Transcripts: Nightly Business Report – August 27, 2018


the Nasdaq and the small cap Russell 2000 hit new highs after the U.S. and
Mexico reached an agreement on trade.

flirtation with going private ends but questions surrounding the company

MATHISEN: Hollywood`s hot summer. Studios are stepping up their game and
there`s one in particular that`s behind a number of box-office

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Monday,
August 27th.

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

HERERA: Nice to have you here, Ty.

MATHISEN: Nice to be back.

HERERA: Welcome back home.

I`m Sue Herera. Good evening, everybody.

Well, the last days of summer are anything but lazy on Wall Street. The
Nasdaq powered past 8,000 for the first time ever. The S&P 500 closed at
an all-time high and the Dow blew past 26,000.

A breakthrough trade deal with Mexico removed a source of uncertainty
that`s been hanging over these markets for months.

So, let`s get right to the numbers. The Dow Jones Industrial Average rose
259 points, the Nasdaq hit a record, advancing 71 points, and the S&P 500
added 22.

Bob Pisani has more on today`s market rally.


Monday for the stock market with the S&P 500 and the Nasdaq soaring to new
highs. The Nasdaq broke above 8,000 for the first time in history fueled
by, what else, the FANG names, Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL),
Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX) and Google (NASDAQ:GOOG) parent

But trade talks were really the story of the day and President Donald
Trump`s deal announcement with Mexico set the stage for stocks to rip
higher and rip higher right across the board. Now, the Dow didn`t quite
notch a new high of its own, but it did break back above the 26,000 mark
for the first time since February led by Boeing (NYSE:BA), Goldman Sachs
(NYSE:GS) and Caterpillar (NYSE:CAT).

Now, it`s no surprise that industrials and materials were among the sector
winners today. That happens when trade talk gets optimistic. It also has
with metals and mining stocks. They were up as well. Dollar weakened as
well, that happens too.

When you get technology stocks though, industrials and financials all
moving 1 percent or more, the point is you`ve got a very powerful rally on
your hands. And the overall rally is broadening out, that`s the key. It`s
not just tech names, not just FANG names that are moving, banks and
industrials have been moving up as well. We`ve got a very potent stew of
optimism first on trade talk. Secondly, strong earnings that are not
dropping in the third and fourth quarter, and finally, the strength of the
U.S. economy. All three averages now are set to post their best august
gains in four years, the trading volume of course remains light. It is
August after all.

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


MATHISEN: Well, investors are hoping today`s trade deal is the first of
more to come, but getting to this point took a lot of work and the work is
far from finished.

Kayla Tausche has all the details.


calling it a deal, Mexico calling it an understanding. Either way, it`s
significant progress by the two countries to resolve some of the thornier
issues that have been plaguing NAFTA talks like content requirements for
autos and new rules for wages for factory workers making those cars. Then
a 16-year time frame for the deal — the U.S. backing down from a proposal
to walk away after just five.

And zero tariffs for agricultural products. Farmers awaiting aid to help
offset China woes are optimistic on the prospects. It doesn`t undo steel
and aluminum tariffs placed on Mexico or Canada. It doesn`t outline how
disputes should be resolved.

And for a new NAFTA, Canada would be needed to work out its issues with the
U.S. like steep dairy tariffs. Canada`s Foreign Minister Chrystia Freeland
will arrive in Washington Tuesday to begin those talks.

Today, Mexico said a three-party agreement is ideal but it`s possible the
U.S. and Mexico could go it alone.

comprehensive understanding, so, we could move forward in that in that
event. We are — we — that is a possibility. Obviously, that is not our

TAUSCHE: That would present a legal dilemma. Senior White House officials
believe they have the authority to move forward with the bilateral deal.
Congressional aides from both sides of the aisle say they don`t and some of
the most prominent Republican lawmakers needed to move a trade deal forward
call today`s news just preliminary and say Canada is needed for any deal.

The Trump administration`s top trade official Robert Lighthizer saying it
would notify Congress by the end of the day Friday on what deal had been
reached. There are hopes of a vote and an executive signature on that deal
by the end of November.

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


HERERA: Art Hogan joins us now to talk about the importance of these trade
deals to the market. He is the chief market strategist at B. Riley FBR.

Welcome back, Art. Good to see you.

much for having me.

HERERA: You know, basically, one analyst that I was talking to today said
you have to look at it this way one down but two to go. Meaning Mexico we
probably have an agreement with but we still have Canada and China looming
large over this market.

HOGAN: Yes, I`d say we actually have three to go. I think that the first
exit ramp off of the trade war highway was going to be NAFTA, anyway we
slice it. They were the first ones in and they`re so important to us in
terms of trade logistics, supply chain. So, it`s very important to get
back into that negotiation process.

