphia
and Houston. Prices have been so strong because of a critical shortage of
homes for sale. Supply is increasing slightly, but not enough, and the
latest read on housing starts from the homebuilders was not encouraging.

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

(END VIDEOTAPE)

HERERA: New developments this evening on Tesla and its CEO Elon Musk. The
SEC is reportedly investigating whether Mr. Musk tweeted about taking the
company private in an effort to hurt short sellers.

Phil LeBeau is in Chicago for us tonight.

Phil, what are the details? What are they going to be looking at?

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, Sue, this is
according to a report of “The Wall Street Journal”. And essentially, three
questions according to “The Journal:” are in mind for the SEC when it comes
to Tesla.

The first one which you mention side what was Elon Musk`s intent when he
sent out the tweet saying funding is secured at $420. Was he trying to
hurt short sellers? It`s one thing to be active and you want your company
to go long if you`re a CEO, and it`s another thing and it might be market
manipulation if you were trying to send out a message in order to hurt a
specific investor.

Along those lines, the SEC also wants to know a couple of other things.
One, what was the communication between Elon Musk and the board of
directors? And was there any details about the funding secured, the
possibility of going private? Were any of those details shared with
members of the board prior to him sending out those tweets?

So, those are some of the questions, and like any investigation it may
broaden out and go in a different directions over time, but we`re really
starting to see the SEC focus on this question of intent and the facts
surrounding when Elon Musk sent out that tweet and the possibility of
taking Tesla private.

GRIFFETH: Quickly, Phil, but the basic of it, they`re going to pit the
board members against Mr. Musk because they`re going to be asking how much
they knew about the funding —

LEBEAU: Right.

GRIFFETH: — before he sent the tweet, right?

LEBEAU: Right. And, look, the facts should be easy to find out fairly
quickly and also keep in mind, Bill, there is a long tweet trail from Elon
Musk when it comes to his feelings about short sellers for the stock.

HERERA: Indeed there is.

Phil, thank you so much. Phil LeBeau for us tonight in Chicago.

Bill?

GRIFFETH: Elsewhere, the losses spiral for J.C. Penney and that`s where we
begin tonight`s “Market Focus”.

The struggling department store chain reported a wider quarterly loss and
lower sales. Penny also said it expects to report a loss for the full year
as the discount`s merchandise to get rid of excess inventory. And the
company is still looking for a CEO. Remember Marvin Ellison abruptly left
last May to run Lowe`s home improvement centers. He has aren`t been
replaced yet.

J.C. Penney lost more than a quarter of its market value today, falling 27
percent to $1.76. That is an historic low.

Chinese internet retailer JD.com missed both earnings and revenue estimates
for the second quarter, even though sales soared more than 30 percent. But
that was well below the peak growth rate of 60 percent registered back in
2015. The company is part owned, you may know, by Tencent and Walmart.
Shares of JD were off more than 1 percent to $31.97.

Activist investor Starboard Value has reportedly taken a 5.8 percent stake
in Symantec (NASDAQ:SYMC). According to “The Wall Street Journal,”
Starboard is pushing for operational changes to improve the cybersecurity
software-maker`s profit margins. Symantec (NASDAQ:SYMC) rose more than 4
percent today on that news to $19.41.

HERERA: The FDA has approved the first generic version of the EpiPen. The
drug is made by Teva Pharmaceuticals. The approval comes right before the
back to school season when EpiPen sales typically rise and amid reports of
shortages by the medicine. Teva did not say when its generic version would
become available or what it might cost. Shares rose 7 percent to $24.11.

After the bell, Nordstrom`s earnings and revenue beat second-quarter
expectations. Same-store sales were up 4 percent. Analysts weren`t even
expecting 1 percent. Earlier this year, the retailer called off its plans
to go private after a buyout price could not be agreed upon. Shares spiked
more than 10 percent on the earnings report, after finishing the regular
session up nearly 1 percent to $52.28.

