Transcript: Nightly Business Report – October 30, 2018

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

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Dramatic finish. The
market surges as the bulls gain control of Wall Street, at least for today.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Status update. Facebook
(NASDAQ:FB) marks one of the most difficult periods in its history with a
big earnings beat but weaker revenue and slowing growth rates.

GRIFFETH: Electric shock. G.E.`s dividend runs out of power. Regulators
widen their probe into its accounting and the stock falls to a multi-year
low.

Those stories and much more tonight on NIGHTLY BUSINESS REPORT for this
Tuesday, October the 30th.

HERERA: Good evening, everyone. And welcome.

What a finish. Stock rallied all day long and then surged into the closing
bell. Money flowed into sectors punished recently, pushing tech stocks
higher, as well as materials, energy and real estate.

Today`s solid gains follow yesterday`s big move lower, and a month of wild
swings that have left investor with a bit of whiplash. So, here are the
closing numbers: the Dow Jones Industrial Average soared 431 points to
24,874, the Nasdaq was up 111 and the S&P gained 41.

And while the gains today were welcome, would investors perhaps prefer to
see a bigger pullback before heading higher?

Mike Santoli tackles that question.

(BEGIN VIDEOTAPE)

MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The brutal October
stocks selloff has already cut the S&P 500 down by 10 percent and the
relentless selling has led to index declines on 18 of the past 23 days.
Now, trader seeking signs of relief are waiting for a washout. That`s when
a persistent market decline accelerates to a crescendo of indiscriminate
selling, accompanied by a surge of investor panic. Such a decisive plus to
the downside often precedes a strong rally attempt and sometimes even a
lasting market bottom.

The trouble with a washout is there is no agreed upon metric for
identifying one. Not every steep decline necessarily gets to such a
dramatic stampede of the herd away from stocks. But some of the markings
of the washout include more than 90 percent of all stocks declining on
heavy trading volume, accompanied by a rush into safe treasuries that drop
their yield sharply. Also, a surge in volatility index to a new high,
perhaps above 30, above recent peaks in the high 20s.

A recent pattern of half-hearted rallies either soon after the market opens
or shortly before it closes has prevented the market from reaching some of
these extremes. That`s not to say the market needs to fall that much
farther in the short term to fully exhaust the selling and heighten
investor fright. The current correction could stabilize near these levels
with a few days of calm. But ironically, a solid bottom sometimes requires
the kind of market action suggests that the investors are afraid that the
bottom is nowhere in sight.

For NIGHTLY BUSINESS REPORT, I`m Mike Santoli.

(END VIDEOTAPE)

GRIFFETH: Facebook (NASDAQ:FB) is the last of the so-called FANG stocks to
report the latest quarter. The others who have already reporting being
Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX) and Google (NASDAQ:GOOG) parent
Alphabet. The social media giant results took on greater importance this
quarter given the issue it has been dealing with like privacy, data
breaches and election interference.

So, after the bell tonight, Facebook (NASDAQ:FB) easily beat profit
expectations earning $1.76 a share when Wall Street`s expectations were for
$1.47. Revenue was up 33 percent from a year ago to $13 billion but that
was slightly less than expected. So, you got volatility in the after
hours. The stock initially fell and then moved higher.

Julia Boorstin has more on Facebook`s results.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The growth of
Facebook`s user base is slowing. But the social media giant is still
growing its profits far faster than expected. Facebook (NASDAQ:FB) growing
earnings per share by 11 percent instead of nearly 8 percent decline
analysts anticipated.

Facebook (NASDAQ:FB) grows daily active base by 9 percent from the year
earlier, while monthly users grew 10 percent but that`s down from 11
percent growth, both of those groups last quarter.

CEO Mark Zuckerberg looking to shift the conversation away from the
slowdown in its core service, to the health of its family of apps, saying
that more than 2 billion people use at least one of Facebook`s messaging
services every day, saying, quote, we are building the best messaging and
stories, and there are huge opportunities ahead in video and commerce as
well.