I`ve long held that renegotiating NAFTA or whatever you want to call it,
and in some shape or form was going to be the first move by the
administration to get some good news on trade out there. I also think good
news on trade is clearly being choreographed around the midterms, so that`s

I think the second leg of the stool will be with Europe. We haven`t gone
after their autos yet. We haven`t escalated with Europe and I think not
escalating with Europe will be the other piece of good news.

China`s going to be a longer play. China`s much more complicated and
really the worst players in trade, right?

So, in all of the trade tensions, China is the — you know, the one that
dumps steel and aluminum, and the one that steals IP. So, you know,
really, that`s going to be the longer play, but I think any good news on
trade and trade policy right now is going to be a market positive as we
very much so saw it today.

MATHISEN: I think you`d have to say, Art, that today was a bit in the
market of a relief rally that things were getting better though a lot of
this was already telegraphed. If this was a relief rally, is the market

HOGAN: Well, I can tell you this, Tyler. We`ve gotten very little good
news on trade. So, since the beginning of the year, we`ve had two
significant sell-offs. One was, you know, in February, we were concerned
about higher interest rates and that yield on a ten-year blasting through 2
percent with that high jobs number.

The second has all been about trade. There is a significant reason why
it`s been seven months from the last peak in the market to Friday where we
made a new high in the S&P; and that was entirely trade the headwind that
has trade the concerns over tariffs the concerns over what bad economic
offshoots there would be with a mutually destructive trade war with China,
that continues to be the case.

So, I think the market is going to react to any good news, whether we`re
negotiating, whether we`re getting closer. But, yes, we`ve been
telegraphing that things were getting better with Mexico for two weeks now.
We finally came to an agreement with Mexico. We hope the same process can
move forward with Canada at this juncture and get this behind us, you know,
in the November time frame.

I think not escalating anymore with the Eurozone would be spectacular and
then try to sit down and have concrete conversations with China, but that`s
going to be a longer play. That`s next year`s business I think.

HERERA: All right. On that note, Art, thank you.

HOGAN: Thank you.

HERERA: Art Hogan with B. Riley FBR.

MATHISEN: Well, as we reported last week, some of the country`s leading
CEOs are concerned that changes to immigration policy will hurt not only
their own companies but the broader economy as well, and as the Aditi Roy
reports, it could cause skilled workers to leave the U.S.


worked in the U.S. since 2013. She moved to the country from India to be
with her husband who was working as an engineer for Microsoft (NASDAQ:MSFT)
under an H-1B visa. She was able to live in the U.S. under an H-4 visa
designed for spouses of H-1B workers but there are restrictions.

Despite having a college degree and several years of work experience in
India, Sachdev wasn`t allowed to work in the U.S.

SHILPA SACHDEV, H-4 VISA HOLDER: I spent a significant amount of time at
home by myself. I was apprehensive to go out and meet people because I
would constantly question why wasn`t I allowed to contribute to the
American economy as well.

ROY: In 2015, the Obama administration approved vision that allowed H-4
workers to be employed in the U.S. and Sachdev started working. She`s now
a content manager for cloud computing firms Service Now. Her husband is an
engineering manager at Facebook (NASDAQ:FB). The couple owns a home in Los
Gatos, California.

SACHDEV: For me, being able to walk can be summed up in one word. It`s

ROY: But that financial independence could soon end. The Trump
administration has indicated in a recent court filing that it will reverse
the Obama era decision and prohibit H-4 visa holders from working and
companies, many of which depend on foreign labor, are speaking out. In a
letter to the administration, top CEOs warned changes to the H-4 work
authorization will likely cause high-skilled immigrants to take their
skills to competitors outside the U.S.

HIBA ANVER, IMMIGRATION ATTORNEY: For us to have policies in place that
discourage foreign talent from making the United States their home,
obviously, is going to have a trickle-down effect to companies.

ROY: But those who oppose H-1B and H-4 holders working in the U.S. point
to cases at southern California, Edison and Disney (NYSE:DIS), which have
been accused of displacing U.S. workers with lower paid foreign employees.

JOHN MIANO, DISPLACED WORKERS ATTORNEY: That`s what goes on constantly
throughout the job market where these companies are replacing Americans
with cheap foreign workers.

ROY: Sachdev says the hardest part for her is waiting.

SACHDEV: We`re at the mercy of what the administration will do. So, it`s
just a wait and watch game from here on out, and it`s not fun.

ROY: There`s a good chance if she`s unable to work, both she and her
husband would move abroad.

