Transcript: Nightly Business Report – September 7, 2018

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Pay day. The pace of hiring
picked up in August and worker paychecks may finally be getting fatter.

Closing the gap. She was a trailblazer on the tennis court and now Billie
Jean King is helping change the game for gaming.

Reduce, reuse, recycle — the motto that led to a bright idea and a
successful metal scrapping business.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Friday,
September 7th.

Good evening, everyone and welcome. Bill Griffeth is off tonight.

It is being called the strongest job market in a generation and today, we
got the numbers to prove it. In August, the economy added 201,000 jobs and
the unemployment rate remained near an 18-year low at 3.9 percent. Some
were concerned that the threat of tariffs and countertariffs would hold
employers back from hiring, but that wasn`t the case.

And as Ylan Mui reports, employees got another bit of positive news.

(BEGIN VIDEOTAPE)

YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Another solid month of
job growth. The big surprise: a jump in wages. Average hourly earnings
rose 10 cents to $27.16. That`s a nearly 3 percent increase from a year
ago. A pace that the president touted today while in North Dakota.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: And what happened this
morning? Did you hear that? Two-point-nine percent. It`s, like, the best
wage number that we`ve had in many, many years and that makes me very
happy.

AARON KLEIN, BROOKINGS INSTITUTION: What I think people need to realize is
it`s not the unemployment rate that brings people back into the labor
market, but it`s wages. People decide to return into the labor market
because they think they have a chance to make money.

MUI: And that may be why job growth in August was broad based. Health
care added 33,000 jobs, construction was up 23,000 and transportation was
up by 20,000. Still, a few sectors did shed some workers. Manufacturing
was down by 3,000 jobs. The auto industry lost nearly 5,000 and retail
shrank by almost 6,000 jobs.

The Labor Department also lowered its estimated job growth in June and July
by 50,000 workers. But even with those revision, job gains over the past
three months have averaged a robust 185,000 jobs a month and some experts
fear the hot job market could force the Federal Reserve to raise interest
rates more quickly.

DAVID KELLY, J.P. MORGAN FUNDS: I still think the Fed is going to do two
more times this year and two more times next year. I know there are
question marks about December, but if I`m Jay Powell, so long as the labor
market is tightening, so long as the — you know, we`re generating 150,000
to 200,000 jobs, I think I keep tightening up until I get to neutral.

MUI: And higher interest rates could end up taking the steam out of the
labor market.

For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington.

(END VIDEOTAPE)

HERERA: So, let`s turn now to Craig Dismuke for some more analysis on
today`s jobs report and what it might mean for the Fed. He is the chief
economist at Vining Sparks.

Good to see you, Craig. Welcome back.

CRAIG DISMUKE, VINING SPAKRS CHIEF ECONOMIST: Hey. Good evening, Sue.

HERERA: So, weigh in on this, it was a very strong report, almost all of
the way across the board. Some are saying it may be too strong. Where do
you fit on that?

DISMUKE: Well, I would agree. I think it is very strong, obviously. Just
to give it some context, for the year so far, we`ve averaged 207,000
payrolls per month. It`s very strong for the year. Coming into the year,
the economists thought we would average around 165,000, so over 40,000 more
jobs per month than what economists thought, so it`s been very good.

I think the question is, is it sustainable? And I would say that I don`t
think it is going forward.

HERERA: So, do we revert to the mean and still have job growth, but not
growth that`s too hot? Where do you think we`re going to settle out?

DISMUKE: So I think we will slow down and one of the challenges and you
can see it in the report this morning, as we`ve seen growth, job growth
above what is sustainable longer term, they`re starting to be some wage
pressure. We`re seeing wages up to 2.9 percent now. That can start to
create some inflationary pressures.

As it does that, the Fed can start to become more reactionary and that`s
what the concern is as the Fed starts to hike rates faster than at the
gradual pace they`ve been on so far. If they do that, then I think you can
certainly slow down economic growth and job growth. We expect to see job
growth slow down around 180,000 for the second half of the year and then
down to 160,000 for 2019.