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

(END VIDEOTAPE)

HERERA: Dow component Coke went on a health kick and it`s paying off.
Higher sales of sugar free sodas and Vitamin Water helped that company top
earnings and revenue estimates. It also benefitted from higher prices and
that benefitted the stock price which grows 2.5 percent.

Sara Eisen has the details.

(BEGIN VIDEOTAPE)

SARA EISEN, NIGHTLY BUSINESS REPORT CORRESPONDENT: A beat for Coke and
some of the best growth we have seen in the entire consumer staples
industry, organic growth which is the industry metric up 6 percent. Why?
Coke is growing especially Coke Zero Sugar which is growing double digit.
Diet Coke is finally resonating with millennials after years of declines,
thanks to new flavors and slimmer packages. Waters (NYSE:WAT),
specifically sparkling water like Topo Chico and Smartwater continuing to
do well.

Those are some highlights. And it really was a global story of strength.
And what`s been a more difficult economic environment around the world.

JAMES QUINCEY, COCA-COLA CEO: Clearly as we have gone through the year,
the headwinds have got a little tougher. The macros around the world are
perhaps softening a little, particularly in some of the emerging markets
and coming into Q3. And we have seen that affect us in the exchange rate
obviously. Being in over 200 countries, we bring money from around the
world back to U.S. dollars, and that`s gone against expectations and turned
to more of a headwind coming into the second half of this year.

EISEN: The strong dollar did shave a few points off of Coke`s profits.
But the take away, the company has implemented a turnaround under CEO James
Quincy spinning off some of its bottlers, focusing on beverages that are
growing, focusing on brands doing better around the world and simplifying
the business.

He also made some big deals during the quarter buying both Costa Coffee for
$5 billion, and investing in Body Armor, a pace of deal making that Quincey
says will not necessarily repeat itself in other quarters.

But that is what makes Coca-Cola (NYSE:KO) such a standout in what is a
very little to no-growth industry of beverages food and household products,
much like P&G, which just had its best sales growth in years, also
realizing the fruits of a turn around.

For NIGHTLY BUSINESS REPORT, I`m Sara Eisen.

(END VIDEOTAPE)

GRIFFETH: And another Dow component, Pfizer (NYSE:PFE), reported mixed
quarter. Earnings topped expectations, but revenue fell short and the
company narrowed its full-year forecast overall. Pfizer (NYSE:PFE) cited
pricing pressures on some of its medicines, along with increased generic
drug competition. And as a result, that stock fell a fraction on this big
up day today.

HERERA: And then there is General Electric (NYSE:GE). The embattled
conglomerate slashed its dividend to next to nothing and regulators
expanded their probe into its accounting. This after reporting quarterly
results that came in below expectations. The pile of bad news pressured
that stock, sending it down more than 8 percent to just about $10 a share.

Morgan Brennan has more.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was another
kitchen sink quarter for General Electric (NYSE:GE) as the company slashed
its dividend for the second time in less than a year. The move came as the
industrial giant struggled to turn around with a new CEO 30 days on the
job.

LARRY CULP, CHAIRMAN & CEO, GE: I know there`s been renewed speculation on
our future strategic direction. The strategy we announced on June 26th to
create a more focused portfolio that sets up the businesses to win and
strengthening our balance sheet is today the right plan going forward.

BRENNAN: That strategy involves spending off health care and exiting oil
and gas over the next few years. Larry Culp (NYSE:CFI) used to run Danaher
(NYSE:DHR) where his 10-year yielded strong returns. For GE, he plans for
a bigger plan in early 2019.

But today started the process with two changes: the restructuring of the
power business which continues to suffer and overshadow better performing
units like aerospace. And also the drastic cut to the quarterly dividend
from 12 cents down to a penny.

