Transcript: Nightly Business Report – October 17, 2018

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

Federal Reserve hints at more rate hikes ahead, contributing to another
volatile day on Wall Street.

world`s largest retailers are making a play this holiday season for the $11
billion hole left by Toys “R” Us.

HERERA: Are you feeling lucky? Well, there is more than $1 billion up for
grabs this week as lottery fever grips the nation.

Those stories and much more tonight on NIGHTLY BUSINESS REPORT for
Wednesday, October 17th.

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

It was the selloff that wasn`t. When the opening bell rang this morning
stocks fell sharply. Just like that half of yesterday`s gains were erased.
However the intense selling didn`t lasts. Stocks climbed back. Even after
the release of the minutes from the recently hawkish Federal Reserve
meeting, stocks held steady.

So, after some oh bouncing around, here is where things settled out for
this day at least. The Industrial Average fell by 91 points. We`re now at
25,706. It has been down more than 300 points at one time today. Nasdaq
fell by just two points. The S&P was off a fraction.

HERERA: Hundreds of companies in the S&P 500 have not been participating
in this bull market. Take a look at this.

There are 239 stocks down 20 percent or more from their all-time closing
highs, 159 are down at least 30 percent from all-time highs, 107 down at
least 40 percent from their highs. And 66 are down at least 50 percent
from their highs.

Well, with fewer stocks taking the major indexes to record highs what is it
signaling about the market?

Joining us to talk about that is Mike Gibbs, managing director of Equity
Portfolio Strategy at Raymond James.

Welcome, Mike. I mean, on the surface the statistics that I just kind of
rattled off, it doesn`t sound very positive.

MIKE GIBBS, RAYMOND JAMES: No, you`re right. You sometimes need to look
beneath the surface to see how strong it is. I don`t think the ample
investor understands the fact that the S&P 500 can fool them from time to

And the S&P 500, 50 stocks make up 52 percent of the daily price move. So,
that`s why it`s so important to monitor the data that you highlight and
that`s to get a pulse of really what`s happening in the stock market. And
that`s what`s happening with the average stock out there.

So I think it`s important to monitor that because what have we are seeing

GRIFFETH: But here is the point we get to as a market rally, the more
stocks you have participating, the more sustainable that rally is. But
when you have fewer and fewer stocks participating as the market continues
higher which is what the numbers suggest. Eventually, that rally peters
out. Do you agree or not?

GIBBS: No, I do agree. And it`s a gauge that we monitor from our strategy
area. And I`ll highlight for instance if you go back and look at 2014,
2015 we saw something happen in the small cap stocks. The index was barely
off its high. But you are seeing a huge percentage of stocks down 20
percent or more.

And eventually, that index went through a pretty substantial decline before
it found its bottom in 2016. So, that`s why it`s so important to monitor
what`s going on. And what we`re seeing today is something that we pay
attention to, but I do caution you that it`s not wise to focus on one
indicator alone.


GIBBS: And you must focus on the entire array of indicators. We do think
the fact that the economy is strong, earnings continue to be strong, we
continue to be bullish on the market appear and by what about the pullback?
We are paying attention to the highlight.

And if this market stabilizes and runs to a new high, which we think it can
do other the next 12 months, if the percentage of stocks that are down 20
percent or more remains at a very high level, it could signal we could have
problem down the road.

HERERA: Well, you kind of answered my next question, which is to make it
actionable for our viewers, if you have fewer stocks participating in the
upsurge of the market as a long-term investor, what do you do? You mention
that you would buy the dip. But, you know, for the average investor out
there, what should they be doing?

GIBBS: Yes, no, I agree, it`s a great point, Sue. The average investor
should not be overly consumed with the data we are throwing out there.
They should be aware of it. And if they are working with an adviser, you
know, most of the advisers are looking at this data in conjunction with
others, which is what I mentioned before and the caution in focusing on one
data point.

The investor should be aware of this. The investor should look at their
total portfolio. The investor should assess what`s happening in the
overall economy, and where the earnings extreme of the stock market because
that makes it go higher, and if it continues to be strong which it is

HERERA: Right.

GIBBS: Then I think what we are seeing as far as underneath the surface
will correct itself and will fix itself.

HERERA: All right. Mike Gibbs, thank you very much. Mike Gibbs with
Raymond James.


GIBBS: Thanks.

GRIFFETH: Elsewhere, the Federal Reserve as we have been reporting has
been the target of growing criticism by the president over the pace of its
recent interest rate increases. But the minutes of the Fed`s last meeting
which were released today show that policymakers intend to stay the course.

