Transcript: Nightly Business Report – November 13, 2018

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

lows of the year as domestic crude remains in the grips of its biggest
losing streak on record.

China are in discussions again. And that offered some momentary relief for

HERERA: Tax breaks. How much did New York and Virginia give up in order
to get the second headquarters of one of the world`s largest companies?

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Tuesday,
November 13th.

GRIFFETH: And we bid you good evening, everybody.

It was another volatile day for stocks but the focus today was once again
on oil, and for good reason. U.S. crude is in the midst of the worst
losing streak ever. Prices today closed at their lowest level of the year,
that`s a stunning reversal from just a few weeks ago when the commodity was
trading at a four-year high.

Back in early October, there was a concern that a shortage would push
prices to as much as $100 a barrel. But today, the concerns are about a
supply glut. According to a new report from OPEC, major oil producers have
been keeping their spigots wide open. And that report resulted in some
domestic crude today falling 7 percent to settle around $55 a barrel,
making 12 straight sessions of declines.

Exxon and chevron were two of the worst performing stocks in the Dow today.
And oil field services Halliburton (NYSE:HAL) and Schlumberger (NYSE:SLB)
hit a 52-week low. And tonight, oil producers are in Abu Dhabi and there`s
no doubt that prices are top of mind.

Steve Sedgwick is there for us tonight.


continue to fall on Tuesday, despite a respite the markets saw on Monday.
You`ve got WTI and Brent trading in bear market territory, i.e., down more
than 20 percent from their recent October highs. They actually rose in
part on Monday on hopes that there would be less supply in the market.
That came on the back of an oil meeting of OPEC minorities here in Abu

But I`m afraid by Tuesday, the market was falling yet again. This follows
President Trump tweeting that he didn`t want Saudi Arabia and OPEC to be
cutting production. Very tough for Saudi as well because they see
increased supply and concerns there will be a supply glut and hence bigger
inventories in early 2019. So, they were hoping to get ahead of the curve
and cut production to alleviate those concerns.

And this at the same time as the U.S. showing record production, so then
they would be ceding market position to those United States shale producer.
Well, a very tough conundrum for OPEC, a tough conundrum for Saudi Arabia.
But as we speak, prices continue to fall.

This is Steve Sedgwick, for NIGHTLY BUSINESS REPORT, in Abu Dhabi.


HERERA: And trade is the other issue investors have been keenly focused
on. And today, we learn that talks between the U.S. and China have indeed
reassumed. That thawing of tensions helped lift trade sensitive stocks
like Caterpillar (NYSE:CAT).

Ylan Mui has more details.


Mnuchin spoke by phone with China`s top trade official. The two are
expected to meet in Washington soon and both sides are busy preparing for
the big meeting between President Trump and President Xi later this month.

about China. And I think that`s very, very, very positive. You know, the
president initiated a phone call with President Xi. We now know that we
will in fact discuss trade at the G20 meeting in Argentina.

MUI: White House economic adviser Larry Kudlow has tried to keep
negotiations on track but not everyone in the White House agrees with him.
Trade adviser Peter Navarro recently blasted Wall Street globalists for
pressing Trump to cut a deal with China.

Today, Kudlow has choice words for his colleague.

KUDLOW: He was not speaking for the president nor was he speaking for the
administration. His remarks were way off base. They were not authorized
by anybody. I actually think he did the president a great disservice.

MUI: China is not the only front in trade negotiations. The vice
president met with Japan`s prime minister in Tokyo today, promising to work
together on trade, infrastructure and national security.

Tomorrow, an official from the European Union will be here in Washington.
They are all hoping that by keeping an open dialogue, they can keep any
tariffs away.

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


GRIFFETH: But the potential easing of trade tensions was not enough to
offset the decline in the energy sector today. The Dow was also dragged
lower by Boeing (NYSE:BA) as new questions swirl around its latest 737
model aircraft. The result: a wild day of trading. The Dow range was 300
points. It fell 100 at the close to 25,286. The Nasdaq rose 1 cent, the
S&P was down by four.

