Transcript: Nightly Business Report – December 24, 2018

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

investors are asking as stocks are routed once again. Is there any hope
the jolly old fella makes a pit stop on Wall Street to end the year?

D.C. drama. A partial government shutdown, treasury calls to banks to
reassure the investors and the president continues to attack the Fed, all
creating a hangover for stocks.

And, down to the wire. Shoppers are still out there getting last minute
gifts. And that`s making retailers happy for the holidays.

All that and more for this Monday, Christmas Eve, 2018.

And we do bid you good evening, everybody, and welcome. Sue has the night

For those on Wall Street expecting Santa today, it was not meant to be.
Instead we got the Grinch. And growling bears as the S&P 500 is now 20
percent below its most recent high which defines a bear market. We got the
worst Christmas eve performance for the Dow and the S&P ever. That`s
right, ever. Turmoil in Washington continues to hang over the markets.
We`ll have more on that in just a moment.

But let`s take a breath and look at the day`s final numbers. The Dow lost
653 points. That was the low of the day. It closed at 21,792. The Nasdaq
fell another 140 points today. And the S&P dropped by 65.

Bob Pisani tells us if there`s any hope of a last minute appearance from
St. Nick.


find it tough to get into the holiday spirit this year, but could there be
any hope for a year end rally? Maybe. You might have heard of the term
Santa Claus rally? The Santa Claus really begins today and that`s the
tendency for the market to rise in the last five trading days of the year
and the first two of the New Year. You know, it`s good for an average gain
of 1.3 percent on the S&P 500. That`s pretty good for seven days.

Now, the usual explanation for this is that the first half of December is
dominated by tax law selling. So, you`re losers and once that`s completed,
you try to buy some stocks for the year. And since volumes are typically
light in the second half of September, a modest increase in buying interest
produces a modest rally. That makes some sense.

But the Santa Claus rally is usually framed in the negative, if Santa Claus
should fail to call, the bears may come to broad and wall. The S&P500 have
averaged a loss of about 1.2 percent in the subsequent three months
following a failed Santa Claus, versus an average 2 percent gain after a
Santa Claus rally succeeds.

If there is any hope for a Santa Claus rally this year — well, here`s the
key question. What`s the right price at which the buyers are going to
emerge? Let`s assume something. Let`s assume flat earnings next year.
That`s not the assumption.

Most people assume 8 percent, but let`s assume flat earnings of $162 for
the S&P 500. That means no growth next year in earnings, what`s the right
multiple? With the modest slowdown, the right multiple for it`s between 14
and 15 so let`s say 14 1/2. That would produce 2,350 on the S&P. That`s
almost where we are now. We`re just above it.

That`s pricing in an awful lot of bad news for next year. But at least
it`s a target. At this rate we could hit that early next week. Still time
for a rally.

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


GRIFFETH: Now to Washington where concerns over the possibility of the
president firing Federal Reserve Chairman Jerome Powell and word that
Treasury Secretary Mnuchin called the heads of six major banks over the
weekend are all keeping Wall Street on edge.

Steve Liesman takes a look at what`s going on there.


Traders thinking about sleigh bells, Santa and snow, instead get a serious
stock market sell-off. It`s impossible to know what brought on the worst
Christmas Eve stock decline ever. Fed rate hikes or economic weakness
concerns, but fingers are also pointing to actions of the Trump
administration and Treasury Secretary Steve Mnuchin.

STEPHANIE LINK, NUVEEN: We just don`t need more bad news. We didn`t need
Mnuchin to be confused by the commentary he was talking about. We didn`t
need a government shutdown. This adds to the negativity that we`ve already
had and the concerns we have out there, mainly on trade, in my opinion.
Mainly on the Fed, and the international selling.

LIESMAN: Among developments, Monday afternoon, the president continued his
war on the Fed tweeting, quote, the only problem our economy has is the
Fed. They have no feel for the market, don`t understand trade wars or
strong dollars or Democrat shutdowns over borders. Earlier in the day,
Treasury Secretary Mnuchin convened a special meeting of the president`s
working group on capital markets described as a check-in to discuss
coordinating government functioning during the shutdowns but meetings only
happen during serious blowups.