Steve Liesman reports tonight for us from the Federal Reserve in


raise rates in September by a quarter point, minutes to their meeting
showed they suggested there was more rate hike work to do in the months
ahead. The minutes showed that most of voters at the Federal Open Market
Committee or FOMC meetings said further rate hikes would be needed even
after hiking rates to 2 to 2.25 percent range in September.

What`s more, a number of them felt they might have to act to slow the
economy. That is levy a, quote, modestly restrictive rate in order to slow
the economy down and reduce the risk of overheating or overshooting on
their 2 percent inflation target. Behind all this were fairly optimistic
views on the economy.

FOMC members saw strong growth and some stronger than anticipated along
with low unemployment. They said part of the strength came from the
effects of fiscal stimulus. But some saw of the effects of the stimulus
laws wearing off in coming years and there was concern about the trade
disputes, along with weaker overseas growth.

There was also worries that the financial troubles in some emerging markets
could spread to other countries. Overall, Fed officials, though, saw the
risks as balanced to the economy and said on the upside maybe that fiscal
the stimulus would work out better than forecast.

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


HERERA: Home building activity dropped more than expected in September,
adding to a string of weaker reads on the housing market. Housing starts
fell more than 5 percent last month. The biggest decline was seen in the
south which accounts for the bulk of home building.

Separately, total mortgage application volume fell 7 percent in the most
recent week as rates rose to a near 8-year high. Housing stocks were all
lower in today`s session.

GRIFFETH: Well, when it comes to a possible trade deal with China,
President Trump says that the two countries are just not yet ready to start
talking again. And that sentiment was echoed today by the commerce


WILBUR ROSS, SECRETARY OF COMMERCE: I don`t know that I`d call it a
continued impasse. We are where we are, and in any negotiation, there are
ups and downs. There are hiatus and more active periods. So it appears as
though we may be in something of a hiatus now.


GRIFFETH: And, by the way, late today, the Treasury Department declined to
label China a currency manipulator. That`s a title that has been
threatened but not used since 1994. The report released today says that no
major trading partner met the criteria to be designated as intentionally
manipulating its currency.

But China was put on a watch list along with a number of other countries.

HERERA: Farmers across this country are feeling the impact of the trade
war with China. Soybeans in particular have seen prices plummet. And now,
there is a glut of grain on the market.

Ylan Mui is in Frankfort, Indiana.


here on Mike Beard`s farm. He is expecting a big haul this year and he is
not alone. Here in Frankfort and across the heartland, farmers are
producing more soybeans than even before. Over 4.5 billion bushels were
expected this year.

MIKE BEARD, MEADOW LANE FARM: I thought we had a pretty good crop in the
ground, and it was growing well.

MUI: In fact, soybean production is expected to hit a record high just as
demand drops off because of the trade wars.

Soybeans are the country`s top agricultural export, totaling $22 billion
last year, more than double the amount of corn exports. And China is the
biggest foreign buyer. But over the summer, it hit the industry with a 25
percent tariff.

Now, Beard is facing a glut of grain.

BEARD: Best case scenario now would be that we have profitable talks with
China, put this tariffs retaliation on our soybeans behind us.

MUI: Here at the Kokomo Grain Company, the silos are filling up fast with
all that extra supply. Not only soybeans but also corn. That got hit with
the Chinese tariff too.

MIKE SILVER, KOKOMO GRAIN STORAGE CO.: Farmers with available storage are
storing more, especially soybeans this year than they typically would.

MUI: To make room, Kokomo cleaned out an unused building, leased extra
space and moved 2 million bushels of corn under this tarp.

SILVER: We have gone to extraordinary means to come up with space to be
able to handle this year`s crop.

MUI: Farmers typically have to store at least part of their harvest. But
stock piles are at an all-time high.

About an hour away from Kokomo, Brent Bible has 90,000 bushels of soybeans
stored on his farm.

BRENT BIBLE, STILLWATER FARMS: It`s tough to get everything in. And
elevators are running out of room. Terminals are running out of room.

MUI: If all goes well, the silos could be cleared out by spring. And
farmers could turn a profit by selling grain even at a lower price.

The government has also promised up to $12 billion in aid. But if the
trade war goes on much longer, Beard fears Chinese demand for U.S. soybeans
could disappear for good.

BEARD: Personally, I think we have lost the share. But there are
opportunities here. There are other places that on this earth that consume
soybeans and corn. And we need to investigate and work with those people
that — that are a potential market for us.

MUI: On the farm, hope springs eternal.