Many on Wall Street expected that cut. But given GE`s longstanding
reputation for reliable payout, the move speaks to the company`s continued
cash crunch.

JACK DEGAN, HARBOR ADVISORY CIO: A very large percentage of the shares are
owned by retired employees and individuals. And those folks, a lot of them
were relying on the dividend. So, although I agree with the decision to
eliminate the dividend because they certainly need that extra cash for
restructuring and dealing with liabilities like, you know, a dramatically
underfunded pension.

BRENNAN: But today`s results left more questions than answers. Since GE
didn`t update its guidance but did disclose broader investigations into its
accounting practices as both the SEC and Justice Department probe several
multibillion-dollar charges, including one detailed today for the power
business.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan at the New York Stock
Exchange.

(END VIDEOTAPE)

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

We begin tonight with Nordstrom (NYSE:JWN) which was upgraded to outperform
from neutral at Wedbush. The analyst there cited the potential for revenue
and gross margin expansion over the next several years for the retailer.
Price target $75. Nordstrom (NYSE:JWN) shares finished up nearly 7 percent
today to $66.90.

Nvidia was upgraded to overweight from neutral at J.P. Morgan. The analyst
cited the stock`s recent underperformance and sees stronger longtime growth
ahead. The price target, $255. Shares rose nine percent to $203 even
today.

HERERA: And also with J.P. Morgan, shares of JetBlue were upgraded to
overweight from neutral. The analyst cites the stock`s valuation, calling
it the cheapest stock of the domestic airlines. The price target is $20.
JetBlue shares soared 5 percent to $17.08.

That same analyst downgraded Southwest to underweight from neutral. The
analyst says the stock prices stalled out. The price target is $52.
Shares rose 2 percent to $49.15.

GRIFFETH: Coming up, the one concern that many Republicans, Democrats and
independents share as they get ready to cast votes in next week`s midterm
election.

(MUSIC)

GRIFFETH: Former Federal Reserve Chair Janet Yellen made some comments on
the economy this evening, speaking at the Schwab Impact Conference. She
said she is concerned that the economy could overheat and that a couple of
more interest rates increases are necessary. She also said that the market
volatility reflects the uncertainty surrounding the global outlook right
now.

HERERA: The home ownership rate edged higher in the third quarter. This
as younger buyers entered the housing market the first time. According to
the census bureau, the totals share of American households that own a home
inched up to 64.4 percent.

Separately, home prices rose 5.8 percent in August compared to a year ago
and that is according to the Case Shiller home price index. That is the
first time in a year that the index has come in below 6 percent.

GRIFFETH: Well, with the midterm earthquakes just a week away, there is
one issue that investors across the political spectrum will be thinking
about going into the voting booths.

Ylan Mui tells us what it is.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Come on down, you are the next voter —

YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s one thing that
voters from both political parties agree on, concern over the rising
national debt. That`s the upshot of a new poll by the non-partisan
Peterson Foundation. Republicans, Democrats or independent roughly 3/4s
say the debt is a factor in who they`ll support in the next week`s midterm
elections.

MICHAEL PETERSON, PETERSON FOUNDATION: They know that the debt affects the
economy, and affects their way of life and their incomes. And they want
Washington to do more about it.

MUI: The foundation has long called on lawmakers to rein in spending. The
deficit ballooned to $779 billion over the past year. That`s a jump of 17
percent. Next year, it`s forecast to hit a trillion dollars.

But not everyone sees trouble on the horizon.

JARED BERNSTEIN, CENTER ON BUDGET AND POLICY PRIORITIES: People have heard
for decades that large budget deficits are bad for the economy and yet the
economy is doing quite well. I mean, the unemployment rate is at an almost
50-year low, yet we have this very large budget deficit. So, I think it`s
pretty hard to convince people that it`s really that big a problem.

MUI: President Trump is asking his cabinet to cut costs.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: I would like you to come
back with a 5 percent cut, get rid of the fat. Get rid of the waste. And
I`m sure you can do it. I`m sure everybody at this table can do it. It
will have a huge impact.