The same cannot be said for shares of Nvidia which came under pressure
after the close when the chipmaker beat estimates, but its revenue guidance
was lower than expected. That sent shares initially lower by about 5
percent. They closed the regular session down $1.64 to $257.44.

GRIFFETH: Well, here`s some positive news for those saving for retirement.
The number of 401(k) millionaires is now at a record. A new report from
Fidelity says 168,000 of their accounts have balances of at least seven
figures, that`s up more than 40 percent from a year earlier, a big rise,
and a rising stock market gets most of the credit, of course, for that nest
egg milestone/

And there`s more good news, a separate report from United Income shows that
folks already in retirement are now on average, wealthier than any previous
generation.

HERERA: But according to bankrate.com, older millennials are the most
stressed of any age group, more than 77 percent, in fact, say they lose
sleep over things like money and work. So how are millennials and others
who are not in the 401(k) millionaire club faring and what happens if this
bull market ends?

Amanda Dixon, analyst at bankrate.com, joins us now to talk about that.

Welcome, Amanda. Nice to have you here.

AMANDA DIXON, BANKRATE.COM ANALYST: Thanks for having me.

HERERA: You know, this market has been a gift in many cases to those who
are saving for retirement. But why do you think millennials are stressed
out not just about money, but also about things like work.

DIXON: Millennials are so stressed because they`re in a transitional stage
in life, they`re trying to advance in their careers and become financially
stable. But this is all happening at a time where wages are stagnant and a
lot of them are starting families and they just have a lot on their plates.

GRIFFETH: You know, and it`s critical when you identify that they`re the
older millennials, age 29 to 37. These are young people who came of age
during the financial crisis ten years ago and they remember that, don`t
they?

DIXON: Absolutely. A lot of these millennials, they remember when their
parents struggled financially and so a lot of them have that mindset as
they tried to improve their own financial lives.

HERERA: Are you finding or did your research find that they are actively
investing in the stock market to either save for retirement or build up
that nest egg? And are they, do you think, emotionally prepared if this
market turns?

DIXON: What we`ve seen in our other research is that surprisingly, about
41 percent of millennials don`t have any retirement savings at all and when
it comes to investing, a lot of millennials choose cash. So that could be
problematic for them moving forward in the future.

GRIFFETH: So I guess the traditional advice that boomers got when we were
that age still stands today to try and save as much as you can and keep it
invested for the long term, I guess. That`s still the case, right?

DIXON: Absolutely. It`s best to start aggressively saving for retirement
especially if you want to retire at an earlier age and it doesn`t hurt to
begin as soon as possible even if you have student debt.

HERERA: Are you finding or did your research find because wages have been
starting to edge up a little bit that they are able to save a little bit
extra or is inflation eating away at that?

DIXON: Right. What we`re seeing is that wages are stagnant and inflation
is actually wiping away wage gains. So, a lot of people are still
struggling to save money.

HERERA: Amanda, thank you so much for joining us tonight.

DIXON: Thanks for having me.

HERERA: Amanda Dixon is with bankrate.com.

GRIFFETH: Well, the world today has been mourning the passing of the
“Queen of Soul”. Aretha Franklin was truly a legend in the music business.
Her theme was global and she paved the way for a number of other female
artists.

She sold more than 75 million records worldwide during her career. She won
18 Grammys. She was the first woman inducted into the Rock & Roll Hall of
Fame and she had 112 singles land on the Billboard charts, that`s the most
of any female singer.

According to some reports, she was worth $60 million. She was also known
to donate generously to local charities throughout the city of Detroit and
organizations like Save the Children, and Easter Seals. Aretha Franklin
died this morning at pancreatic cancer at the age of 76.

(MUSIC)

HERERA: New York University is doing something no medical school has done
before. It will make tuition free for all medical students regardless of
their financial situation. School officials are concerned that rising
costs and increased student debt are pushing new doctors into other high-
paying fields. NYU has raised $450 million of the $600 million needed to
fund that tuition forever.