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


GRIFFETH: Well, the U.S. is once again the world`s most competitive
economy. This is the first time the U.S. has reached the top spot on that
list in a decade.

The World Economic Forum compiles this listing of countries based on things
like workforce diversity, press freedom, labor rights and disruptive
businesses. Singapore came in number two. Germany rounded out the top

HERERA: It`s time to look at some of today`s upgrades and downgrades.

Home Depot (NYSE:HD) and Lowe`s were downgraded to neutral from outperform
at Credit Suisse. The analyst is concerned that home prices will moderate
as higher interest rates weigh on affordability. The firm`s price target
on Home Depot (NYSE:HD) was $204. The price target on Lowe`s is $111.
Home Depot (NYSE:HD) fell 4 percent Lowe`s off 3.

Netflix (NASDAQ:NFLX) was downgraded to sector weight to overweight at
KeyBanc, one day after its blowout earnings. Analyst cites the need for
stronger revenue growth not just subscriber growth. The price target is
$377. And on the back of its quarterly report, the stock was higher by 5
percent to $364.70.

American Airlines, Delta and United Continental were all upgraded to buy
from hold at Deutsche Bank. The analyst cites the carrier`s ability to
manage fuel costs. The firm also noted strong passenger demand in the U.S.
and the transatlantic markets. Shares of American, Delta and United were
all higher.

GRIFFETH: Still ahead, why the U.S. is watching the green rush in Canada.


GRIFFETH: Employees at U.S. Steel are set to get the biggest pay raise in
years, 14 percent over a 4-year period. All the result of a new deal just
negotiated with the company. Now, some also say it`s because of the White
House`s clamp down on steel imports which have helped to lift steel prices
in the U.S. the agreement still needs to be ratified by the company`s
16,000 workers around the country.

HERERA: Canada today became only the second country in the world to
legalize recreational marijuana. But the closely watched move north of the
border failed to inspire investors. Pot stocks like Cronos, Tilray, Canopy
Growth and Aurora Cannabis all sold off in trading today.

Deirdre Bosa is in St. John`s Newfoundland tonight.


CROWD: Five, 4, 3, 2, 1!


midnight here in St. John`s Newfoundland, history was made.

Recreational marijuana became legal in Canada. All day starting on the
East Coast and moving west with the sun, similar scenes of celebration
played out as Prime Minister Justin Trudeau makes good on his 2015 campaign
promise. The first sale went to Newfoundland local Ian Power who said it`s
been his dream to be the first person to buy the first legal gram of
cannabis in Canada.

IAN POWER, FIRST BUYER: I never thought it would be legal. And then when
it started rolling about ten years ago, I`ve helped people to get medical
marijuana. I`m happy for cannabis users across the country. Not just me.
It`s about people wanting to have a safe recreational pastime and for
medical research for cannabis in the future.

BOSA: Other countries that are moving slower toward easing marijuana laws
like the U.S. are watching the rollout closely.

Bruce Linton, CEO of Canopy Growth, Canada`s largest pot company says that
regulators from Europe to South America are using Canadian regulations as a

BRUCE LINTON, CANOPY GROWTH CEO: What they`re saying is Canada has the
best set of rules. We`re taking them and turn them into a Portuguese
language or German. And so, the platform as understood is the best.
Canopy is sort of the leader in that. And now, what we have this global
thing happening at an unbelievable rate.

BOSA: This store has already sold tens of thousands of dollars worth of
legal pot on day one. But that`s just a drop in the bucket. And what`s
expected to be a $5 billion industry by 2020.

That could prove lucrative for the Canadian government and the country`s
private sector. Losers could be players in the American cannabis industry
where marijuana remains federally illegal. But there are still many
unknowns for Canada`s now legal market, from the enforcement of regulations
to supply shortages and online sales and delivery. Canada will have to
contend with the questions on a global stage as the grand cannabis
experiment plays out.

For NIGHTLY BUSINESS REPORT, I`m Deirdre Bosa, St. John`s Canada.


GRIFFETH: A food fight at Campbell`s Soup, and that`s where we begin
tonight`s “Market Focus”.

The company`s heirs who are members of the Dorrance family are taking a
standing against activist investor Third Point. Third Point`s CEO Dan Loeb
had been pushing to oust all 12 members of Campbell`s board of directors
during its November meeting. He`s also called for the sale of the company.

Third Point, though, said it`s not surprised by the Dorrance family`s
resistance to all that. Stock fell 5 percent today to $36.32.