On Sunday, the treasury secretary said he talked to the heads of the six
biggest banks and they assured him there`s ample liquidity, but no one
asked if there was a liquidity problem.

On Saturday, there was several reports the president was asking if he could
fire Fed Chairman Jerome Powell, something that the president does not
believe he has the authority to do. But never deny the president was
asking the question.

in sort of communicating that sort of communicating that the president is
interested in getting rid of Powell is not a productive strategy.

LIESMAN: And on Saturday, at the stroke of midnight, the government
entered the third partial shutdown of the year.

Fears of a weakening economy are real, as are concerns that Fed rate hikes
will have negative consequences. But on Christmas Eve day, the focus was
us on the Treasury and the White House, not on a white Christmas.



GRIFFETH: With 2018 nearly in the books, our next guest says now is the
time to add value and growth names to your portfolio.

Nancy Tengler is back with us, chief investment strategist at Nancy Tengler

Merry Christmas. Welcome back.

Merry Christmas, Bill.

GRIFFETH: You know, it`s either John Templeton or Warren Buffett who is
famous for saying buy when the fear is the highest. Is that where we are
right now, do you think?

TENGLER: I think we`re darn close if we`re not already there, Bill. I
think it was Warren Buffett who also said, you won`t w know who`s naked
until the tide goes out. I think we have seen a lot of investors and
particularly those who are passively invested buying more of stocks as they
go up. And now is the time when you want to be invested with active
manager who`s looking — or you be active yourself, who`s looking at
quality and valuation.

GRIFFETH: Now, we have a list of stocks that you`re apple. Regular
viewers of this program will know that virtually every single money manager
has picked apple. And my joke is if you liked it at $230 two months ago,
you must love it below $150 right now. Why Apple (NASDAQ:AAPL) right now,
I guess because of the decline?

TENGLER: Yes. Well, two things. This stock has reached a similar
valuation before in 2012 when it hit $700 a share presplit. It was trading
about nine times when it became super interesting to people like Carl Icahn
and eventually Warren Buffett.

But for those of us who slug away at this every day, what we know about
Apple (NASDAQ:AAPL) is a couple things. One is an extraordinary brand and
an extraordinarily well-managed company that`s been raising the dividend
10, 12 percent a year, and is now trading at 2 percent. And that`s been
the historically the pretty attractive time to step in. It`s back to
trading at nine times earnings if you back out the cash.

And you have to believe that no one is ever going to buy an iPhone again if
you think that this company is not going to resurrect itself and grow
again. Services is growing at 25, 30 percent a year.

GRIFFETH: What do you say to the folks who are watching who are very
nervous about this market? I imagine a lot of people are. The decline may
not be over yet, right? What do you make of what`s going on on Wall Street
right now. This is a sharp decline this month and much of October as well.

TENGLER: Yes. You`re right. Sharp and quick.

Yes, so I would say at we have seen t before. We have seen market sell-
offs eight times in the last 50 years at the bear market level with no
recession in sight. And we usually see a correction of anywhere between 10
to 20 percent every single.

But I think what has people so unnerved and those of us who have been doing
this 30, 40 years like myself is the rapidity of the decline, and that I
think has a lot with the algorithms.

GRIFFETH: The computers are at it again.

TENGLER: Yes, yes.

GRIFFETH: Nancy, thank you for stopping by. Again, merry Christmas and
thanks for joining us.

TENGLER: Thanks, Bill. Thanks for having me.

GRIFETH: Nancy Tengler with Tengler Wealth Management.

Stocks are lower for the year, but there has to be a best performer or
least worst performer and health care is one of the top sectors. Down
about 2 percent so far this year.

Bertha Coombs looks at the winners and the losers in that group.


continues to see relative performance to the overall market, but the
pullback this month has now seen the S&P 500 health care sector give up all
of the year`s gains.