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


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

U.S. Steel was downgraded to underweight from overweight at Morgan Stanley
(NYSE:MS). The analyst cites falling steel prices. The price target is
$30. The stock closed right around that level at $30.66.

Chipotle`s rating was cut to underperform from neutral at Wedbush. The
analyst says risk to Chipotle`s margins and same store sales growth has
increased. The price target is $445. The stock fell more than four and a
half percent to $495.60.

MATHISEN: And similarly, American Eagle Outfitters (NYSE:AEO) was
downgraded to neutral from outperform at Wedbush. The analyst there cites
the stocks valuation. Shares have risen about percent this year. The
price target now $29 a share. Shares fell four-and-a-half percent to

Meantime, Papa John`s was upgraded to buy from neutral at Kalinowski
Research. The analyst says the sale of the company makes sense and that
the odds of an acquisition may be increasing. A price target now, $52.50.
The stock rose a fraction to $45.01.

HERERA: Still ahead, tech stocks are hot but there are some names in that
sector that might get even hotter.


MATHISEN: Toyota (NYSE:TM) and Uber will reportedly jointly develop
driverless vehicles. According to “The Wall Street Journal”, Toyota
(NYSE:TM) will invest five hundred million dollars in the autonomous
packed. Uber had been looking for ways to lower development costs
following a fatal crash involving one of its vehicles earlier this year.
The investment now puts Uber`s valuation at about $72 billion.

HERERA: Investors got their first chance today to react to news of Tesla
saying it plans to remain a publicly traded firm. But clearly, there is
some concern the sheriff`s fell more than 1 percent. While the decision
ends a brief flirtation with going private, it does not mark an end to many
legal and business questions swirling around that company.

Phil LeBeau has more.


story that started with a bang nearly three weeks ago has ended with a

Tesla CEO Elon Musk who created a frenzy by saying he might take his
company private at a valuation topping $70 billion now says Tesla will stay
private. Musk explained the decision saying, although the majority of
shareholders I spoke to said they would remain with Tesla if we went
private, the sentiment in a nutshell was please don`t do this.

GENE MUNSTER, LOOP VENTURES: I think it`s still true that the company
should be a private company. That said is it`s just simply not in the cars
and sets up what — for what I think is going to be one of the most
dramatic stocks over the next few years.

LEBEAU: Tesla shares have been on a wild ride since this story started on
August 7th. That volatility could continue as investors deal with fallout
from Musk`s flirtation with privatizing the automaker. The biggest issue,
an SEC investigation looking into whether or not Musk misled the market
when he tweeted that he had funding secured to take the company private.
It turns out there was no deal locked in and investigators are looking into
the basis for Musk`s tweets.

TERESA GOODY, THE GOODY GROUP FOUNDER & CEO: I can`t say with certainty
because I haven`t seen all of the evidence and I don`t know what the SEC
investigation is going to uncover. Maybe there is something out there
where he had a reasonable basis. So far, everything that I`ve seen, each
time he speaks, there seems to be an admission as though there was not a
reasonable basis.

LEBEAU: Overshadowed by all of this is whether Tesla can increase
production and sales of its newest electric car, the Model 3.

There`s also the question of whether Tesla will be able to turn a profit in
the second half of this year as Elon Musk has promised. If that happens,
don`t be surprised if this summer saga about Tesla going private quickly
fades from the minds of investors who have invested in Tesla and in Elon



MATHISEN: Pfizer`s experimental hard drugs shows promise and that is where
we begin tonight`s “Market Focus”.

The company said a study showed that the medication reduced the risk of
death in patients with a rare heart disease by 30 percent, but concerns
were raised about competition in the space and whether rival medications
were more effective at treating the disease. Shares of Pfizer (NYSE:PFE)
were off nearly 2 percent to $41.58. But meanwhile, shares of Alnylam
Pharmaceuticals (NASDAQ:ALNY) and Ionis, which make competing therapies saw
their shares jump.

While Netflix (NASDAQ:NFLX) is reportedly testing out a system in a number
of international markets that lets new users subscribe to the streaming
platform outside of the apps run on Apple (NASDAQ:AAPL) devices. The move
is being made to help reduce the amount of commission fees Netflix
(NASDAQ:NFLX) pays to Apple (NASDAQ:AAPL) to appear in its App Store.
Netflix (NASDAQ:NFLX) shares rose more than 1 percent to $364.58.

And sticking with Apple (NASDAQ:AAPL), sort of, Bloomberg reports that the
company will debut three new iPhones, including its largest ever, with a
six and a half inch screen. Apple (NASDAQ:AAPL) has yet to announce the
date for that. The stock rose a fraction to $217.94.

