Transcript: Nightly Business Report – September 26, 2018

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

(BEGIN VIDEO CLIP)

JEROME POWELL, FEDERAL RESERVE CHAIRMAN: Our economy is strong. Growth is
running at a healthy clip.

(END VIDEO CLIP)

CONTESSA BREWER, NIGHTLY BUSINESS REPORT ANCHOR: The Federal Reserve hiked
rates for the eighth time since 2015. What this means for the economy, the
market and your wallet.

New rules? Most corporations don`t want the government involved in their
business. But on Capitol Hill today, big tech companies are pushing for
more oversight.

One of a kind. How the first and only female CEO of a publicly traded home
builder is trying to close the gender gap.

Those stories and more on NIGHTLY BUSINESS REPORT for Wednesday, September
26th.

And good evening, everyone. I`m Contessa Brewer, in tonight for Sue Herera
and Bill Griffeth.

We begin with an important aspect of the American economy: interest rates.
Today, the Federal Reserve lifted the benchmark rate for the third time
this career, the eighth time since 2015. Fed Chair Jerome Powell called
the economy strong and he said he is not concerned about inflation.

The upbeat outlook led the central bank to increase its forecast for growth
this year and next.

Steve Liesman is in Washington with more on today`s decision.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Federal Reserve
raising interest rates by a quarter percentage point as expected to a new
range of 2 to 2.25 percent all but signaling another rate hike is coming as
soon as December.

Fed Chairman Jay Powell was pretty clear why the Fed is taking this course
of action.

POWELL: Our economy is strong. Growth is running at a healthy clip.
Unemployment is low. The number of people working is rising steadily. And
wages are up. Inflation is low and stable. All of these are very good
signs.

LIESMAN: Amid expectations for the good times to continue Fed officials on
average forecast the rates will rise another 75 basis points next year and
finish above 3 percent. But Powell also said there are risks out there to
raising rates and risks to not raising rates.

POWELL: If we move too quickly, we can, you know, snuff out a recovery
unnecessarily. And inflation falls short of its 2 percent target. Or if
we move too slowly, we have an economy that overheats.

So, we`re — that`s happened through history. We don`t see any signs of
that now. But we`re always trying to navigate between those two shoals.
And think that gradually raising interest rates is the way that we kind of
take both of those risks seriously.

LIESMAN: Powell didn`t seem overly concerned about the high level of the
stock market or lots of debt on the books of corporations. But he did say
it represented a risk.

He also said that tariffs represent a risk to the economy, but hadn`t shown
up yet in the economic data.

So, Powell said these are good times and the Fed thinks by nudging rates
higher and stopping at a low, he can let the good times roll just a little
bit longer.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman in Washington.

(END VIDEOTAPE)

BREWER: Well, interest rates influence everything from the economy to the
financial markets. So what could the path of rate hikes mean for your
investments?

David Lebovitz is a global market strategist at J.P. Morgan Asset
Management.

David, good to you today.

When we`re talking about this rate hike, what will we expect to see as an
impact on the overall economy?

DAVID LEBOVITZ, GLOBAL MARKET STRATEGIST, J.P. MORGAN ASSET MANAGEMENT:
So, you know, I think that the Fed, to Chairman Powell`s point, is trying
to move gradually. They`re trying to telegraph exactly what they`re doing.
But, you know, frankly, with eight rate hikes since 2015, we`ve already a
seen a bit of a slowdown this year in auto spending. We`ve seen a slowdown
in home spending.

So, I think higher rates are already taking hold on some of the most
interest rate sensitive sectors of the U.S. economy. Obviously, growth has
remained relatively robust given all the fiscal stimulus being pumped into
the system. But, you know, my expectation is that as rates continue to
move higher, you could see the more interest rate sensitive sectors like
autos and housing come under pressure over the next few quarters.

BREWER: And we saw that even today with utilities. Are we expecting to
see that markets, stocks with equities here that people might be invested
in their 401(k)s?

LEBOVITZ: So, I think that equities it`s important to draw a line between
those stocks that benefit from higher interest rates and those stocks that
come under pressure from higher interest rates. You know, a lot of
investors have used things like utility stocks, consumer staple stocks,
telecom stocks as a way of producing more income in the portfolios over the
course of the current expansion given that interest rates have been low for
the majority of this economic growth period.

But, you know, if you think about things like financials, technology,
energy, they do fairly well when interest rates rise. So, we think that
investors probably need to be more selective at the current juncture. We
certainly expect the high dividend paying sectors to remain under pressure,
but that doesn`t mean there are no opportunities that investors can take
advantage of.