KATIE STOCKTON, FAIRLEAD STRATEGIES: The health care sector has obviously
been a major force of that performance this year. We`ve seen it peter off
I think in part because of their relatively overbought condition.

COOMBS: The medical device subsector is a big example of investors taking
profits on stocks that had seen big rallies, while still out of the year.
The fourth quarter has seen big losses for the sector`s high fliers. Like
cardio device makers Abiomed. Still up for the year, it is still trading
at more than 60 times expected earnings per share after a 35 percent plunge
this quarter.

Analysts at UBS said in the year ahead, demographic fundamentals of an
aging population still favor device makers. The continued expansion of
medical advantage bodes well for the health insurance sector which has held
on to the 4 percent gain for the year. But the legal challenge to the
Affordable Care Act could weigh on the sector in the year ahead, especially
for Medicaid-aligned insurers like WellCare, which is up for the year, but
has lost nearly a third of its value in the fourth quarter.

The Trump administration`s proposed rules on Medicare drug pricing will
pose a major head wind for drug makers in 2019 like Regeneron, the maker of
high priced eye treatment which could see reimbursements slashed. The
stock is down 8 percent for the year.

The overall biotech sector is down 14 percent for the year. But by
contrast, traditional drug makers have held up relatively well during the
fourth quarter pullback. And as investors have looked to traditional safe

STOCKTON: And now, we see sort of rejuvenation of that with the breakdown
in the market. Again with that potential sort of boost to defensive
posturing, at least the pharmaceutical stocks should be pretty well-
inflated in environment, at least from a technical standpoint.

COOMBS: Indeed, Merck (NYSE:MRK) and Pfizer (NYSE:PFE) are the Dow
Industrials` best performer year to date. Their 3 percent dividend yields
no making them attractive to investors in a defensive market.

For NIGHTLY BUSINESS REPORT, I`m Bertha Coombs, New York.


GRIFFETH: Coming up, the final push.


hours to shop for those Christmas presents, but does the recent drawdown in
the stock market keep people away from the malls this Christmas season?

We`ll tell you when NIGHTLY BUSINESS REPORT returns.


GRIFFETH: With all talk of an economic slowdown, the consumer does not
seem to be listening right now. The “Wall Street Journal” citing
MasterCard (NYSE:MA) spending polls says that total U.S. retail sales with
the exception of autos rose more than 5 percent between November 1st and
December 19th. And they`re not finished either. It is estimated about 7
percent of holiday shoppers hit the stores this Christmas Eve and they were
out over the weekend, as well.

Leslie Picker is too. She`s in Danbury, Connecticut for crunch time.


PICKER: It`s Christmas Eve and with gift giving just hours away, a certain
type of shopper is on a mall mission — men.

UNIDENTIFIED MALE: I did some last minute Christmas shopping for my

UNIDENTIFIED MALE: Last minute shopping.

UNIDENTIFIED MALE: This is like super last minute, you know? Like this my
first time shopping.

UNIDENTIFIED MALE: I shop my best when I`m under pressure.

UNIDENTIFIED MALE: Everything is last minute.

UNIDENTIFIED FEMALE: The men, they`re crazy. They want to wait until the
last minute.

PICKER: Yes, when it comes to Christmas shopping the biggest
procrastinators are typically men, according to the consulting firm
Customer Growth Partners. Men buy more during the few days leading up to
Christmas which is why items like jewelry and purses tend to be popular
purchases during that time. Toys and electronics on the other hand are
bought more frequently on Black Friday because consumers fear the stores
will run out of stock.

While the stock market has plummeted since Thanksgiving, the shoppers at
the mall on Christmas Eve said it isn`t impacting their spending. That
said, analysts think the weakening market they ultimately affect sales.

STACEY WILDLITZ, SW RETAIL ADVISORS: Retailers are not having a wonderful
Christmastime from the investment perspective right now but I think
shoppers are clearly out there. They have been spending. So, it`s not
encouraging since the online business comes at a lower margin.