HERERA: Where do you fall in terms of the Fed? You mentioned the fact
that you think they might be more reactionary. We heard one of the people
featured in Ylan`s piece saying that basically he thinks two this year, two
next year. Do you think they`ll do more than that in terms of hiking
rates?

DISMUKE: Well, if you see job growth continue above a 200,000 per month
pace, then it could force their hand to do so, and I think that`s what the
risk is.

Our best case is that as wage pressure starts to weigh on employers`
ability to hire, you see job growth slow down a little bit, which keeps the
inflationary pressure lower. And if that`s the case, if that plays out as
we expect, then I think you`ll see one, maybe two this year. We`re
starting to believe that you`ll see two more this year and the potential
for one or two next year.

I do think that once we get near 3 percent on the Fed funds rate, the
economy is going to have a little bit more difficulty managing that and
we`ll see activities start to slow a little bit and the neutral rate is
slower than what the Fed is projecting at this point.

HERERA: OK. Craig, thank you so much.

DISMUKE: Thank you, Sue.

HERERA: Craig Dismuke with Vining Sparks.

Well, before the release of the monthly jobs report, the president of the
Boston Fed said that the central bank`s plan to gradually raise interest
rates is the right one.

(BEGIN VIDEO CLIP)

ERIC ROSENGREN, FEDERAL RESERVE BANK OF BOSTON PRESIDENT: When we have an
economy that`s already where we want it to be, there`s no reason to be
accommodative, and we still have accommodative monetary policy. The only
reason we shouldn`t move it up more quickly is because we don`t have that
much inflationary pressure at this point and partly, it`s a prevention to
make sure that we don`t have more serious inflation going forward.

(END VIDEO CLIP)

HERERA: Federal Reserve policymakers are scheduled to meet at the end of
the month and they are widely expected to raise rates a quarter-point cut.

On Wall Street, trade concerns pressured stocks as the market closed out a
rather volatile week of trading. The Dow Jones Industrial Average fell 79
points to 25,916. The Nasdaq was down 20 and the S&P 500 dropped six. And
for the week, all of the major averages were lower.

Bob Pisani takes a look at what investors are focusing their attention on.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Stocks were weaker on
the summer Friday as trade tensions mounted once again. The markets
started the day lower after a strong jobs growth showed wage growth rose to
its fastest pace in nine years. Good for consumers, but that sent bond
yields up and spooked stocks into a hotter read on inflation could spur the
Federal Reserve to raise rates more aggressively than investors thought.

Then came President Trump`s announcement and he`s ready to slap $267,000 in
tariffs on Chinese goods, which signaled a rapid escalation of the U.S.-
China trade war.

Remember, this is in addition to $200 billion the president had previously
announced which Trump said could come very soon.

The stocks immediately turned south on this move. And the Dow suffered its
biggest drop in about a month and led lower by Boeing (NYSE:BA), United
Technologies (NYSE:UTX) and Caterpillar (NYSE:CAT).

Trump also said he`s beginning trade talks with Japan. But so far also
appeared to be off to a difficult start.

No surprise that the usual trade-related suspects traded down, metals and
mining stocks, oil companies and large Chinese stocks like Alibaba, and
Baidu (NASDAQ:BIDU). This all follows an already tough week for tech
stocks, which fell almost 3 percent amid a slump in social media and
semiconductor stocks.

So, for those at home keeping score of what exactly moves the market,
number one it`s trade fears. Number two, it`s the Federal Reserve raising
rates, and number three, technology, leadership faltering. But political
turmoil in Washington, not so much a big market mover.

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

(END VIDEOTAPE)

HERERA: Apple (NASDAQ:AAPL) says some of the proposed tariffs would hit
some of its products. In a letter to the U.S. trade representative, Apple
(NASDAQ:AAPL) indicated that a proposed 25 percent tariff on $200 billion
worth of Chinese imports would affect a wide variety of its products
including the Apple (NASDAQ:AAPL) watch. Shares fell a fraction in trading
today.