BREWER: And what`s the impact of these rate hikes on treasuries? We saw
the yield moving lower today.

LEBOVITZ: Yes. So, obviously, when interest rates rise bond prices fall
and a lot of investors that I`ve been speaking with have noted they`re
seeing negative returns from bond funds for the first time in a number of
years. You know, I think the treasury yields coming down today were a
reflection of the market interpreting the Fed comments as being a little
bit softer, a little bit more dovish than they were expecting.

Frankly, we still think the path of least resistance for interest rates is
higher. The Fed is going to hike again in December. In our view we think
two or three times next year. That should lead interest rates grinding
higher the next 18 months.

BREWER: David Lebovitz with J.P. Morgan Asset Management — David, good to
see you. Thank you.

LEBOVITZ: Thanks for having me.

BREWER: Interest rates also influence the cost of borrowing, the return on
savings and your pocketbook overall. We joined by Mark Hamrick, senior
economic analyst at bankrate.com.

All right. Let`s dive into the ways that we might see this. When it comes
to what a lot of people across the nation have auto loans. Will we see
higher rates translating to what we pay per month for autos?

MARK HAMRICK, BANKRATE.COM SENIOR ECONOMIC ANALYST: Well, first of all, if
you already have an auto loan, that is not likely to change. We are
talking about auto loans for future customers. And, you know, our point of
living at Bank Rate is to remind people to shop around. That holds true
across the borrowing universe.

And let`s remember that while there may be an average rate of let`s say 5
percent for auto loans and likely be going higher, that shoppers can do
better than that and auto makers continue to add incentives including low
cost financing.

BREWER: And what about mortgages? Will you see impact on mortgages?

HAMRICK: Really more so for adjustable rates. Those who have fixed rates
mortgages, obviously, those are fixed by definition. So for those who are
either still coming into the market and will expect to be in their homes in
future years, a number of years, we generally recommend that they look at
fixed rate mortgages and for those who have rates that are going to reset,
they want to look at how much longer they`ll be in their home and possibly
refinance into a fixed rate mortgage.

BREWER: All right. And then, finally, I wanted to ask you in terms of the
impact on what we`re paying, what about credit card debt? A lot of
Americans carry some debt from month-to-month. Will you see of an impact
there?

HAMRICK: Yes, absolutely. I tend to underscore this more than anything
else when it comes to borrowing because we`ve now crossed over the trillion
dollar level in terms of credit card debt. Since the Fed began tightening,
obviously raising its benchmark rate by 2 percent since the beginning in
2015, we have seen the average for credit cards go up from 15 percent level
into the 17 percent level.

And as we have already established here, we do look for perhaps as many as
four rate hikes over the coming years. So, that means that we might be two
third of the way through the rate hikes. So, at Bank Rate, we continue to
advice people to pay down or better off pay off credit card debt and
continue to save.

BREWER: All right. So, if that`s the advice there, are they — you know,
on ways that you avoid some of pain that might come with the rate hike. Do
you have advice for people on how to take advantage of a coming rate hike?

HAMRICK: Absolutely. Well, I like to say that savers were the often
forgotten casualties of the low interest rate environment which was
essentially the medicine the Federal Reserve had to employ in the midst of
a financial crisis. Slowly but surely, we are seeing savings rates rise.

But again, it`s really amazing — and this is demonstrated on our site how
much variance we see if you just shop around. So, while we might say that
for example the average on a one-year CD is below 1 percent. You can get
substantially higher than that by shopping, same for 2-year CDs, five-year
CDs as well.

BREWER: All right. Mark Hamrick with BankRate.com, thanks for the advice.

HAMRICK: Great to be with you. Thank you.

BREWER: Those inflation comments from the Fed chief set off a chain of
events on Wall Street. Bond yields turned lowered, which pressured bank
stocks and because of the financial sector which is, of course, critical,
the broader market fell, gave up earlier gains. The Dow Jones Industrial
Average dropped 106 points to 26,385. The Nasdaq was off 17. And the S&P
500 was down 9.

In a speech to the United Nations Security Council, President Trump called
out China, not for its trade tactics but for trying to influence the
upcoming midterm elections.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Regrettably, we found that
China has been attempting to interfere in our upcoming 2018 election,
coming up in November, against my administration. They do not want me or
us to win because I am the first president ever to challenge China on
trade. And we are winning on trade. We are winning at every level.

We don`t want them to meddle or interfere in our upcoming election.