HERERA: And with these wild moves in the market, there may have been
voices cautioning investors. There are many out there. The latest, though
is Bank of America`s Merrill Lynch analyst who is advising investors to
stay cautious because he says the big low for stocks has not arrived yet.

So, David Wright is the cofounder of the Sierra Funds. He agrees. And
Frank Murtha is the doctor of psychology and cofounder of
They`re both here to put this market sentiment into context.

Welcome to both of you. Pleasure to have you here.


HERERA: David, I`m going to start with you. You agree with the analyst.
I mean, that was a strong statement. But you`ve been bearish for a while
here. What is it you`ve been seeing in the market that leads to you
believe there`s still more to come in?

WRIGHT: Well, the major in indices in the U.S. has peaked at different
times. That somewhat occurs at a major top but most importantly is the
preponderance of new lows over new highs, 52-week new lows. And when you
get a string like that, it`s very dangerous.

HERERA: Dr. Murtha, plenty of people have been saying to me with all these
calls for a sharply lower market here, we keep hearing how a correction
like that would be healthy. And they say, how is that healthy when I`m
losing money? What do you say to them?

markets that go up. I don`t like losing money. Is it healthy in the grand
scheme, taking a step back? Sure, sometimes taking a step back can enable
you to take two steps forward.

GRIFFETH: But, I mean, how does that work? It`s not just a psychological
amount. It is a market that doesn`t go up forever. It has to pullback at
some point to allow people to get in at better prices. Isn`t that the

MURTHA: Well, you know, we`re talking about laws of physics and we`re
talking about laws of markets. And they tend to track each other pretty
closely but not exactly. Certainly, it`s been a fantastic run. I do think
that the narrative has shifted some, and that a pullback at this point is
something that a lot of people are anticipating. So, it`s certainly not
the worst thing in the world.

HERERA: David, a lot of people are also talking about the fact that when
some of those things that Bill just mentioned, the 20 percent correction
being healthy and things like that, that applied to a market that is not
structured the way that the market is now. Does that make a difference in
the way that you view things?

WRIGHT: Not — I`m not really sure. The weight of the ETFs now and ETF
trading could be a sort of a problem, a hidden problem. We don`t know how
they will be unbundled if and when the decline becomes severe. But, you
know, basically, we are looking at a multi-month bear market probability

GRIFFETH: And if that`s the case, David, what do you do? I mean, people
sitting at home right now, they`re hearing all these forecasts. The market
has been very volatile in October and now parts of November, and they`re
probably wondering what do I do with my money right now? You`re in the
real world trading there. And what do you at the time them.

WRIGHT: I would say put stops under your five biggest holdings, put —
look at your five biggest holdings that relate to equities and put
meaningful stops under them and be sure to act with discipline.

HERERA: You know, Frank, talk to us about the psychology of this market at
this point. And if you are a longer term investor, what should you do to
take some of the emotion out of your planning and out of your trading if
you are an active trader?

MURTHA: Well, there are a few things that I think would be helpful for
investors at a time like this. One of them is to really expand the scope
of what you consider possible. One of the most important and pervasive
biases that really hurt investors at times like is to have a very narrow
vision of what can happen. The fact of the matter is, it could be a
gigantic pullback or not.

Once you emotionally prepare yourself for that and recognize the large
scope of possibilities, then you are prepared. Then the second thing you
want to do is make sure you have a plan in place. I mean something
specific. So, you can actually act on it in the moment, because once it
happens, it`s just too late to do that.

GRIFFETH: Yes, it`s too late when you`re already in the middle of that.


GRIFFETH: David, what about those who hold bonds? There are a lot of
people watching us right now, they buy those bonds for income. As stock
prices go lower, bond prices tend to go hire as people move — shift from
one asset to the other. What do you tell those folks at times like this
when there is this volatility?