HERERA: The software company VMware is buying start-up Cloud Health
Technologies in an effort to expand and streamline its cloud offerings.
VMware did not disclose a price for the deal, but “Reuters” said VMware is
expected to pay about $500 million. Shares of VMware fell a fraction to

Shares of the chip maker Advanced Micro Devices (NYSE:AMD) rose after
investors got a chance to react to a new product announcement over the
weekend. The company said it was launching a high-performance graphics
card for data centers. Analysts say that new card could result in
increased market share. The stock hit a 12-year high, rising more than 5
percent to $25.26.

MATHISEN: Well, with the Nasdaq at a record, should investors look beyond
the so-called FANG stocks? Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN),
Netflix (NASDAQ:NFLX) and Google (NASDAQ:GOOG) for opportunity.

Kim Forrest, portfolio manager at Fort Pitt Capital, joins us right now.

Hi, Kim. How are you?


MATHISEN: I`m great. Let`s start with the FANGs. Would you touch them at
these prices or if you don`t already own them, should you stay away?

FORREST: I think you should stay away. I think they`ve really benefited
from, well, great performance of the underlying business, but also for the
last couple of years, people have really piled into them and driven up
their prices and the price to earnings ratio as well. So, you know, being
this sort of value-oriented investor that we are would look elsewhere as
opposed to FANGs.

HERERA: So, you spread the net kind of wide. So, not all of tech is
overvalued or even fairly valued. You`re still finding some good values
out there?

FORREST: We are and they`re kind of in the unloved or they`ve made a
couple of missteps sort of thing or maybe in one case that there`s a lot of
supply of their product out there, but we believe that it`s going to
shortly turn around.

MATHISEN: So let`s talk about one of the stocks in the tech space that has
been incredibly hot this year and especially most recently, and that`s AMD,
the chip maker. This has been —


MATHISEN: — this has been a challenge stock for a long time, but it has
rocketed up. Is that the one to buy now or should, as a value player,
should I look elsewhere namely Intel (NASDAQ:INTC) or AMAT?

FORREST: Well, I would look elsewhere and that can come as no surprise. I
mean, it`s done really, really well. If you owned it or owned it,
congratulations. It`s up about a hundred and forty five percent this year,
way to go.

But looking forward and looking at the history of the company and, you
know, their product lines, I`d be wary. It`s very, very difficult to keep,
you know, executing at a high level. And in the past, AMD has had some
disappointments when they`ve had something similar happen a good product
release, you know, winning market share and things just seem to happen to
the company.

HERERA: Quickly, you also like Intel (NASDAQ:INTC) as well. Why?

FORREST: Why? Well, because it`s kind of unloved at this point. We all
know that a couple of years ago they weren`t selling cell phone chips that
seems to not be an issue right now. And AMD is nipping on its heels. AMD
came out with a chip using a technology that Intel (NASDAQ:INTC) has missed
the mark on, but we believe that because of their prior execution, Intel
(NASDAQ:INTC) is going to catch up and they still have a tremendous amount
of market share.

But investors do love growth and that`s why AMD is being rewarded right

MATHISEN: All right. Kim, thank you very much. Great to see again. Kim
Forrest, Fort Pitt Capital.

FORREST: Thank you.

HERERA: Well, tonight, the nation mourns the death of Senator John McCain
who passed away over the weekend of brain cancer. During his years of
service to our country, the senator played a pivotal role in business-
related issues. Most recently, he helped block his party`s push to repeal
the Affordable Care Act. In the 1980s, he became embroiled in the savings
and loan scandal. Decades later, in the wake of the financial crisis, he
investigated Wall Street wrongdoing, calling Goldman Sachs (NYSE:GS)
behavior, quote, unethical.

Senator John McCain, an American hero and an independent thinker, who left
his mark on the world of business and finance.


HERERA: Walt Disneyworld employees could see their hourly pay increase to
$15 an hour by the year 2021. The proposal is part of an agreement reached
between the theme park operator and a group of unions after nearly a year
of negotiations. The new deal faces a vote next month by union members.
It is expected to be approved.

MATHISEN: The entertainment industry is having a sizzling summer as
moviegoers flocked to theatres.

Julia Boorstin has more on the box-office bounce back.


both animated and live action, to romantic comedies.

The summer box-office is on fire. The season so far is up 14 percent over
last year, bringing the year-to-date totals up over 9 percent, to the
highest ever box-office at this point in the year, not adjusted for

Bolstering the box-office, Warner Brothers “Crazy Rich Asians”, already the
top grossing comedy of the year, with a mere 6 percent drop between its
first and second weekends, nearly unheard of.