Casino mogul Tillman Fertitta has reportedly approached Caesar`s
Entertainment about a possible merger. It is unclear whether Caesar`s will
entertain such an offer. Fertitta already owns the Golden Nugget.
Speculation though sent shares of Caesar`s much higher, up 12 percent today
to $10.20.

And Winnebago`s revenues exceeded $2 billion for the first time in the
company`s history last quarter. The results released today were better
than expected thanks to strong demand for some of its products, but on its
conference call, the CEO did tell analysts that it is facing some higher
material and labor costs.


MICHAEL HAPPE, WINNEBAGO CEO: The cost impact of the tariffs on the RV and
marine industries have been real and in some cases are ongoing with the new
rounds of tariffs imposed against China, really just now beginning to
impact our financials.


GRIFFETH: Winnebago stock gained 4.5 percent today to $33.20.

HERERA: Prudential is no longer considered systemically important. The
government removed the label, freeing the insurance company from more
rigorous oversight by the Federal Reserve. Prudential says it is pleased
with that decision. The stock was up almost 2 percent to $99.70.

General Electric (NYSE:GE) reportedly beat out Siemens to land an Iraq
power contract. According to “The Financial Times”, the deal to supply
power to that country is worth about $15 billion. The stock rose 9 cents
to $12.19.

And the aluminum producer Alcoa (NYSE:AA) reported better than expected
earnings, thanks to a rise in the price of the metal. The company also
announced a share repurchase of $300 million. The stock rose in initial
after hours trading extending gains from the regular session.

GRIFFETH: During its last full year in business, back in 2016, Toys “R” Us
brought in $11 billion in revenue. Now that`s — now that the toy icon is
gone, a slew of big players are vying for a piece of the sales. Target
(NYSE:TGT) and Walmart are just two of the many familiar names that
recently announced plans to expand their in-store and online toy offerings.

Joining us tonight to kind of handicap which companies may win, may lose as
they try to win this category, Linda Bolton Weiser is senior research
analyst with D.A. Davidson covering consumer product companies.

Thanks for joining us tonight.


GRIFFETH: There`s a real scramble going on, isn`t there, right now.

WEISER: Yes, absolutely. It`s about 15 percent share of the U.S. toy
retail market up for grabs. All the big retailers are making plans to try
to grab some of that share. So, Walmart, Target (NYSE:TGT), Amazon
(NASDAQ:AMZN) all have special initiatives that they have announced to put
more emphasis on the toy category.

HERERA: So, they each have different plans or initiatives as you mentioned
to grab market share. Which one do you think might be the most effective?
And how are they going to fair against Amazon (NASDAQ:AMZN)?

WEISER: Well, I think — I think each of them is going to be able to you
know gain their fair share.

You know, Walmart in particular is stepping up and trying to be a more
experiential type of retailer the way Toys “R” Us was. So, they are having
a lot of in-store events for kids and their parents leading up to the
holiday time period. Amazon (NASDAQ:AMZN) reportedly will have a special
catalog and distributed at Whole Foods markets. And Target (NYSE:TGT) has
expanded, you know, hot toy list and expanded number of skews they carry
for the holidays. They all have plans in place.

GRIFFETH: There is a thought, though, when Toys “R” Us went under that
maybe some of the market share just disappeared and won`t come back. In
other words we won`t see all of the sales that Toys “R” Us used to enjoy
going to any of those new competitors. What do you think?

WEISER: Well, no, I think that, you know the demand for toys is what it
is. And in the United States right now, the toy retail market is growing
healthily in the mid-single digits. So consumers will demand the toys and
purchase them regardless of how many outlets are out there selling the
toys. I do think that — that the market once we get past this transition
period will remain very healthy.

HERERA: All right. That`s the retail side of it. What about the
companies producing the toys? Who is best positioned do you think for in
upcoming holiday season between the Hasbros, and the Mattels and the like?

WEISER: Well, you know, the larger companies with the power brands like
Nerf and Barbie and Hot Wheels, those are some of the product lines that
are going to be featured by the top retailers this holiday. So, I think,
really the larger toy companies can benefit. Some of the smaller toy
companies that relied on Toys “R” Us to distribute and sell their products,
those are the one that might suffer here. And some of those quite frankly
won`t survive.

GRIFFETH: Well, it`s going to be a very interesting holiday shopping
season. We`ll see how it plays out.

Linda Bolton Weiser with D.A. Davidson, thanks again for joining us

WEISER: You`re welcome.

HERERA: Coming up, an industry that is taking off.


again in demand. Why is the industry soaring to new heights?

I`m Phil LeBeau. That story coming up on NIGHTLY BUSINESS REPORT.