WRIGHT: Well, when the stock markets of the world get really scary and
fear does go across boundaries very quickly, inevitably, global
institutions will plow into the dollar and into U.S. treasuries. So, I`m
looking for a very good season ahead, very good next six months in treasury
bonds. So, for a high grade bonds, hang on. For high-yield bonds and
emerging market debt, be very cautious.

HERERA: All right. On that note, gentlemen, thank you. David Wright with
the Sierra Funds and Frank Murtha with

GRIFFETH: Time to take a look at some of today`s upgrades and downgrades.
We begin with shares of Nvidia tonight. They were upgraded to positive
from neutral at Susquehanna with the analyst citing opportunities in the
growing artificial intelligence market. Price target $230. That stock
rose another 5 percent today to $199.33.

Southwestern Energy (NYSE:SWN) was upgraded to neutral from underperform at
Bank of America (NYSE:BAC) Merrill Lynch. The analyst cited the recent
rise in natural gas prices and cold weather forecasts. In fact, the firm
sees the potential for a spike in nat gas prices because of tight inventory
levels. Stock rose a fraction to $5.82.

HERERA: And also at Bank of America (NYSE:BAC), Best Buy (NYSE:BBY) was
downgraded to neutral from buy. The analyst cites slowing industry growth
and cost inflation. The price target is $70. The stock fell a fraction to

Perrigo (NASDAQ:PRGO) was downgraded to hold from buy at Berenberg. The
analyst cites increased competition in the generic drug market, along with
reduced pricing. The price target is $72. The stock was down a fraction
to $65.39.

GRIFFETH: Still ahead, as home price growth slows, home owners are still


GRIFFETH: Starbucks (NASDAQ:SBUX) is trimming its corporate workforce by 5
percent. The coffee chain says it`s laying off 350 employees in marketing,
creative product, technology and store development. Most of the impacted
positions are in the company`s Seattle headquarters. Starbucks
(NASDAQ:SBUX) said the restructuring is to streamline its business and spur
growth. Shares finished down a fraction in today`s trade.

HERERA: Home Depot (NYSE:HD) grew revenue and profits at its quicker than
expected pace even as the home improvement retailer said it faced tougher
comparisons this quarter from a year ago when its businesses got a lift
from those devastating storms. The company shares finished down just a
tick to $179 even.

Courtney Reagan reports from Long Island City, New York, on what drove the
earnings beat.


housing market shows signs of slowing. Home Depot (NYSE:HD) sales
continued to outpace even the company`s won expectations. In the home
improvement retailer`s third quarter, both the number of customer
transactions and the amount shoppers spent increased. Sales to
professionals like contractors outpaced those to do-it-yourselfers. Though
DIY sales were also strong.

Projects of $1,000 or more grew 9 percent in the quarter.

The good enough to outweigh the negatives, like higher costs and lower
hurricane-related sales compared to last year.

Home Improvement CEO Craig Menear says that the home improvement outlook
and environment are solid even as sales of existing homes moderate with
mortgage rates rising long with home prices.

Strong growth economic growth historically high consumer sentiment and
unemployment near the 50-year lows are all factors Home Depot (NYSE:HD)
calls drivers of home improvement, leading the retailer to raise its full
year forecast for both sales and profit.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan in Long Island City, New


GRIFFETH: And Home Depot (NYSE:HD) is not the only one retailer reporting
earnings this week. We have Walmart, Macy`s and JCPenney also on tap to
offer fresh insight about the industry and the holiday shopping season.

Greg Melich is retail analyst at MoffettNathanson. He joins us tonight to
talk about that.

In fact, you`ve upped your forecast for holiday sales to 5 percent gain.

minute ago. And, frankly, jobs are strong. Consumer confidence looks
pretty good. And a wealth effect should also be helping these holidays.
So, we think the consumer is going to be out to spend this year.