MUI: But both Republicans and Democrat are floating proposals that critics
say come with big price tags. Trump wants a 10 percent tax cut for middle
class household. Democratic Senator Corey Booker wants to give every child
a $1,000 savings account. And Senator Kamala Harris (NYSE:HRS) is calling
for a new tax credit worth up to $6,000 per household. The cost to the
country: an estimated $3 trillion.

PETERSON: The problem is sometimes campaign promises do become reality.
And so, to the extent elected leaders run elections and try to win with
making promises that we can`t afford, that`s a dangerous thing.

MUI: What do voters really want to see? Peterson says it`s politicians
reducing the deficit by reaching across the aisle.

For NIGHTLY BUSINESS REPORT, Ylan Mui in Washington.

(END VIDEOTAPE)

HERERA: All right. So, what does the market want to see from the midterm
elections?

Jeff Bush is back with us. He is a partner at the Washington Update and he
joins us now with his thoughts.

Good to see you back with us, Jeff. Welcome.

JEFF BUSH, PARTNER, THE WASHINGTON UPDATE: Thank you, Sue.

HERERA: You make the point that — in your opinion, the markets have
priced in a Democratic House win. If that is the case, what has the market
not priced in right now? What might surprise the market a bit?

BUSH: Well, I think there are two potential surprises, one, that the
Republicans would actually maintain control of the House. And I think we`d
see an immediate relief rally. But at some point, the market is going to
remember that there are some systemic issues that we have to deal with —
rising interest rates, the tariff discussion, trade wars and the like,
which will tamp that rally down a little bit.

GRIFFETH: Clearly, the economy is in good shape, Jeff. Unemployment, you
know, growth, you name it. Does that resonate with voters right now in
your view? In other words, does the president have coattails that will
extend into the House and Senate campaigns this season?

BUSH: Where the coattails exist, I think they exist, very long coattails.
The problem is those coattails are not universally across the country,
which is very common for a president in his first midterm election.

So, in Texas, for example, I think those coattails do exist. We saw some
interesting polling today that showed that 86 percent of Texans believe the
president is doing the right thing and following the right policies. And
you have to believe that`s going to be very beneficial to Ted Cruz and the
Republicans and the House in Texas.

HERERA: You have made the point you said when you talked to people and you
go out and talk to institutions that depending on the outcome of the
midterms, that the president will find himself at a crossroads. What do
you mean by that? And how do you think he will react to it?

BUSH: Well, that`s exactly what we are talking about. The president after
the election at some point, he`ll have to face the fact that he is at a
crossroads, assuming Democrats do take the House. And I think he has a
choice at that point. He can double down on the Republican all-base
strategy that he`s used over the last two years, or he could pivot to a
1996 Bill Clintonesque type of return and to try to get something done.

If he goes go the direction of trying to get something done, I think the
most likely candidate would be an infrastructure program under the guise of
a jobs deal. If he decides to go the all-base Republican strategy, that`s
where I think he would double down on tariffs, really ramp up the
discussion around immigration, because tariffs and trade are the one area
that President Trump has a tremendous amount of authority.

GRIFFETH: However, if the House goes back to the Democrats what do you
think that does to his strategy on trade and tariffs and so forth?

BUSH: Well, again, the president has a lot of authority as it relates to
tariffs and so forth. So, he can continue down that road. That`s why I
believe if he goes the all-base Republican strategy, that we could see a
redoubling of the president`s efforts in that space.

Where we could see some trimming of the president`s agenda obviously would
be tax reform. That`s going to be off the table at the moment the
Democrats win the House and are installed in January.

HERERA: Jeff, thank you so much. We appreciate it. Jeff Bush with the
Washington Update.

BUSH: Thank you.