PICKER: This year, spending online does appear to be growing in season,
however. Data from MasterCard (NYSE:MA) found U.S. e-commerce sales jumped
18 percent year over year between November 1st and November 19th. But the
biggest procrastinators may have little choice but to step foot in the
mall. About 7 percent of Americans are still shopping for the last minute
gifts on Christmas Eve, according to the survey by the National Retail
Federation. Even though it`s Christmas crunch time, no one here at the
mall appears to be panicking quite yet.

For NIGHTLY BUSINESS REPORT, I`m Leslie Picker, Danbury, Connecticut.


GRIFFETH: Well, let`s talk now about how the retail sector may fare this
holiday season when all is said and done.

Joining us for a third time this holiday season, Charles O`Shea, the lead
retail analyst at Moody`s (NYSE:MCO).

And I assume — we are two guys, I`m finished with any shopping. Are you?



O`SHEA: I think I`m done.

GRIFFETH: You`re among the last minute there.

When we talked on from Black Friday, correct me if I`m wrong, you were on
the high end of forecast for sales at around 5 percent for the holiday
season. Have you raised that now?

O`SHEA: No. I think we thought 5 to 6 percent.


O`SHEA: And I don`t know that we were hedging or not. And we normally
don`t do that. But we decided to do it this year. We went positive on our
outlook for the next 12, 18 months for the sector and we wanted to put more
meat on the bone. So, we came out with a holiday sales forecast.

There are a lot of tail winds riding the consumer right now, and we felt
that those were going to really show themselves during the holiday and I
think that you`ll see that and I think you`ll see `19 be a pretty good year
as well.

GRIFFETH: The job market is strong, that helps. But the stock market
doesn`t help the old wealth effect we talk about.

O`SHEA: I think for the holiday — I think we talked about this last time,
middle and lower income families really focused on Christmas. And no
matter what happens, they seem to find a way to pull a rabbit out of a hat
and make Christmas good for their families. The upper end consumers are
resilient. They`ll have a Christmas as well.

So, I think that when you look at the two barbells here on the demographics
side, the bottom can kind of offset some things that may happen at the top,
and one of the things that you kind of hope for if you`re looking at that
luxury buyer is that they bought early before the market started to get a
little squirrely.

GRIFFETH: Before we look ahead, beyond Christmas, the usual suspects you
still feel are the ones that benefit the most, in terms of the retailers

O`SHEA: Yes.

GRIFFETH: The Walmart`s, the Target`s, Best Buys, who else?

O`SHEA: TJX, Amazon (NASDAQ:AMZN), Costco (NASDAQ:COST). Home depot will
do well. That`s not such a big holiday business although they sell a lot
of Christmas trees.

What we`re seeing is a continuation of the thesis that we have for a while
where big is better. The bigger, stronger guys are going to exploit the
weak. I`ve used the term retail Darwinism. I think that applies here.

The more money you have, the better your balance sheet is, the more you
have to invest. The better able you are to build the things you need to
compete with the amazons of the world.

GRIFFETH: I`ve got two more quick questions. One, this is first Christmas
without Toys “R” Us.

O`SHEA: Yes.

GRIFFETH: A number of them were scrambling to pick up that business.
Who`s going to win?

O`SHEA: Amazon (NASDAQ:AMZN), Walmart, Target (NYSE:TGT) and the battle
for the second tier will be best buy. And then some of the niche guys that
got into to get it into it.

GRIFFETH: OK. After Christmas, after the New Year, does reality sit in
some kind? What happens to the retailers do you think?

O`SHEA: I think the strong still will do well. I think what you`ll see in
the early part of `19 is a lot of the weaker retailers decide whether
they`re going to be there or not. We have got a lot of debt returning and
maturing in `19 and `20. We`ve got a lot of distressed retailers who got
35 names in our B-3 and below list now. That`s where you`re going to
separate the wheat from the chaff here in early 2019.