Well, trade, the economy and taxes are just some of the issues that will be
on the mind of voters when they head to the polls for the midterm
elections, and one of the most closely watched contests is in California
where we find John Harwood. He`s in Anaheim tonight for us.

John, as the jobs report showed today, the economy continues to boom. So
what does that mean for Republicans trying to maintain control of Congress?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, Sue, not as
much as they hoped it would mean. There are three reasons for that. Many
average workers have not seen much pickup in their wages although the jobs
report was good on that front today. A second reason is that there are a
lot of voters who even though the economy is doing well as it is here in
southern California, have concerns about other issues like president
Trump`s behavior. And then finally, there`s a mixed bag here in southern
California to the tax cuts that were passed last year and yes, it cut
rates, but it also took away the popular state and local tax deduction.
So, there are some people here who will be paying higher taxes and not
lower taxes.

HERERA: All right. So, those are some of the arguments. What other
economic arguments are both sides of the spectrum making?

HARWOOD: Well, it is so interesting here in California`s 45th district in
Orange County. You have the Democratic candidate who is a protege of
Elizabeth Warren, the law professor like Warren used to be, who is making
the case that the benefits of the economy are not being evenly distributed
and she wants to change that. On the Republican side, you`ve got a former
stockbroker investment executive and she`s making the case that a turn
toward Democrats in control of Congress would be a radical economic shift.

Take a listen.

(BEGIN VIDEO CLIP)

REP. MIMI WALTERS (R), CALIFORNIA: I think you`re going to see this
country move more towards socialism under Nancy Pelosi. You know, Nancy
Pelosi does a very good job of representing her people in San Francisco,
but they simply are not on the same page as the constituents in my district
in the 45th.

KATIE PORTIER, CA (NASDAQ:CA) 45TH DISTRICT CANDIDATE: I teach business
law, and I`ve seen first hand that we need to have rules of the road that
makes capitalism functional and that make it work, and so this is about
making sure that we`re creating opportunity for families that we`re
balancing what businesses want to do for a profit motive with making sure
that we have opportunity.

(END VIDEO CLIP)

HARWOOD: And, of course, Donald Trump is a wild card in this race,
unpopular in this district and in the convention center behind me,
tomorrow, former President Barack Obama, who is very popular, is going to
be here to rally for the Democratic candidate Katie Portier and a half
dozen other Democrats running. California is a key state for Democratic
hopes to win back control of the Congress — guys.

HERERA: All right. John Harwood, thank you so much.

And it is time to take a look at some of today`s upgrades and downgrades.

Southwest`s rating was upgraded to buy from hold at Argus Research. The
analyst cites improving airline fares. The price target is $73. The stock
rose more than 1 percent to $61.90.

Wells Fargo`s rating was cut to neutral from buy at Macquarie. The analyst
says it`s a stock valuation call. The price target is $63. The stock fell
a fraction to $57.40.

Still ahead, it`s not easy finding bargains in this market, but our market
monitor says he did just that.

(MUSIC)

HERERA: Verizon`s head of media and advertising is reportedly in talks to
leave the company. Tim Armstrong came to Verizon (NYSE:VZ) in 2015 when it
acquired AOL (NYSE:AOL). He helped direct its purchase of Yahoo
(NASDAQ:YHOO) two years later, but struggled to connect the online
advertising business with Verizon`s wireless customer data.

A rough day again for Tesla shares. The company`s chief accounting officer
resigned after less than a month on the job and news surfaced that the head
of its human resources department is leaving, as well. Add to that this
video of the CEO Elon Musk apparently smoking marijuana in a live podcast
appearance with comedian Joe Rogan. Put it all together and you have the
recipe for a down day. The stock closed 6 percent lower.

Tesla shares are down more than 20 percent since Musk first tweeted about
going private and that was last month.