GRIFFETH: Well, some market watchers say the president`s comments late
last night that he expects a great deal with China on trade may have
contributed in some way to the day`s market rally. But the Chinese
officials were not pleased after those reports yesterday that the White
House was considering an additional round of tariffs on Chinese goods.

Eunice Yoon has that reaction tonight for us from Beijing.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: China dismissed talk
of more tariffs from President Trump today. The foreign ministry says the
U.S.`s noise won`t intimidate China. Reports said the Trump administration
would impose more tariffs on China if talks between President Trump and Xi
at the G20 meeting next month resulted in nothing.

The announcement could come as early as December and would cover the rest
of the Chinese goods that are currently not subject to tax and about $260
billion worth or so. More tariffs would put greater pressure on American
companies here. A recent survey by the American Chamber of Commerce in
south China found that 64 percent of U.S. companies polled were considering
relocating production lines to outside of China because the trade war was
hurting profits.

The foreign ministry also reacted to the U.S. Commerce Department export
band on a Chinese chip maker saying China hope the U.S. would do more to
enhance trust rather than damage it. The state-backed firm Fujian Jinhua
Integrated Circuit has been accused by U.S.-based Micron Technology
(NASDAQ:MU) of stealing secrets.

But under the ban, the company won`t be able to source important components
from U.S. suppliers. The Commerce Department said the decision was made on
national security grounds.

And that is adding to a growing feeling in China circles that the real goal
of the Trump administration is going beyond trade and instead is to
decrease America`s dependence on China.

For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.

(END VIDEOTAPE)

HERERA: Under Armour`s turnaround takes hold. And that`s where we begin
tonight`s “Market Focus”.

The athletic wear maker topped earnings and revenue estimates and raised
its earnings outlook for the year. The company attributes the strong
quarter to a rise in sales overseas and fewer promotions. Under Armour
(NYSE:UA) shares jumped more than 24 percent to $20.97.

Americans are swiping their MasterCards a lot. The company reported
stronger than expected earnings and revenue for the third quarter, thanks
to higher consumer spending. MasterCard (NYSE:MA) shares, though, were off
more than 1 percent to $187.73.

Profits at BP hit a five-year high. Earnings for the quarter more than
doubled and were bolstered by stronger oil prices and cost cuts. The
company says production during the first nine months of the year rose
thanks to the tapping of new oil fields. Shares of BP rose nearly 3
percent to $42.21.

GRIFFETH: Aetna (NYSE:AET) reported the profit of a billion dollars in the
third quarter on growth in its Medicare and Medicaid health plans. The
company saw its membership rolls rise as well. Aetna`s better than
expected results arrived just as the company nears the completion of its
takeover by CVS (NYSE:CVS). Shares rose 1 percent today to $197.65.

Tapestry turned into a strong quarter, thanks to an increase in demand for
its Coach (NYSE:COH) and Kate Spade handbags. The company plans to pull
some inventory though from department stores and cut back on flash sales as
a way to maintain its exclusivity. And the CEO today said he believes the
trade war with China is manageable.

(BEGIN VIDEO CLIP)

VICTOR LUIS, TAPESTRY CEO: Today, in fact, between three and four percent
of our handbags come from China. So, we don`t see a great impact from any
duties. And we indeed today announced that all of our impact this year,
the 10 percent duty on travel goods from September to December, which could
become 25 percent starting from January, have been embedded in our
guidance.

(END VIDEO CLIP)

GRIFFETH: Well, despite all the good news, shares of Tapestry fell 1
percent on this day to $40.32.

And Chesapeake is buying Texas oil producer Wild Horse Resource Development
for $4 billion. That company says the acquisition will significantly boost
its oil production. Chesapeake has historically focused on natural gas
production. Investors didn`t seem to like the deal though. They sent
shares lower by 12 percent to $3.27.

HERERA: Coming up, Amazon`s search for a second home.

