Transcript: Nightly Business Report – November 28, 2018

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

(BEGIN VIDEO CLIP)

JEROME POWELL, FEDERAL RESERVE CHAIRMAN: Interest rates are still low by
historical standards and they remain just below the range of estimates of
that level that would be neutral for the economy.

(END VIDEO CLIP)

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: The Fed chief seems to
signal a significant in the Central Bank thinking, resulting in a powerful
rally on Wall Street.

Battle of the blue chips. Microsoft (NASDAQ:MSFT) is close to overtaking
Apple (NASDAQ:AAPL) as the world`s most valuable company, all the result of
a remarkable reinvention.

And pushing into pick-ups. Jeep adds fuel to the already hot brand with a
truck designed to look like no other.

Those stories and much more tonight on NIGHTLY BUSINESS REPORT for this
Wednesday, November the 28th.

And we bid you good evening, everybody. Sue is off tonight.

What a Wednesday, though. The Dow soared by more than 600 points, its
biggest one-day gain in eight months and its second best day of the year.
With today`s rally, the Dow and S&P have now erased their November declines
after investors cheered remarks from the head of the Federal Reserve about
the pace of future interest rate hikes which we will get to in a moment.

Here are closing numbers today with the Dow advancing 617 points. We`re
back above 25,000. The Nasdaq added 208 points. That`s a nearly 3 percent
gain. And the S&P was up 61.

Bob Pisani has more on today`s Fed-driven rally from the New York Stock
Exchange.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Stocks were in full on
rally mode today on the heels of Federal Reserve Chair Jay Powell`s
comments about interest rates and the economy. The Dow and S&P have now
gone positive for the month of November and all three averages notched
their third straight day of gains.

The big takeaway here, Fed Chair Powell signaled that current interest
rates are near neutral and emphasized that the Fed is not on a preset
policy path when it comes to hiking interest rates. He also reassured
investors that the Fed doesn`t see any dangerous excesses in the stock
market today.

Powell`s remarks pushed stocks higher right across the board. Technology
stocks got a boost led by software names and buzz over Microsoft
(NASDAQ:MSFT) becoming the world`s most valuable companies. Materials and
industrials are taking a beating on trade concerns, slowing global growth
and a stronger dollar also outperformed today. And consumer discretionary
names were sharply in the green thanks not only to FAANG stocks like Amazon
(NASDAQ:AMZN) and Netflix (NASDAQ:NFLX), they`re consumer discretionary,
but also retailers like Ross Stores (NASDAQ:ROST) and Gap (NYSE:GPS).

The bottom line is this, the markets overreacted to Powell`s comments back
on October 3rd, and investors are waking up to the fact that the Fed
remains flexible and continues to keep a close eye on the economic data.

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

(END VIDEOTAPE)

GRIFFETH: But what exactly did Jerome Powell say that sparked the rally
and of this magnitude?

Steve Liesman digs into that for us.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Federal Reserve
Chairman Jerome Powell igniting a powerful market rally, saying the Fed is
not on a preset course to raise rates and the Fed is, quote, just below the
range of neutral estimates. That`s the rate that neither slow nor speed up
the economy.

POWELL: Interest rates are still low by historical standards and they
remain just below the range of estimates of that level that would be
neutral for the economy. That is neither speeding up nor slowing down
growth.

LIESMAN: All that suggest the Fed has some but not a whole lot more work
to do. He added that rates remain low by historical standards and affirmed
the Fed`s plan to gradually raise rates but with perhaps less certainty
than he did in the past.

POWELL: I liken it walking into a room full of furniture like this and
suddenly lights go out. So, what do you do? You slow down and maybe go a
little bit less quickly and you feel your way more. That`s just the
thought, is you feel your way more.

So, under uncertainty of this kind, you be careful. And I think that`s
what we`ve been doing with monetary policy for some time. We`ve been
moving gradually in a way as a way of keeping those risks at bay.

LIESMAN: Markets were pretty certain about how they felt about Powell`s
remarks. Stocks shut up, bond yields and dollar shot down. And Powell
maintained his generally upbeat view on the U.S. economy.

POWELL: The unemployment rate is 3.7 percent, a 49-year low and many other
measures of labor strength are at or near historic bests. Inflation is
near our 2 percent target. And the economy is growing at an annual rate of
about 3 percent, well above most estimates of its longer run trend.

LIESMAN: You could call this a relief rally. Relief that the Fed is not
hell-bent on raising rates no matter what the actual economic outlook,
though acknowledgement that rates are going up from here.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

GRIFFETH: So, do Mr. Powell`s comments really reflect a shift in thinking
at the central bank or not? And what does it all mean for the markets and
the economy?