(END VIDEO CLIP)

BREWER: Experts say those comments open up a new front in Trump`s
administration posture towards the world`s second largest economy.

Well, we want to take time to look at today`s upgrades and downgrades.

IBM was upgraded to buy from neutral at UBS. The analyst cites strong
demand for services, artificial intelligence and cloud offerings. The
price target is $180. The stock rose more than 1 percent to $151.61.

GoPro`s rating was lifted to outperform from perform at Oppenheimer. The
analyst there calls its product compelling. The price target $9. The
stock gained 4 percent to $6.92.

Activision Blizzard`s price target was raised to $88 at Piper Jaffray. The
analyst says the game “Call of Duty: Black Ops 4” could help boost
earnings. The firm maintains the overweight rating, shares gained 1
percent to $81.57.

And still ahead, a new phone scam and a call that no parent ever expects to
get.

(MUSIC)

BREWER: San Francisco officials have temporarily should down the city`s
new $2 billion transit center after a crack was found in a steel beam.
Engineers are now inspecting that beam. The new transit hub opened a month
ago. And it`s expected to accommodate 100,000 passengers each weekday.

The House of Representatives tonight passed an $850 spending bill. That
measure funds the Defense Department and includes a plan to avoid a
government shutdown Sunday but the president still has to agree and sign
the measure.

Executives from major tech companies were back on Capitol Hill, testifying
on consumer privacy. And today, they were pushing lawmakers to establish
federal regulations.

Julia Boorstin explains.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Executives from
AT&T (NYSE:T), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Google
(NASDAQ:GOOG), Twitter and Charter Communications (NASDAQ:CHTR) taking the
stand before the Senate Commerce Committee to answer question base how they
protect consumer data in the most effective way to craft regulation.

SEN. JOHN THUNE (R), SOUTH DAKOTA: There is a strong desire by both
Republicans and Democrats and by both industry and public interest groups
to work in good faith to reach a consensus on a national consumer data
privacy law that will help consumers promote innovation, reward
organizations with little to hide and force shady practitioners to clean up
their act.

KEITH ENRIGHT, GOOGLE CHIEF PRIVACY OFFICER: We do not sell personal
information. We acknowledge we made mistakes in the past from which we
learned and improved our privacy program. We understand that the
foundation of our business is trust.

BOORSTIN: With the general consensus that regulation is inevitable, the
question is what the laws will look like. And companies would prefer to
have federal legislation because the consistency is easier to navigate than
a patchwork of state laws.

The concern many tech giants testifying, this summer, California passed a
new privacy law considered comprehensive and stringent, and could hinder
their growth.

ERIC HIPPEAU, LERER HIPPEAU: Now what we are seeing is that the states
while the federal government is discussing it and not doing anything, the
states are moving, starting with California. And now, they are talking
about it. So, the federal government is under pressure now to come up with
a law. Otherwise, you`re going to have a patchwork of laws which will be
unworkable.

BOORSTIN: With Google (NASDAQ:GOOG) saying complying with European privacy
regulation is a tremendous challenge, warning that similar laws here would
hurt start-ups. The question is what regulations will look like.

STEPHANIE MEHTA, FAST COMPANY: Companies love to complaint about
regulation. And yes it`s a burden. But I think the bigger problem for
companies is uncertainty. I think that, you know, if they have a
regulatory framework they can work within and that they can help shape,
which is why I think you`re seeing so many of these big companies say we
are in favor of some sort of regulatory framework because they want to be
part of the rule-making progress.

BOORSTIN: With questioning focusing on the potential for mandatory
notification of data breaches within a certain time period and question
base whether consumer should have to affirmatively opt in to having their
data used and shared, Congress is trying to figure out what kind of rules
could protect consumers without hindering innovation and growth.

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

(END VIDEOTAPE)

BREWER: CarMax (NYSE:KMX) topped expectations and that`s where we begin
tonight`s “Market Focus”.

The car retailer said new digital initiatives helped drive an increase in
same store sales. And that led to an overall earnings beat. The company
points to results lifted by higher selling prices for used vehicles.
Shared finished the day down more than 1 percent to $74.66.

Papa John`s ousted founder is not walking away from the pizza chain without
a fight. John Schnatter has contacted a number of private equity firms to
buy back the restaurant chain he left earlier this year. Several private
equity firms reportedly have rejected Schnatter`s proposal to partner on a
bid and shares of Papa John`s pop 8 percent to $50.14.