The casino industry as of late has been launching a number of initiatives
that it hopes will close the gender gap. The latest effort is being made
by Caesar`s Entertainment. The casino has turned to a female tennis legend
who has served up gender equality in her own sport that helped tackle that
problem.

Contessa Brewer is at U.S. open in New York with the details.

(BEGIN VIDEOTAPE)

CONTESSA BREWER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Decades ago,
Billie Jean King made a name for herself as a trailblazer, a feminist
tennis champion.

BILLIE JEAN KING, BILLIE JEAN KING LEADERSHIP INITIATIVE: We fought very
hard to have equal price money, and the U.S. Open was the first major in
1973 to have equal price money for men and for women.

BREWER: Today, she`s taking the lessons the games taught her and applying
them to gaming.

KING: I think what they liked for us was inspiration to get people
onboard, and convince people that this is the right path to take. Men are
much better than they used to be and the younger generations are fantastic.

BREWER: Among the companies King is advising, Caesar`s Entertainment.
It`s working to fill 50 percent of the executive posts with women by 2025.

Caesar`s executive Jan Jones Blackhurst knows about overcoming challenges
to gender equality. In the `90s, she became the first woman mayor of Las
Vegas.

JAN JONES BLACKHURST, CAESAR`S ENTERTAINMENT: There was always a little
pushback. There`s pushback from men whose jobs are going to be taken. And
quite frankly, they`ve been taking our jobs for a long time.

BREWER: Other companies are making notable strides and in part because
it`s a highly regulated industry. MGM just opened a new casino in
Massachusetts built by more than 7 percent women construction workers,
double the national average and it boosted partnerships with women-owned
businesses like Park Cleaners.

REBECA MERIGIAN, PARK CLEANERS INC. OWNER: MGM was really looking for
diversity here, to make what they have envisioned work and that`s embracing
everyone in the community and treating us as equals.

BREWER: Wynn Resorts (NASDAQ:WYNN) is following the same blue print for
the newly renamed encore Boston Harbor, but the initiatives have been
especially far reaching, following a #MeToo scandal that led tote
resignation of its founder Steve Wynn. In tackling the fallout, the
company hired three women to sit on its board and created a new department
to address fair treatment and commission a pay and promotion study.

BOB DESALVIO, WYNN BOSTON HARBOR PRESIDENT: I think we`ll wind up with a
better work environment and a better place for our guests to enjoy because
they`ll look around and see that we are really reflective of today`s
society.

BREWER: King hopes more CEOs will recognize the value and leveling the
play in court.

KING: I want to ask yourselves this question, do I want to be on the right
side of history? The right side of history is caring about each person and
fighting for equality for everybody.

BREWER: From the court to Las Vegas, it takes more than lady luck to
change the game.

KING: This is hard? Yes. But is it worth it? Absolutely.

BREWER: At the U.S. Open in New York, Contessa Brewer, NIGHTLY BUSINESS
REPORT.

(END VIDEOTAPE)

HERERA: A Barnes & Noble (NYSE:NE) (NYSE:BKS) investor pushes for the
company to sell itself and that`s where we begin tonight`s “Market Focus”.

Richard Schottenfeld, one of Barnes & Noble`s largest shareholders,
disclosed that he had raised his stake in the bookstore chain and spoke
with the founder about considering a potential sale. Schottenfeld said
shares are substantially undervalued and represent an attractive investment
opportunity. Barnes & Noble (NYSE:NE) (NYSE:BKS) shares popped 16 percent
to $5.30.

Mondelez is forecasting smaller than expected earnings growth for next
year. Today, the CEO unveiled a plan that he hopes will help drive growth
and he plans on using his existing brands to do it.

(BEGIN VIDEO CLIP)

DIRK VAN DE PUT, MONDELEZ CEO: Our brands can play in other categories and
we`re at the moment the biscuit, chocolate and candy company. But if you
think about Oreos, you can see the example, Oreos in ice cream, Oreos in
yogurt, you can find Oreos brownie. So, we have brands that can play
across these categories, and we`re going to do a bigger drive towards also.
So, broader snacking.