PAUL DERGARABEDIAN, COMSCORE: That second weekend hold means that this
film is going to continue to do well because it`s a pure reflection of the
enthusiasm that all audiences have for the film.

BOORSTIN: So there have been some breakout hits like “Crazy Rich Asians”,
most of the summer`s success has been in the back of familiar franchise
films, and Disney (NYSE:DIS) in particular is cashing in.

With “Incredibles 2”, the biggest film of the summer, Disney (NYSE:DIS) has
a piece of four of the five biggest films of the season including Fox`s
“Deadpool 2”, “Solo: A Star Wars Story” and “Ant-Man and the Wasp”, giving
it more than a third of the box-office market share year-to-date.

Universal`s “Jurassic World: Fallen Kingdom” was the second biggest film of
the summer. The question is whether this summer surge can continue or
whether with a blip in theatres ongoing competition with Netflix
(NASDAQ:NFLX) and the like.

Investors seem bullish. Year-to-date, AMC shares are up about 25 percent
while Cinemark are up about 9 percent, and IMAX shares are up some 5

And fall and holiday films are already drying buzz, including Marvel`s
“Venom” from Sony (NYSE:SNE), Warner Brothers` “Aquaman”, and Disney`s
“Mary Poppins Returns”.

DERGARABEDIAN: I think we`re going to see the potential for a record-
breaking year or a near record-breaking year given the diverse content
that`s on the way in the fall and the holiday movie season.

BOORSTIN: The one factor could hold back the year`s totals, Disney
(NYSE:DIS) doesn`t have a “Star Wars” film to draw moviegoers over the
holidays, as it has in the past three years.

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


HERERA: The U.S. Open is one of the biggest and most lucrative tennis
events of the year. There are reports that the tournament is expected to
bring in at least $350 million this year, which is significantly more than,
say, the Australian Open. And that may be because of the changes taking
place to reinvent that game.

Eric Chemi takes a look at the business of the sport from the National
Tennis Center in Queens, New York.


thousands of fans at the U.S. Open marks the unofficial end of summer as
the world`s best tennis players gather in New York City for the year`s
final grand slam.

2018 marks the fiftieth anniversary of the U.S. Open in its current form,
when professionals were allowed to compete and a lot has changed since

As organizers now compete with a 24/7 sports calendar and waning attention
spans, they have to keep the excitement year-after-year, picking up the
pace and bringing the energy is key.

GORDON SMITH, USTA EXEC. DIR. AND CEO: The time clock, we`re going to have
interesting things going on on the court. We have — if you come to the
open, we got music, we got all kinds of things going on to make it an
exciting event. It`s — we don`t want you to have to be quiet all the time
and mind everything. It needs to be an active energetic sporting event and
most, even three out of five seven matches don`t last any longer than a
football game.

CHEMI: This is growing the game. The U.S. Tennis Association has made a
big push to getting younger people playing the sport. To attract even more
fans, the USTA has remodeled their Orlando headquarters to become more of a
destination for tennis lovers, offering low-cost tenniscations.

three or four days, and they`ll come. They`ll play tennis in the morning.
They`ll have a break, and then you`ll have more tennis late afternoon, then
we have some social activities around that — it`s really a booming right

In fact, we just opened last year. And our adult camp business is up like
a hundred percent from our first year.

CHEMI: To speed up the game, there`s a speed clock and a debate over
whether the men`s matches should be shortened to best of three sets.
Defending U.S. Open champion Rafael Nadal thinks the current format is

that in the grand slam, it`s good to have the best of five because that
that makes long matches and matches that stays that for the history,
normally more than the best opening.

CHEMI: Like it or not, the sports world is changing and U.S. Open
organizers are hoping that the adjustments that they`re making will lead to
growth of the $6 billion U.S. tennis industry.

For NIGHTLY BUSINESS REPORT, I`m Eric Chemi in Queens, New York.


MATHISEN: And finally tonight, the most expensive car ever sold at auction
fetched $48 million this weekend. As we told you Friday, expectations were
high and the results didn`t disappoint. The Ferrari 250 GTO was sold by a
former Microsoft (NASDAQ:MSFT) executive who bought the car in 2000 for
what experts say was less than 1/10 of Saturday`s sale price.

HERERA: Wow. Talk about return on investment.



It`s good to have you back.

MATHISEN: Nice to be here.

HERERA: That`ll do it for us tonight. I`m Sue Herera. Thanks for joining

MATHISEN: I`m Tyler Mathisen, and have a great evening, everybody. We`ll
see you back here tomorrow night.


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.


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