HERERA: Who are going to be the leaders do you think this time around? I
mean, sometimes it`s the discounters but Toys “R” Us isn`t in existence
anymore. So, that`s changed the landscape considerably.

MELICH: We think it`s these retailers are getting multichannel rights.
So, we think Amazon (NASDAQ:AMZN) is going to get their fair share. They
should be about a third of retail growth in the fourth quarter. But
Walmart, Target (NYSE:TGT) — Target (NYSE:TGT) is really laying into toys.
We think that could help their traffic at least 1.5 percent, just the Toys
“R” Us closing and the shares they could pick up there.

So, I think those are some names holiday stocks that we think are well-
positioned. But as you can see, some of our favorites are actually the
ones that aren`t playing for holiday. They`re really — the home
improvement names that are playing for next year.

GRIFFETH: Speaking of Walmart, they report this week. You think that`s
the most important report this week. Why?

MELICH: Well, they`re about 10 percent of U.S. retail sales. And their,
if you will, the best read on if the consumer is out continuing to
shopping, they really leaned into multichannel this year. And if they can
keep traffic growth growing north of 2 percent, and with some inflation
perking out there and tariff pass through put in potentially some price
pressure on the consumer, I think Walmart is a great bellwether to see
whether the consumer can handle that inflation that could start to perk up
if the tariffs keep on rolling in.

HERERA: How are faring against the likes of Amazon (NASDAQ:AMZN)?

MELICH: Well, they are holding their own this year, and that they`ve been
able to — they worked hard. They let their margins fall from nearly 8
percent to 5-1/2 in the U.S., but they`ve gotten traffic from negative to
positive over the last few years. And that`s critical.

Amazon (NASDAQ:AMZN), though, don`t count them out. They`ve got 70
million-plus households signed up for prime. They are now shopping we
think in our survey more than 30 times a year. So, we think, overall,
Amazon (NASDAQ:AMZN) is still taking a good probably $60 billion of retail
dollar growth this year. That`s about a third of the growth.

GRIFFETH: Tomorrow, we get the consumer price index. Last Friday, we had
the producer, the wholesale price index, which was the strongest in six
years. Do you think retailers will be able to pass on these price
increases? Do they have the pricing power right now?

MELICH: I think the answer is some will and some won`t. And that`s one of
the things we`re really looking for in this earning season, holidays, who
has it. In our view, and it really matters even more into next year. If
the tariffs stay where they are, we go to 25 percent. We think retail
earnings growth could be cut in half from 8 percent to 4 percent. And
that`s even assuming they price through about 60 percent of it.

We think the home improvement names and auto parts are better positioned to
pass through. And we think companies like Bed Bath and Beyond, Dollar Tree
(NASDAQ:DLTR), are some of the ones with more pressure in terms of being
able to pass through inflation.

GRIFFETH: Very good. Greg Melich with the MoffettNathanson, thanks again
for joining us tonight.

MELICH: Thank you.

HERERA: Tyson Foods (NYSE:TSN) takes a hit from trade disputes and that`s
where we begin tonight`s “Market Focus”.

The top U.S. meat processer said the trade war has resulted in lower prices
and larger supplies which caused it miss quarterly revenue estimates.
Tyson says it is not currently shipping beef, pork or poultry to China.
The stock fell 5-1/2 percent to $58.17.

Advance Auto Parts (NYSE:AAP) raised its full-year sale forecast and
reported better than expected third quarter results. The auto parts
retailer cited stronger demand. Analysts say the results show the
company`s multiyear turnaround is taking hold. The stock rose more than 10
percent to $184.72.

GRIFFETH: General Electric (NYSE:GE) now plans to cut its stake in oil
field services provider Baker Hughes (NYSE:BHI) sooner than expected. The
move will reduce GE`s stake in the company to just above 50 percent and it
will raise about $4 billion in cash at current market prices. As we
reported, CEO Larry Culp (NYSE:CFI) is now focused on reducing that
company`s debt load and raising cash levels. Shares rose 7 percent today
to $8.61.