(END VIDEO CLIP)

HERERA: Shares of Mondelez were off 2 percent to $42.52.

Kraft (NYSE:KFT) Heinz said business is being hurt by rising costs and the
impact from Canada`s retaliatory tariffs. The maker of Heinz ketchup said
higher labor, freight, oil and plastic packaging costs are at a headwind.
The company did however say it is open to a potential acquisition to drive
its growth. The shares fell a fraction to $56.59.

And investors had their first chance to react to Finisar`s stronger than
expected results which came out after the bell last night. The technology
company expects earnings for the current quarter to surpass expectations.
The shares rose 7 percent to $20.15.

Our weekly market monitor guest says that you can still find some great
investment opportunities in a market that he says is not cheap. It`s his
first time on the program. We welcome Mark DeVaul, co-portfolio manager of
the Hennessey Equity and Income Fund.

Welcome, Mark. Nice to have you here.

MARK DEVAUL, HENNESSY EQUITY & INCOME FUND CO-PORTFOLIO MANAGER: Great.
Thank you. Thanks for having me.

HERERA: Let`s get right to your picks. Dollar Tree (NASDAQ:DLTR), they
really operate thousands of stores across country. Why do you like them?

DEVAUL: The Dollar Tree (NASDAQ:DLTR) does operate around 15,000 stores
under one banner name. One Dollar Tree (NASDAQ:DLTR) which is about 6,500
stores. And the other Family Dollar, 8,500 stores.

What we like about is Dollar Tree (NASDAQ:DLTR) is really the industry
leader in terms of margins and same-store sales. Everything is a dollar at
their stores. It`s a great treasure hunt environment for consumers, so
doing very well.

The opportunity, though, is the 8,500 family Dollar Stores, that they
acquired a few years ago. That business has been struggling. We think
right now, the market is not pricing in any value to Family Dollar which we
think is too draconian.

Family dollar itself generates $10 billion in annual sales, $450 million in
operating profits. So, we think there`s significant upside potential on
the stock, but very limited downside.

HERERA: All right. Carnival (NYSE:CCL) Corporation, the cruise ship
operator is in obviously the entertainment space as well as the travel
space.

Why do you like it?

DEVAUL: Yes, Carnival (NYSE:CCL), we like a number of things. One it`s in
a tax advantage industry and they only pay a 5 percent effective tax rate,
consolidated industry. So, very few competitors, and basically the three
main players control 80 percent-plus of the market, so it tends to lead the
better pricing power.

We also see supportive demographics there, aging population in the U.S. and
other developed markets should lead to a strong backlog of clients over
time, and we`re seeing better bookings and higher pricing and higher
onboard spending. So, a lot of positives at Carnival (NYSE:CCL), trading
at a discount to the market.

HERERA: And we finish up with Apple (NASDAQ:AAPL), a name that almost
everybody knows. You say management has been very open about returning
cash to shareholders. They`ve been aggressive with buybacks. That`s one
of the reasons you like it.

DEVAUL: Yes, we like Apple (NASDAQ:AAPL) a lot. I mean, I think it`s one
of the best in terms of balance sheet. They generate about $65 billion in
annual operating cash flow, and very strong brand. Obviously, iPhone is
important, 70 percent of sales. But they also have a growing services
business, iPads, iPods overtime have done very well.

So, we`re very bullish about the company and like the downside protection
driven by the balance sheet and the sustainability of the cash flows.

HERERA: Mark, thank you so much for joining us. Have a great weekend.
Mark DeVaul —

DEVAUL: Thank you. You too. Appreciate it.

HERERA: With the Hennessy Equity and Income Fund.

And you can read more about his picks by going to our website, NBR.com.

Coming up, one man`s bright idea that is full of heavy metal.