GRIFFETH: Well, I enjoyed our conversations during this season. You see
at the holidays.


GRIFFETH: Merry Christmas.

O`SHEA: Merry Christmas to you, too.

GRIFFETH: Charlie O`Shea with Moody`s joining us.

Apple (NASDAQ:AAPL) is reportedly facing a boycott by Chinese consumers and
that`s where we begin tonight`s “Market Focus”. Japan`s Nikkei newspaper
is reporting that Chinese companies are instructing employees not to
purchase Apple (NASDAQ:AAPL) products in response Canada of Huawei`s CFO.
Some companies are issuing fines for threatening to fire those who don`t
comply. Apple (NASDAQ:AAPL) shares finished down more than 2.5 percent
today to $146.83.

Software developer Mind Body said it`s planning to go private after
spending three years on the Nasdaq. That company which creates platforms
for fitness and spa businesses is selling itself to a private equity firm
for nearly $2 billion. Mind Body is also being given a 30-day window to
consider more attractive offers if they come forward. Shares of Mind Body
skyrocketed nearly 65 percent today closing at $35.83.

Private equity firm Apollo Global is reportedly in talks with Chinese
conglomerate HNA Group to buy product distributors Ingram Micro (NYSE:IM).
It is being reported that HNA wants to sell Ingram Micro (NYSE:IM) for $7.5
billion including $1.5 billion in assumed debt. Apollo Global management
shares were unchanged today to $23.75.

Small cap drug maker Acorda Therapeutics (NASDAQ:ACOR) said that its
Parkinson`s disease treatment has been given the green light now by the FDA
and shares of Acorda rose 6 percent to $13.77 as a result.

Netflix (NASDAQ:NFLX) market share is growing. “The Guardian” newspaper
says the streaming giant will have more subscribers than British
broadcaster Sky by the end of this year. Netflix (NASDAQ:NFLX) expected to
end 2018 with about 9.7 million U.K. subscriber subscribers. Shares were
down about 5 percent to at $233.88.

Kraft (NYSE:KFT) Heinz and Mondelez have now reportedly been short listed
for the second round of bidding for Campbell`s international business.
“Reuters” says that and both Kraft (NYSE:KFT) and Mondelez are interested
in acquiring the foreign portfolio to expand their own global footprints.
The business could sell for as much as $3 billion. Shares of Mondelez,
Kraft (NYSE:KFT) and Heinz and Campbell`s were all lower with the rest of
the market today.

Well, we`re all familiar with identity theft unfortunately. Where someone
pretends to be you to make purchases, to apply for credit, get your tax
refund. But did you know that the same could happen to businesses and it`s
on the rise as a matter of fact. Business identity theft was up 46 percent
last year according to Dun & Bradstreet (NYSE:DNB).

Andrea Day has our story.


BRIAN VECCI, CYBER SECURITY PROFESSIONAL: It`s really easy for an attacker
to impersonate a business.

taking over your company and running it as their own, without you having a

Cyber security pro Brian Vecci.

VECCI: For businesses, it could be months or years before they realize it.

DAY: It`s called business identity theft. At stake — your brand,
reputation, even trade secrets.

FBI unit chief Steven Shapiro.

STEVEN SHAPIRO, FBI UNIT CHIEF: They`ll take on their client lists or the
special sauce that makes them operate and compete with them directly. In
other instances, they`re pretending to be that business.

DAY: Have you seen where businesses are hit with the attack?


DAY: He won`t disclose names, but says a recent case cost the business $1
billion in market share and hundreds of jobs.

How tough is it to spot?

SHAPIRO: Depending on the business, it can be very difficult to spot.

DAY: He says criminals can open phony social media accounts that look
legit. Even start making and selling goods. What makes this so enticing
for criminals?

SHAPIRO: Criminals have a perception that it`s easier to find business`s
data than there is for individuals. There`s also perception that
businesses have deeper pockets than an individual would in an identity
theft situation. At risk is the very reputation of that business.