Cannabis firm Tilray saw its third quarter revenue rise more than 85
percent. But on the bottom line, its quarterly loss expanded from a year
ago as a result of higher operating expenses. The company spent more to
fund growth at home and abroad as it positions itself to take advantage of
the increasing legalization of recreational use of marijuana.

Word of the wider loss resulted in volatile stock moves in the extended
trading session tonight.

HERERA: Amazon (NASDAQ:AMZN) has made it official. Its massive second
headquarters project which was posed to transform whatever city Amazon
(NASDAQ:AMZN) chose will now go to two cities instead, New York and
Arlington, Virginia, as we reported.

But as Scott Cohn tell us, the decision raises at least as many questions
as it answers.



MAYOR RAHM EMANUEL (D), CHICAGO: All hands on deck.

COHN: Sometimes a little weird.

REP.-ELECT GREG STANTON (D), ARIZONA: We might have to start with going to
the state to see if we can get the legislator to change the name to
Phoenix, Amazona.

COHN: Two hundred thirty-eight cities from across the continent entered
the bidding for 50,000 jobs and $5 billion in investment. The result: a

GOV. ANDREW CUOMO (D), NEW YORK: This was a fierce competition. I think
it`s exciting for Amazon (NASDAQ:AMZN). I know it`s exciting for the state
of New York.

MAYOR BILL DE BLASIO (D), NEW YORK: This certainly consolidates Queens as
a great economic capitol and consolidates New York City as a great
international tech hub.

COHN: New York`s Long Island City neighborhood gets half the prize, a nod
to a strong tech workforce. The other half goes to northern Virginia, a
strong workforce as well. And a strategic location wedged between Reagan
National Airport and the Pentagon.

GOV. RALPH NORTHAM (D), VIRGINIA: It is performance-based incentive
package that we put on the table. So, the return on our investment will be
very good.

COHN: And a consolation prize to Nashville, Tennessee, for its strong
economy. It will get a 5,000-employee operations center.

GOV. BILL HASLAM (R), TENNESSEE: This is the largest jobs announcement in
the history of the state of Tennessee.


HASLAM: And 5,000 jobs that will average I think I`m safe to say $150,000
in salary. Said it now they can`t take it back.

COHN: Amazon (NASDAQ:AMZN) gave no official explanation for the split
decision. But in the end, no one city in North America could provide
everything the company wanted. Most important, 50,000 skilled workers in
one place.

The move also allows the company which made $177 billion in revenue last
year to make the most of government subsidies: $1.5 billion from New York
state, $600 million from Virginia, and more than $100 million from

GREG LEROY, GOOD JOBS FIRST EXEC. DIRECTOR: We are seeing more than $2
billion in subsidies being offered by Virginia and New York for an
expansion the company had to make.

COHN: All the locations will have to work to do to make way for Amazon
(NASDAQ:AMZN) like infrastructure improvements. Meanwhile, for the 235
cities that didn`t make the grade, like Boston, Chicago, Dallas, plenty of
questions about what they did wrong, how they can do better and why they
got into this battle in the first place.



GRIFFETH: And from big business to small, confidence among main street
businesses owners remains near record levels right now. They cite high
profit trends and historically low inflation. But the survey also showed
the small businesses are concerned about the tight job market. They say
that they have not experienced this level of labor market constraint since
the late 1990s.

Kate Rogers (NYSE:ROG) spoke to one owner who`s feeling that pressure.


business particularly hard hit during the Great Recession. His Albany, New
York-based company sells office furniture and provides interior design
services not in particularly high demand as the economy was taking a nose

that I owned one of the top five things nobody needed during the recession.

ROGERS: Today, his business has nine staffers as economy continues to chug
along but not without a price. Dion has to get more aggressive with
recruiting tactics. He`s increasing pay for new interior designers because
workers with the skills he`s looking for are hard to come by.