Joining us tonight Michael Farr, the president of the money management firm
of Farr, Miller and Washington.

Michael, always good to see you. Thanks for joining us tonight.

MICHAEL FARR, PRESIDENT, FARR, MILLER & WASHINGTON: Pleasure, Bill. Great
to be here.

GRIFFETH: A lot of debate whether, you know, under the criticism of the
president recently did, the Fed chair blink? Is this a game-changer for
markets and the economy? What do you think?

FARR: You know, Bill, a little bit. I think Steve Liesman said it, you
know, what the market heard was that the Fed is not hell-bent on raising
rates. That they are going to do what Jay Powell has said he was going to
do all along, which is be data dependent. And I think that data
dependency, walking through the dark room full of furniture —

GRIFFETH: Right.

FARR: — is reassuring to markets.

GRIFFETH: Now, is this — does it have you rethinking your strategy? I
don`t know what you`ve been doing with the market lately here. But
clearly, today, Wall Street changed their thinking about the market. It
seemed like a green light went on.

What about for you?

FARR: You know, I continue to think probably the risk trade of the FAANG
stocks is something that`s over with. I think the shift we have seen to
value is going to be with us a long time. The prospect to 2.5 growth rate
next year and following year make me thing we need to focus on balance
sheets than the momentum stocks.

GRIFFETH: All right. So, going into the speech, the feeling was we were
definitely getting a rate increase in December. Next year the feeling has
gone from four rate increases down to two, maybe now one. Does it matter
to you how many they raise rates from here?

FARR: It matters to me that — yes, a little bit, Bill, yes. But if we
get three more, that takes up to a 3 percent Fed funds rate that pushes the
mortgage rate up around 6 percent. That could be too fast.
So, I`m encouraged the Fed is going to be data dependent.

You know, we haven`t seen bull markets die of old age. Most have been
filled by the overly aggressive Fed. And that`s what scared Wall Street.
I think that has us feeling better tonight.

GRIFFETH: And with all of this said and done today with the huge rally
here, what do you expect for the rest of the year? Is the Santa Claus
rally upon us or not?

FARR: You know, Art Cashin has been saying that you could look for the
Santa Claus picture on milk cartoons because isn`t going to happen, he is
MIA.

I think this brightens the chances of a Santa Claus rally. I think that
the comments from the Fed statement when they actually go ahead and raise
rates in mid-December will probably be along the same lines and I think
markets will take encouragement. And yes, I expect markets to finish
higher on the year.

GRIFFETH: All right. Very good. Art Cashin, the long time dean of the
traders at the floor of the New York Stock Exchange, a great guy.

FARR: You have to do it.

GRIFFETH: Michael Farr of Farr, Miller and Washington — thank you,
Michael. See you later.

FARR: Thanks, Bill. Thanks.

GRIFFETH: Elsewhere, economic growth remained pretty strong in the third
quarter. This morning, we learned the gross domestic product, the measure
of goods and services produced here in the U.S., grew at 3.5 percent rate
as expected. The report pointed to moderately stronger business spending
and corporate profits, but a little bit weaker consumer spending. It was
the second reading on the third quarter growth rate.

But a new report out on the housing market shows that that corner of the
economy is not holding up as well. And it`s especially soft among the home
builders.

Diana Olick explains.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Sales of newly built
homes in October dropped to the lowest level in 2 1/2 years as potential
buyers pulled back in this new normal of rising mortgage rates and sky high
prices.

MICHAEL DAHL, RBC CAPITAL MARKETS: I think the rapidity of the increase
in-housing costs given the level of price inflation on top of what`s been a
fairly quick move in mortgage rates is making it difficult for the buyers
to catch up.

OLICK: The median price of a home sold during the month was down 3 percent
compared to a year ago. That may be builders trying to respond to rising
rates or it just maybe the mix of homes selling mass has shifted to lower
price models. Today`s buyers have new math to factor. Mortgage interest
rates a full percentage point higher than they were a year ago. Builders
have struggled to offer entry level homes as their cost for land, labor and
materials rise.

DAHL: The reality is land costs have been incredibly high, anything from
permitting to development fees, and then labor has been a persistent
challenge. Those things have really been the main drivers.

OLICK: There now appears to be a glut of newly built home for sales, the
highest number of unsold since 2009, this after two years of a housing
shortage and still tight supply of existing homes for sale.

Builders have been reporting slower traffic through showrooms and dropped
expects for sales over the next six months.

The only bright side to that high supply is that it could finally bring
prices down a bit, welcome chill as buyers and builders head in to the slow
winter months.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.