GRIFFETH: One industry that`s surging in the economy right now, corporate
jets. In fact the business jet business is finally getting a lift after a
decade of trying to clear out the problems caused by the great recession of
the past decade. Industry leaders recently met in Orlando, Florida. And
that`s where we find Phil LeBeau tonight.


LEBEAU: They are big, high-priced and very much in demand. Corporate jets
from small ones selling for a few million dollars to a big boys going for
tens of millions. They are once again hot sellers.

ED BOLEN, NBAA PRESIDENT: Clearly, the global economy is very strong right
now, particularly the U.S. and business aviation tends to follow the
economy. So, this is a particularly good time that we`re seeing for the
aviation industry.

LEBEAU: After business jet sales lost altitude a decade ago, the recovery
has been slow, mainly because a lot of used planes held down demand for new
ones. That`s no longer the case.

Embraer`s new Praetor 600 jet is attracting heavy interest.

MICHAEL AMALFITANO, EMBRAER CEO: We already have sales for the Praetor 600
and the Praetor 500. So, we`re starting to see the momentum for our
customers, not only our existing customers but new customers coming to the
brand especially the corporate flight departments.

LEBEAU: The corporate tax cuts and deregulation under the Trump
administration have also convinced more companies it`s time to get a new
jet. The latest models can fly further with more connectivity and features
attracting a wider array of buyers.

MARK BURNS, GULFSTREAM PRESIDENT: There`s been individual buyers, private
companies, mall companies, large companies. I think everybody is
benefitting from that. I think you`ll see that the next couple years.

LEBEAU: Historically, this is a boom and bust industry, with jetmakers
overbuilding in good years. But this time industry leaders believe it will
be different, confident they can keep the business jet business soaring for
years to come.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Orlando, Florida.


HERERA: And a private jet could be yours if you win the Mega Millions
jackpot, now the second biggest in U.S. lottery history. Now combine that
with Powerball and the payout could exceed $1 billion this week. That is,
of course, if somebody wins.

Frank Holland is in Tenafly, New Jersey, where a lottery fever is running


reasons to play the lottery.

UNIDENTIFIED MALE: Each one of these tickets could potentially change my

HOLLAND: Gary Horbat (ph) is playing to win and hoping to hit it big.

UNIDENTIFIED MALE: I try to tell people, someone is going to win. Why not

HOLLAND: All around the country, people are playing Mega Millions and

Michael Palmer (ph) picking six numbers and hoping for one of the nine-
digit jackpots.

UNIDENTIFIED MALE: You have to give yourself the opportunity to win.

HOLLAND: The power ball drawing for $345 million on Wednesday night. Mega
Millions is on Friday. It now has a $900 million jackpot with a potential
to grow to a billion dollars.

UNIDENTIFIED MALE: With the pot being as big as it is, you obviously you
want to give yourself a chance, maybe multiple chances depending how much
money you got in your pocket.


HOLLAND: These days the chances of winning big money are actually slim.
Both the Mega Millions and Powerball, they changed their formulas to
increase jackpots and attract more players. But that comes with longer

UNIDENTIFIED FEMALE: Random. Random. Just random numbers.

HOLLAND: That`s Stacey Bailey`s (ph) strategy. Lottery officials say
about 90 percent of the big winners do it the same way.

UNIDENTIFIED MALE: It`s going to take a long time to figure out what to do
with that kind of cash once you have it, right?

HOLLAND: Larry Cater (ph) says he`s playing for fun with is coworkers.

What are the plans you actually win?

UNIDENTIFIED MALE: Depends how much we win. I just won $8. You can`t
leave your job over that, right?

HOLLAND: Definitely not. That`s the upside of the new formulas, more
winners for smaller price prizes. But most lottery players have the same
big dreams.

For NIGHTLY BUSINESS REPORT, Frank Holland, in Tenafly, New Jersey.


GRIFFETH: And finally tonight, a familiar face or bird is retiring. The
puppeteer who has played Big Bird on “Sesame Street” is retiring after 507
years. Caroll Spinney tells “The New York Times (NYSE:NYT)” his last day
is tomorrow. The 84-year-old also played the role of Oscar the Grouch.
Spinney has been praised for his genius and his talent and his ability to
breathe life into two of “Sesame Street`s” most popular puppets.

Good for him. We wish him well.

HERERA: Indeed.

Here`s a look at the day on Wall Street. The Dow fell 91 points, had been
down more than 300. Nasdaq down 2. S&P off a fraction.

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

GRIFFETH: I`m Bill Griffeth. We`ll see you tomorrow.

HERERA: Good luck in the lottery.



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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