DION: Overtime, I have seen the salaries of what I`m paying the designers
has increased by about $10,000 since, say, 2012. Along with that, there`s
other creative ways that we compensate them with bonuses and commissions
and things like that. So, the package has gotten more attractive as
businesses continue to improve.

ROGERS: The strong economy has cut Dion`s business and many others in two
ways. New customers have helped to boost the bottom line, but it`s
becoming difficult to find workers to support that new business.

Labor quality has been the top concern for small businesses polled in the
National Federation of Independent Businesses monthly optimism index more
than half the year, outpacing taxes and government regulations. Last
month, the percentage of owners raising wages hit a new record.

To combat competition, Dion is thinking outside the box. He offers to make
principal payments on student loans up to $300 a month, an attractive idea
for younger employees in particular.

DION: I haven`t had anyone turn it down because I think student loan debt
is a real issue. I think there is a benefit for them and I think they
quickly recognize that as a interesting form of compensation.

ROGERS: For Dion, keeping his interior design business thriving requires
both innovative designs and hiring practices.



HERERA: Coming up, Tesla powers up.


robots working nearly 24 hours a day, Tesla believes it has found the key
to driving down the cost of an electric car. I`m Phil LeBeau in Sparks,
Nevada. We`ll go inside Tesla`s Gigafactory when NIGHTLY BUSINESS REPORT



HERERA: As Tesla ramps up sales of its latest vehicle, the Model 3, the
company is also expanding its battery production. Tesla`s Gigafactory now
builds more batteries than all other battery plants in the world combined.

Phil LeBeau takes us inside the plant in Sparks, Nevada, for an exclusive
look at Tesla`s drive to push down battery costs.


LEBEAU: Tesla`s massive Gigafactory is getting bigger and busier.
Thousands of robots and more than 7,000 workers are building battery packs
and drive units for the Tesla Model 3, as sales of the electric car grow,
Tesla is planning on more lower priced models, which means building battery
packs at a lower cost. The challenge Tesla`s automotive president is
confident the automaker can overcome.

– the costliest part of the vehicle. So, it`s really, really important
that we improve our efficiency and the designs so that we make them more

LEBEAU: Tesla is already well ahead of competitors when it comes to
battery costs, partially because of the size and scale of the Gigafactory.
But analysts question how long those advantages will last.

COLIN LANGAN, UBS ANALYST: Do I think they have an advantage? I actually
really don`t think they have a scale advantage for very long. I guess I
put it that way because a lot of scale from battery companies is coming
very, very soon.

LEBEAU: Other automakers from GM, to Nissan, to Mercedes are planning to
build and sell more electric cars, especially five or six years from now.
So, there will be greater demand for the raw materials that make up
batteries. Like lithium.

SAM JAFFE, CAIRN ENERGY RESEARCH: That concerns me a bit, because if
you`re going to — if you`re going to get a mine to start producing at
capacity in 2022, you need to be investing in it today. Investing in —
putting shovels in the ground today. And that is not happening at a pace
that needs to — for the EV industry to really take off in that time

LEBEAU: Tesla is confident it will have plenty of raw materials to
continue expanding battery production, as the industry continues to build
more electric cars. And Tesla continues to push to deliver more lower
priced models.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Sparks, Nevada.


GRIFFETH: Quick update on the pink diamond we told but a few days ago, the
unusually large gemstone with the highest grade of color intensity, sold at
Christie`s today — are you ready? — more than $50 million. That`s a
record for that pink diamond.

HERERA: Beautiful. That does it for us tonight. I`m Sue Herera. Thanks
for joining us.

GRIFFETH: I`m Bill Griffeth. Don`t get any bright ideas. Have a great
evening. We`ll see you tomorrow.

HERERA: It`s a neutral. It goes with everything.

GRIFFETH: Yes, it does.


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.


This entry was posted in Transcripts. Bookmark the permalink.

Leave a Reply