(END VIDEOTAPE)

GRIFFETH: Time to take a look now at some of today`s “Upgrades and
Downgrades”.

We begin with shares of Union Pacific (NYSE:UNP) which were upgraded to buy
from hold at Deutsche Bank. The analyst expects the railroad operator to
post at least $3 billion in profit improvements. Price target now: $175.
The shares rose 3 percent to $151.98 today.

Whirlpool (NYSE:WHR), though, was downgraded to neutral from outperform at
Credit Suisse with the analyst saying that the solid pricing environment
for appliances appears to be reflected in Whirlpool (NYSE:WHR) stock price
already. That price target now $125. Whirlpool (NYSE:WHR) shares rose,
though, along with the rest of the market to $126.22.

And American Airlines was given positive rating in new coverage at
Susquehanna. The analyst says the airline has strength in its overall net
worth. Price target, $47. Shares rose more than 1.5 percent today to
$38.94.

Still ahead, a 1-2 punch for the nation`s soybean farmers.

(MUSIC)

GRIFFETH: Investigators are now looking at possible maintenance mistakes
that may have played a role in that fatal Lion Air jet crash last month.
Initial findings point to possible errors by mechanics who worked on a
malfunctioning sensor just before that flight. The report says the plane
was somehow approved for use even though its flight control system
experienced issues on past trips. The findings at this point would seem to
exonerate the jet`s manufacturer Boeing (NYSE:BA) and its shares rose as a
result by 4-1/2 percent in today`s trade.

Microsoft (NASDAQ:MSFT), wow, it`s close to overtaking the most valuable
company crown from Apple (NASDAQ:AAPL), a position that the software giant
held years ago. At times this week, Microsoft`s market valuation briefly
exceeded Apple`s. But at the close today, it was just below. Microsoft`s
market cap came in at $852 billion. You can see, it`s $6 billion lower
than Apple (NASDAQ:AAPL).

But the climb does underscore renewed investor faith in Microsoft
(NASDAQ:MSFT) after a long stretch of time when the stock was essentially
considered dead money. But that change when Satya Nadella became CEO back
in 2014. He has pushed the company in new directions with a focus on the
cloud and newer technologies like augmented reality.

And with Microsoft (NASDAQ:MSFT) now a business model for reinventing
itself, are there other companies out there that could do the same?

David Deitze is back with us. He`s president and chief investment
strategist at Point View Wealth Management.

Good to see you again. Welcome back.

DAVID DIETZE, POINT VIEW WEALTH MANAGEMENT PRESIDENT: Thank you, Bill.

GRIFFETH: First of all, a breath-taking reinvention for Microsoft
(NASDAQ:MSFT), right?

DIETZE: Yes, absolutely. I mean, you know, we`ve been — it was a
monopolist, but the legacy server client model has started to show its age,
as users transition to mobile, to the cloud. And it kind of lost its way.

There`s a change in management. Nadella reinvigorate it with a culture of
innovation, collaboration, moved to the cloud and came up with this Office
365 which allows you to keep your data on-site or up in the cloud as you
wish.

GRIFFETH: Right.

So, we have to ask ourselves. OK, who else does the same thing? Who are
you looking at as possible reinvention candidates right now?

DIETZE: You know, that is the Holy Grail, Bill. And we`ve got really
three candidates here: IBM, General Electric (NYSE:GE) and the Procter &
Gamble (NYSE:PG).

I`m going to start with General Electric (NYSE:GE) because I think they
have the best opportunity to make the big home run. Like Microsoft
(NASDAQ:MSFT), they`ve got a new leader here. Larry Culp (NYSE:CFI) with a
stellar record at Danaher (NYSE:DHR). So, he is going to reinvigorate.

They already have world class divisions, aviation, health care. So, it`s a
question in our view of winnowing out some of the deadwood and allowing
investors to highlight there. Of course, it`s one 12th of price of
Microsoft (NASDAQ:MSFT), ether price of sales in terms of market cap,
that`s one we`re looking at.

GRIFFETH: All right. IBM, Ginni Rometty has been trying to turn this
company around for a number of years now.

DIETZE: You know, it`s in technology. They`ve just made a great
acquisition with Red Hat (NYSE:RHT) which will catapult them further into
the cloud.

Here`s the problem: Ginni Rometty has been the CEO longer than Nadella has
been. She was there in 2012. She`s also in 2015, they are making $20 a
share. Now, they`re about $6 a share.

So, she kind of owns the dismal performance. So, is she the right person
to make the turnaround?

GRIFFETH: OK. Procter & Gamble (NYSE:PG), quickly, they`ve been the
subject of a lot of shareholder revolts and things, trying to get them to
reinvent themselves as well. Can they do it?