Online polling company SurveyMonkey made the trading debut after pricing
shares above the expected range. The initial public offering put
SurveyMonkey`s value at nearly $1.5 billion. And while the company isn`t
profitable yet, the CEO says it`s making progress.

(BEGIN VIDEO CLIP)

ZANDER LURIE, SURVEYMONKEY CEO: On a net income basis cap, we are still
unprofitable. We are bringing on world class shareholders who understand
the business model. This is a highly cash generating business. So, in the
last 12 months, we had 19 percent free cash flow margin. And because 90
percent of our revenues subscription base, we had really high visibility
and cash generation with the business.

So, we see the opportunity to grow and continue to drive free cash margins.
And over time, you will see net income.

(END VIDEO CLIP)

BREWER: Shares soared 43 percent in their first day of trading, closing at
$17.24.

After the bell, Bed, Bath and Beyond reported a surprise decline in same
store sales and missed earnings expectations. The retailer also cut its
sales outlook for the year and said profits will come in at the low end of
previous guidance. So, as you might expect, shares initially fell in after
hours. They finished the regular session down a fraction to $18.81.

A growing international scheme is leaving a trail of wealth victims across
the country. Criminals can call loving families and claim they are holding
loved ones for ransom.

Andrea Day investigates.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: What do you, tell me what you need. I don`t know.
Tell me.

ANDREA DAY, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is an extortion
call, the man is desperate to save his son`s live.

UNIDENTIFIED MALE: Listen, calm down.

DAY: How real was it for you?

JAMEY HEATH, MUSIC PRODUCER: How real was it? It was someone had my son.
Someone had my son who I had heard crying and screaming in the background,
covering his mouth, with a gun to him.

DAY: Thirty minutes, he says, of complete terror. Jamey Heath had no idea
he was being conned. But this is no ordinary hoax. An extortion scheme so
paralyzing, the feds can call it a violent crime. FBI special agent Erik
Arbuthnot.

ERIK ARBUTHNOT, FBI SPECIAL AGENT: The victims are wealthy, architects,
doctors, lawyers, professional people, get the phone call, make the
payment.

DAY: Heath is a music producer and lives in Los Angeles. Investigators
say a recent target for the extortionist. She was inside had his home when
he got the call.

HEATH: I hear them say they`re going to hurt me they`re going to shoot me.
And then while he is talking they are going to shoot — and I hear someone
cover his mouth. And someone grabs the phone and says is this Nick`s dad
listen to me and listen to me closely. How you respond in the next 20
seconds determine whether or not you see your son again.

DAY: So, right from the start, you thought it was your son.

HEATH: Oh, yes, it wasn`t thinking. It was just my son.

DAY: He rushed to his bank to withdraw cash.

HEATH: I parked in that driveway. I ran out frantically down the street
here, ran into the bank through the glass doors.

DAY: Once inside, he got a text from his wife.

HEATH: That said Nick is safe. He`s at school.

DAY: That`s when he finally called his son.

According to the FBI, versions of the scheme have been around for about a
decade. But it wasn`t until recent years that agents made a startling
discovery, while pouring through victim`s phone records.

Arbuthnot says they found calls made to people across Beverly Hills were
coming in from one place.

ARBUTHNOT: Our investigation has revealed for the most part these phone
calls are being made by prisoners in foreign countries, mostly prisoners in
Mexico.

DAY: So you`re telling me that Mexican prisoners have this terrifying
scheme down to a science?

ARBUTHNOT: Yes, yes we are talking about thousands of phone calls over the
last few years.

DAY: This is undercover video aired by the Mexican broadcast network
Imagen. It was taken inside a prison in Mexico City. The people you see
on the phone here are inmates. According to investigators casually making
cold calls, right out in the open.

So, these prisoners are really hoping to strike it rich with the calls?

ARBUTHNOT: Absolutely. The whole point of in for enemy is to make money,
make money fast, make as much money as possible.

DAY: The call to Jamie Heath also from Mexico.

Do you think you`ll ever forget that experience?

HEATH: No. No, because for me, those 30 minutes my son was taken.

DAY: For NIGHTLY BUSINESS REPORT, I`m Andrea Day.

(END VIDEOTAPE)

BREWER: We reached out to different agencies in Mexico for weeks with no
response. The Mexican embassy told us U.S. authorities have not raised the
issue during meeting was law enforcement. But the FBI told us they`ve been
working with Mexican officials to come up with a plan to shut down this
scheme. And the FBI says victims end up wiring money to Mexico or leaving
it somewhere in the United States to be picked up.