(MUSIC)

HERERA: British Airways today apologized for a cyber attack after credit
card information for customers was compromised. The information taken did
not include travel or passport details. British Airways says those who may
have been affected were notified by e-mail.

Well, it takes a lot of mettle, m-e-t-t-l-e to survive as a musician, even
more if you`re using scrap metal, which is m-e-t-a-l, to pay your bills.
Scrap metal is $100 billion industry and 60 percent of U.S. steel is made
from recycled scrap.

And that is why one musician on New York`s Long Island got the bright idea
to make scrapping a full-time business.

(BEGIN VIDEOTAPE)

HERERA: Scrapping metal is not easy especially if you`d rather be doing
this.

But it`s how Von Strauss pays the bills. Jobs he had in the past,
landscape designer, swimming pool builder, even news photographer read like
a list of cans kicked down the road until in 2006, Strauss began picking
them up, literally.

He helped a friend scrap for just a week before starting his own business
and Metal Man was born.

VON STRAUSS, “METAL MAN”: I saw the potential of the money that could be
made if you did it right.

HERERA: Doing it right meant among other thing, financing a truck instead
of renting to improve his cash flow. This is truck number two. The first
one, well, it was scrapped.

STRAUSS: It`s probably a toaster now or a microwave.

HERERA: He also learned hours of separating copper, iron, steel and
aluminum could mean making more money.

STRAUSS: If you don`t cut it off, it`s 85 cents a pound. If you cut it
off, it`s a dollar.

HERERA: Metal man says he`s picked up about 4 million pounds of scrap,
mostly in the fashionable Hamptons on New York`s Long Island. He summered
there as a child and played music gigs there as a young adult.

STRAUSS: You know, you do whip out on the house and there`s copper all
over the house, so I`ll approach these jobs and talk to the guys knocking
it down. They give me 300, 400 bucks, and usually, I double or triple my
money.

HERERA: Prices can fluctuate, sometimes violently. China`s tariffs on
U.S. steel meant growing supply at home this summer and copper prices
dropped nearly 20 percent.

STRAUSS: Ouch.

HERERA: But when he`s busy, Strauss will drop five or six loads a day at
recycling center like Gershow, a family business opened by another scrapper
in 1964. Still, he was pleasantly surprised at how much this load paid.

STRAUSS: Five hundred and forty-nine dollars. It was 1,173 pounds.

HERERA: The biggest risk? Injuries. A fall side lined him for weeks
earlier this year and he is still having issues with his fingers.

A classically trained pianist, Strauss says he`s played in 23 bands and
written more than a thousand songs. Now he`s finishing a collection of 46
originals, his words? His music. There`s value whether his music sells or
not.

STRAUSS: I`m a perfectionist with the music and it transfers into the
business.

I want to do everything right with the metal thing. I want everybody to be
happy when they call me and then they have the Metal Man experience.

Metal Man is on his way here.

HERERA: There`s legend, too. A 1,000-pound safe. Call Metal Man —

STRAUSS: There was about 30 workmen watching this whole thing. They were
all cheering, Metal Man! Metal Man!

HERERA: All part of marketing a superhero persona.

STRAUSS: Iron Man is taken and Man of Steel or Magneto. I`m trying to
recycle metal instead of rip it from the earth and keep mining it and all
of that stuff. So, in a way, I`m trying to do something great for the
planet.

(END VIDEOTAPE)

HERERA: Strauss says no, he wouldn`t call his music heavy metal, but in
addition to his musical interests, all of that heavy lifting did pay for
his trucks and it helped put his daughter through college.

And before we go, here are some fun facts about 401(k)s since today is
National 401(k) Day. The accounts were created in 1880. They were initial
he intended to supplement pension, but today, they are starting to have
that as a vehicle. They had about $4.8 trillion in assets.

And that will do it for us tonight on NIGHTLY BUSINESS REPORT. Thanks so
much for joining us. Have a great weekend, everybody, and we will see you
Monday.

END

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