DAY: Vecci is in the business of protecting those reputations at Varonis.

VECCI: This is absolutely that can happen to any business. That just the
really big ones. A lot of the information that you need to impersonate a
business is publicly available — their names, the names of corporate
officers, the addresses, the phone numbers, the e-mail addresses.

DAY: He says the attack can start with a data breach from the outside.

VECCI: Fifty-eight percent of companies that we looked at last year had
more than 100,000 folders literal to anybody who joined their network and
none of it is monitored.

DAY: And he says don`t discount threats from within.

VECCI: Insiders are incredibly difficult to protect against. First of
all, they know more about your organization. If they really want to do
some damage, they can do it very quickly and very efficiently.

DAY: So, what can you do? Well, the pros` best advice is to restrict data
to those who only need it and make sure when someone leaves the firm,
they`re totally cut off. Also, keep a close eye on credit reports. And if
you are a victim, report it right away to the FBI. That`s



GRIFFETH: Up next, what Hollywood is hanging its hat on for the holidays.


GRIFFETH: The king of the seven seas conquered the box office this
weekend. Warner Brothers and DC Comics “Aquaman” brought in $72 million in
its debut which includes previews. Disney`s “Mary Poppins Returns” came in
second with $22 million. Paramount`s “Bumblebee” finished a close third
with a shade under $21 million.

Well, the holidays are not just for shopping. They`re also a key period
for movies, with the range of new titles opening and looking to draw

So how does the box office compare this year?

Julia Boorstin is in Los Angeles with a look.


office between Thanksgiving and New Year`s is a crucial time for movie
theaters and studios. Holiday stretch generating 17 percent of last year`s
box office.

Christmas week alone often topping half a billion dollars at the box
office. This year, three big franchise films opening ahead of Christmas.
Disney`s “Mary Poppins Returns” and Warner Brothers` “Aquaman” and
Paramount`s “Bumblebee”. They`re hoping to draw moviegoers through New
Year`s with their familiar characters.

PAUL DERGERABEDIAN, COMSCORE: For the last three years, we have had a
“Star Wars” movie opening in mid December. We don`t have that this year.
But we do have a cadre of films,a nice slate of films that could really
boost that box office to a level that rivals that of that one “Star Wars”

BOORSTIN: Even without a “Star Wars,” this year is well on its way to a
box office record. ComScore`s Dergerabedian predicts the domestic box
office will end the year somewhere between $11.6 billion and $11.9 billion.

That`s thanks to record breaking films such as “Black Panther” and
“Avengers”. But it`s not just franchise films out around the holidays.

On Christmas Day, independent Annapurna Pictures is opening drama “Vice”
about Vice President Dick Cheney. One of many holiday movies looking for
awards attention, along with Fox Searchlight`s “The Favorite” and Focus
Pictures` “Mary Queen of Scot”, with Imax (NASDAQ:IMAX) and AMC shares down
this year, they`re hoping to end with a box office bang to drive interest
in audience`s for next year`s batch of films.

DERGERABEDIN: This really is an important time for the studios and the
theaters to do a full court press on audiences who they`re trying to rev up
for the slate that`s come in 2019.

BOORSTIN: And next year is expected to set another box office record,
again on the strength of Disney (NYSE:DIS) Films, including Captain Marvel,
a Lion King remake, “Frozen” and “Toy Story” sequels, along with another
“Star Wars.”

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


GRIFFETH: Before we go, one final look at the day on Wall Street. The
worst Christmas Eve trading day ever with the Dow down 653 points, below
22,000. The Nasdaq and S&P are also down more than 2 percent.

That is it for this edition of NIGHTLY BUSINESS REPORT, the markets are
closed tomorrow, but we`ll be here with a special Christmas edition. I
hope you can join us.

Have a good evening. See you tomorrow.


Nightly Business Report transcripts and video are available on-line post
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and commentators are their own and do not necessarily represent the views
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