DIETZE: We`ve made already a great start. They are at 101 brands. They
got down to 65. Twenty-one are $1 billion or more, and they are leveraging
their huge scale, their huge purchasing power, but at the same time
allowing various divisions to get closer to the consumer.

Interestingly, they`ve allowed Nelson Peltz to come on the board about a
year ago. He`s also putting their feet to the fire. So, we see them, too,
as a great hold for investors looking for a turnaround in leading the
consumer product space.

GRIFFETH: Those activist shareholders having a big role.

David Dietze, good to see you again.

DIETZE: Thank you, Bill.

GRIFFETH: David is with Point View Wealth Management.

Elsewhere Tiffany (NYSE:TIF) loses its luster and that`s where we begin
tonight`s “Market Focus”.

The luxury jeweler reported disappointing revenue and same store sales.
And they cited weak demand from foreign tourists, especially from China who
spent less in the U.S. and in Hong Kong and shares fell nearly 12 percent
to $92.54. That`s the worst day since 2015.

J.M. Smucker (NYSE:SJM) missed Wall Street earnings and revenue estimates
as well and cut its profit and sales forecast for the year. The company
cited an increase in competition which it says forced it to cut prices on
things like Folgers Coffee and Jiff Peanut Butter. And shares dropped by 7
percent today on the otherwise big up day, now to $101.28.

Dick`s Sporting Goods (NYSE:DKS) reported drop in revenue from a year ago
and its fifth straight quarterly decline in same store sales. The retailer
said it faced challenges selling electronic devices and is struggling with
its gun business as well. Now, despite the decline, the company did raise
its earnings outlook and the stock rose more than 2.5 percent to $37.26.

Meanwhile, Chico`s reported disappointing earnings and revenue. That
retailer placed the blame for its weak sales directly at the Chico`s brand
itself. The CEO says the store has plans to shift its strategy and change
its product offerings. It also announced the departure of its brand
president. Small cap stock plummeted by 34 percent today to $4.79.

And tobacco giant Altria is reportedly in talks to take a significant
minority stake in e-cigarette maker Juul. According to the “Wall Street
Journal”, a deal is not imminent. Juul which, of course, launched in 2015
is now valued at around $15 billion. It is quickly becoming a leader in
the e-cigarette market. Shares of Altria, used to be Philip Morris, closed
2 percent higher today to $54.95.

And now to trade and some harsh words from the CEO of Deere. He says the
trade war could have a lasting impact on America`s farmers and the
agriculture sector, something his company is seeing firsthand.

(BEGIN VIDEO CLIP)

SAM ALLEN, JOHN DEERE CHAIRMAN & CEO: In the longer term, the issue that
we worry most about is that as China buys soybeans from Brazil or whoever,
structurally, countries like Brazil will bring more land in production
quicker. And as a result of doing that, we`ll end up with the oversupply
for a longer period of time which will mean that the pain that the U.S.
farmers feeling now will go on for a longer period of time, much like the
grain embargo in the `80s.

(END VIDEO CLIP)

GRIFFETH: And for America`s soybean farmers, it`s not just trade that
they`re dealing with. Wouldn`t you know, they also have bad weather and
rotting crops as a result.

Aditi Roy is in Ville Platte, Louisiana.

(BEGIN VIDEOTAPE)

ADITI ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT: This spring, Richard
Fontenot planted 1,700 acres of soybeans on his farm. But come harvest
time, rain pounded his crops for days on end, damaging much of his crop.
Nearby grain elevators already filled up to near capacity because of the
Chinese tariffs on U.S. soybeans wouldn`t accept his soybeans because they
were too damaged.

RICHARD FONTENOT, LOUISIANA SOYBEAN FARMER: It`s almost emotional. It`s
an emotional roller coaster.

ROY: In the end, the fourth generation farmer was forced to let 60 percent
of his crop rot in the field.

FONTENOT: If the commercial elevators up river had no room to store it, we
could harvest it but no place to dump the trucks. So we had to leave it
out in the field.

ROY: But bad weather is only one problem facing farmers across the U.S.

U.S. soybean farmers usually export a quarter of the crop to China. That
market has virtually disappeared. The glut has pushed prices down from
about $9.84 a bushel during planting season, to $8.60 at harvest.

FONTENOT: For in this operation itself, we probably have about $8.50,
$8.25 a bushel tied into making the crop. After discount this year, we`re
going to be selling it for about $6.50, $6.25 a bushel.

ROY: As a result, Fontenot will lose about $300,000 this year and can`t
store the crop because the grain elevators are full and the crop too
damaged.