(BEGIN VIDEO CLIP)

SCOTT COHN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Amazon (NASDAQ:AMZN)
and Nashville, can they make beautiful music together? I`m Scott Cohn in
another of the HQ2 finalist cities. We`ll look at how Nashville stacks up,
coming up on NIGHTLY BUSINESS REPORT.

(MUSIC)

HERERA: Waymo has become the first company approved to test autonomous
vehicles without safety drivers on public roads in California. Until now,
California has required those vehicles to have a safety operator in the
driver`s seat. The permit gives Waymo a leg up on its competitors like
Cruise which is testing self-driving vehicles in San Francisco. Waymo is
owned by Google (NASDAQ:GOOG).

GRIFFETH: Apple (NASDAQ:AAPL) CEO Tim Cook was in Brooklyn, New York,
today to unveil a number of new products.

(BEGIN VIDEO CLIP)

TIM COOK, APPLE CEO: It`s time for a new MacBook Air. One — yes, one
that takes the MacBook Air experience even further in the areas most
important to our customers. And, of course, what we all want in a MacBook
Air is a retina display.

(END VIDEO CLIP)

GRIFFETH: The MacBook`s new design is noteworthy because it had gone
relatively unchanged since 2010. The company also released a revamped Mac
Mini and an upgraded pair of iPad Pro tablets, all new devices will have
higher starting prices. The Mac and iPad have combined annual revenues of
$45 billion.

HERERA: Amazon (NASDAQ:AMZN) is still promising a decision this year on
where it will locate its $5 billion second headquarters. But as we head
into the final two months of the year, speculation is swirling among the 20
finalist cities.

Scott Cohn has been visiting all of them. And tonight, he reports for us
from Nashville, Tennessee.

(BEGIN VIDEOTAPE)

COHN: In Music City USA, they`re convinced Nashville strikes the perfect
chord.

GOV. BILL HASLAM (R), TENNESSEE: We have the lowest taxes and lowest debt
per capita in the country. And people realize that we value business here.

COHN: It`s a catchy tune. The Tennessee economy grew by a solid 2.5
percent last year, above the national average, with job growth among the
best in the nation. Despite that, cost of living is a bargain among the
lowest in any big city in the country. And in a place where countless
people sought fame, they think Amazon (NASDAQ:AMZN) and the 50,000 workers
it plans to hire can find exactly what they need here.

RALPH SCHULZ, NASHVILLE AREA CHAMBER OF COMMERCE CEO: They are looking for
friendly. They`re looking for open. They`re looking for opportunity.

COHN: There are some sour notes. Tech talent is one of Amazon`s top
priorities. But fewer than 5 percent of Tennessee employees work in tech,
the lowest concentration of any of the finalists. Attracting more talent
could be a challenge. Nashville is wrestling with crime and health care
and in one of America`s fattest cities. Commutes are getting longer as the
city grows but voters just rejected a new mass transit package. No
shortage of concerns here about the growing pains HQ2 would cause in
someone of the smallest finalist cities.

HASLAM: They realize wherever they go, they`re going to have a huge impact
and they want to make certainly thought that out well.

COHN: Nashville hasn`t gotten much buzz in all the speculation about HQ2.
But in the end, that might not matter much. Just being named a finalist
has brought attention to an unsung hero in the economic development world,
a little bit of stardom in a city where stars are made.

For NIGHTLY BUSINESS REPORT, I`m Scott Cohn in Nashville.

(END VIDEOTAPE)

GRIFFETH: Before he go, a look at the final day on Wall Street. A rally
day with the Dow soaring by 431 points, Nasdaq was up 111, the S&P gained
41 today.

HERERA: Let`s see what tomorrow holds. That will do it for us tonight.
Thanks for joining us. I`m Sue Herera.

GRIFFETH: I`m Bill Griffeth. Hopefully, it`s not a trick or treat.

HERERA: Trick or treat, I know, exactly.

GRIFFETH: Have a great evening. We`ll see you tomorrow.

END

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