GRIFFETH: Best Buy (NYSE:BBY) is buying a health tech company that focuses
on older Americans. The electronics retailer is paying $800 million to
acquire great call. This company provides connected health and emergency
response services to more than 900,000 paying subscribers. And, by the
way, this is Best Buy`s largest acquisition ever. Shares of Best Buy
(NYSE:BBY) rose in today`s session.

HERERA: Amazon (NASDAQ:AMZN) reportedly wants to shake up the movie
theater business. There are reports that the e-commerce company is looking
to buy Landmark Theaters which, according to its Website, is the largest
domestic movie chain focused on independent films. According to Bloomberg,
no final decision has been made and the talks could still fall apart.

GRIFFETH: Speaking of Amazon (NASDAQ:AMZN), they could soon make the short
list of candidates for the location of its $5 billion second headquarters
even shorter. The company reportedly has told the 20 finalist cities that
it would be making a second cut and that cut could come soon.

Scott Cohn reports now from another of the cities hoping to be on that
list. That would be Los Angeles.

(BEGIN VIDEOTAPE)

SCOTT COHN, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s the home of
Hollywood, glitz, glamour and, yes, says L.A.`s mayor, a serious world-
class business environment.

MAYOR ERIC GARCETTI (D), LOS ANGELES: Los Angeles now the third largest
economy of any city in the world, after Tokyo and we`re almost the size of
New York. We graduate more engineers of any city around, whether it`s
logistics, the creative capital, manufacturing, international trade. We
think Los Angeles offers something that`s very different than almost any
city in America.

COHN: L.A. is the only Amazon (NASDAQ:AMZN) finalist on the West Coast,
bucking the conventional wisdom that the company wants to expand far from
its existing headquarters in Seattle. But the company hasn`t said that,
only that it wants a metro area with a million people, a stable, business-
friendly environment, a place that can attract talent and creative thinking
on locations. If there`s one thing L.A.`s got, it`s creativity.

GARCETTI: The moment I heard about it, you know, I said Los Angeles.

COHN: City Council Member Bob Blumenfield is pushing the site in his
district in the San Fernando Valley, once the home of an aerospace plant.
It`s one of nine potential sites in L.A.`s official bid.

BOB BLUMENFIELD, LOS ANGELES CITY COUNCIL MEMBER: They`re looking for
brains? Come to Los Angeles. We`ve got them and we`ve got the educated
workforce.

COHN: L.A. does have one of the highest concentrations of tech workers in
the country, and no state has more higher education institutions than
California, but it`s also expensive, notoriously bureaucratic. California
is in the midst of a housing crisis even without 50,000 new Amazon
(NASDAQ:AMZN) employees.

And there are those freeways.

Still, Los Angeles is apparently staying away from the kind of multibillion
incentives that some of the other finalists are offering, preferring
instead to let the region`s strengths speak for themselves.

If so, it`s a wise strategy according to critics who say Amazon
(NASDAQ:AMZN) is banking on politicians who will do anything to win.

AMIHAI GLAZER, U.C. IRVINE: They overestimate what the benefits will be
and particularly the city that hits the most is probably the one that most
overestimated what the benefits are.

COHN: Amazon (NASDAQ:AMZN) isn`t saying anything, building up the
suspense, a very Hollywood thing to do.

For NIGHTLY BUSINESS REPORT, Scott Cohn, Los Angeles.

(END VIDEOTAPE)

HERERA: And before we go, here`s another look at the final numbers from
Wall Street. The Dow advanced 396 points, the Nasdaq gained 32, and the
S&P 500 added 22.

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

GRIFFETH: I`m Bill Griffeth. Have a great evening. We`ll see you
tomorrow.

END

Nightly Business Report transcripts and video are available on-line post
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Business Report is not and should not be considered as investment advice.
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