To make matters even worse, many farmers can`t even access the Trump
administration`s aid to ease the tariff impact because they are not
eligible for the dollars if their crops are still in the ground.

FONTENOT: We had no exports because of the effects of some negotiations.
Those effects carried all the way back into the field.

ROY: To ease the loss, Louisiana Representative Ralph Abraham just
introduced a bill which would allow farmers with unharvested crop to access
trade aid. Fontenot says that`s a good idea, but argues for longstanding
relief farmers need enduring trade relationships.

FONTENOT: We have to do things as a country and as a nation to protect and
things — and maintain us being sustainable for years to come. And trade
agreements are one of those things.

ROY: It`s not just farmers here in the south who were hurting. A new Fed
report shows that farm bankruptcies are also on the rise in the Upper
Midwest.

For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, Ville Platte, Louisiana.

(END VIDEOTAPE)

GRIFFETH: And still ahead, Jeep drives into new territory.

(BEGIN VIDEO CLIP)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Jeep, which has been
red hot with SUVs, is getting into the pickup business. What is the new
Jeep pickup look like? I`m Phil LeBeau in Los Angeles. We`ll show you
coming up on NIGHTLY BUSINESS REPORT.

(END VIDEO CLIP)

(MUSIC)

GRIFFETH: We have an update now to a story that we have been following. A
former Insys executive has now pled guilty as part of an opioid
investigation. The drug marker`s former vice president of sales is the
highest level executive to admit to wrong doing in a scheme to bribe
doctors to prescribe the powerful medications. In pleading guilty, he
entered into a deal to cooperate with prosecutors and could become a key
witness in an upcoming trial that includes the company`s founder.

Well, with pickup sales surging, more auto brands want to sell new trucks.
The latest is Jeep. But Jeep`s new vehicle is not exactly the typical
looking pick-up.

Phil LeBeau has more.

(BEGIN VIDEOTAPE)

LEBEAU: Jeep, one of the hottest brands in the U.S., is heating up the
battle to win over pickup buyers. The new Jeep Gladiator, which looks like
an SUV with a short pickup bed, has a decidedly different appearance, and
that`s by design.

TIM KUNISKIS, JEEP NORTH AMERICA: You got 42 brands and you got 300 name
plates out there, and if you don`t stand for something, you stand for
nothing and you`re going to compete as a commodity. You can`t do that.

We have to have a positioning. The brand has to stand out and the vehicle
lines have to stand out. We think this absolutely breaks the mold.

LEBEAU: Jeep`s resurgence in America is due in large part to the vision of
former CEO Sergio Marchionne, who envisioned a world with more people
wanting SUVs.

That helped spark a boom in Jeep sales over the last decade. Now the
company is trying to stent the Jeep brand with a pickup truck geared for a
different type of pickup buyer.

JEREMY ACEVEDO, EDMUNDS: Lifestyle buyer is nice to have truck buyer.
He`s not going to use it for day to day utility, doesn`t need it for
employment or anything like that. Somebody who likes to have a bed, likes
to tow things recreationally, but using it more to kind of do things that
they`d like to do instead of those things they need to do.

LEBEAU: While Americans may love pickup trucks, they are also incredibly
brand loyal, which is why the Ford F-150 and Chevy Silverado have been top
selling models for decades.

KUNISKIS: Truck buyers are looking for certain things, so we made sure
that we deliver every one of these wide tow truck and that everything that
Jeep is known for, we put on top of that. So, we`re going to give you
everything you want and more. We`re going to give you the open air freedom
that only Jeep can give you.

LEBEAU: Jeep`s Gladiator rolls into the showrooms next year and while
fewer predicting it will be a serious threat to the established pick-up
brands, there is no doubt Jeep is looking to shake up the truck world.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Los Angeles.

(END VIDEOTAPE)

GRIFFETH: Finally, tonight, the fearless girl statue is no longer staring
down the Wall Street bowl. The sculpture was moved last night. It will be
reinstalled in front of the New York Stock Exchange by the end of the year,
and in it`s place is an outline of the footprint where the statue once
stood.

Street`s response with the fearless girl left the marker there visitors can
stand in her place and obviously, plenty of people already are.

Before we go, let`s take a final look at the day on Wall Street. Powerful
rally, the Dow advancing 617 points, the Nasdaq up 208 and the S&P 500 up
61.

That is the NIGHTLY BUSINESS REPORT for tonight. I`m Bill Griffeth. Thank
you so much for watching.

And we want to remind you that this is the time of year that your public
television station does seek your support. And we do appreciate that
support. Have a great evening. 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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