The bottom line here, if you get one of these calls, they say you should
just hang up.

Coming up, women in construction, there aren`t many of them. But one rose
all the way to the top.

(MUSIC)

BREWER: Well, here`s a look at what to watch tomorrow. Supreme Court
nominee Brett Kavanaugh will testify before the Senate Judiciary Committee
about allegations of sexual misconduct. Kavanaugh`s accuser has also said
she will testify.

The revised figure for second quarter GDP growth is due out. And we`ll get
a look at durable goods orders in August.

That`s what to watch on Thursday.

New home sales bounced back in August. Purchases of newly built homes rose
3.5 percent, which was more than expected, and follows two straight monthly
declines. The reason weakness is being blamed on rising home prices and
higher borrowing costs which have outstripped wage gains.

Apartment rents are also heading higher, reversing a year long trends.
Rents are up nearly 3 percent and the occupancy rate is at almost 96
percent. Increasing demand is coming in part from a shortage of homes for
sale, which has led to higher home prices and that in turn has pushed
people into the rental market, reducing demand.

You know, home building is an overwhelmingly male dominated business from
the framers on the job site, right up to the C-suite. But one CEO breaks
the mold not just for herself but for one of the nation`s largest publicly
traded home builders.

Diana Olick is in Scottsdale, Arizona.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Arizona based Taylor
Morrison Homes is the seventh largest publicly traded home builder by
revenue. And its CEO Sheryl Palmer is the first and only one of her kind
in those ranks, a female CEO.

SHERYL PALMER, TAYLOR MORRISON CHAIRMAN AND CEO: I`m not certain that
this was an intentional path for me. But it`s one that felt right for
obviously — I`ve been in this industry for 20 years. Color blind, I`m
gender blind.

So, they might notice that I`m the single female at the table, but for me,
this is just what I do. All the old jokes about there is no line to the
ladies — those are all true. But I — it doesn`t change me. I always
said in business, the day I have to change who I am is probably the day
I`ll stop.

OLICK: Palmer started in home building first at Pulte Homes then Taylor
Morrison. She took the company public in 2012.

You`re at the table.

PALMER: Um-hmm.

OLICK: With the other publicly traded CEOs. Have you ever felt minimized?
And if so, how?

PALMER: For sure. Early days, I think if I were to share a view, I almost
think it kind of glossed over. I just had to continue and I knew that — I
knew that my positions, my views on the business were right. I would say
to the group of CEOs had to get to know me. But now, I think, you know,
it`s an equal playing field, but it took time.

Thanks.

OLICK: And overtime, nearly a dozen years as CEO, Palmer built both her
reputation as well as an uncharacteristically female staff given the
business.

Do you promote women more as a leader of this company? Or do they just
come to you because of what the company is?

PALMER: So I think we promote certain skills that are required. And we
have a culture that I think attracts certain types of people around
personal development. And you know, the passion and the higher purpose of
what we as a company stand for.

We actually don`t have any affinity programs for females. Now, what I
would hear from my people services department is that having me in this
seat does attract other women. I think it gives hope.

Nearly 50 percent of our managers that first level management is female. I
think it`s about 49.2 percent.

OLICK: That`s incredibly rare.

PALMER: That`s incredibly rare.

OLICK: But given the product, houses, Palmer sees it as just plain common
sense.

PALMER: I will tell you, I think it makes us a better company, because to
get the diversity of thinking at our table on a corporate level, at the
division table, it`s really critical. Think about who the buyers are today
out buying houses. And to miss the opportunity to have the female spot and
kind of lens and voice would be shameful.

OLICK: Taylor Morrison`s board is also female heavy, but even with that
achievement, she admits to a glaring problem, one she calls a tragedy.

PALMER: Women just don`t tend to be there for other women. And I don`t
know if that`s a result of there are so few slots at the top that people
feel like they have to compete.

I`m very hopeful that as the industry develops, and as we see more women in
the space, that women take the opportunity to embrace the need and help
other women as compared to push them down.

OLICK: For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Scottsdale,
Arizona.

(END VIDEOTAPE)

BREWER: Well, before we go, let`s take a look at the day on Wall Street.
The Dow fell 106 points, the Nasdaq was off 17 and the S&P slipped 9.

That`s NIGHTLY BUSINESS REPORT for tonight. I`m Contessa Brewer. Thank
you for watching. Have great night, everyone. We`ll see you back here
tomorrow.

END

Nightly Business Report transcripts and video are available on-line post
broadcast at http://nbr.com. 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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