ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Good evening, everyone, and
welcome to this special edition of NIGHTLY BUSINESS REPORT. I`m Sue
Herera. Bill Griffeth is off.
Tonight, we are going to take a look at the year that was, from the stock
market to the economy to policy out of Washington. It was a 12-month
stretch filled with events that few could have predicted.
HERERA: And the ship be rockin` — 300 and 400 point market moves are
usually eyebrow-raisers. Now, not much. Markets jumped in January, tax
cuts in hand until a nasty brew of global tensions led to mounting worries
about growth, and steep drops in February.
Immunity? Not in high fliers like Boeing (NYSE:BA). Not in health care.
Not even in tech. Market darling Apple (NASDAQ:AAPL) might see a loss for
Even as markets climbed in January, so did tensions with North Korea,
claiming its missiles can reach the United States mainland. Historic face-
to-face talks with South Korea and the United States followed, calming
nerves for a bit, but for how long as North Korea complains about a
constant irritant, economic sanctions.
To maintain sanctions, the U.S. leans on China, even as their duel over
tariffs pinched over time auto makers and parts suppliers, farmers selling
pork and soybean, steel and aluminum production, even tech where tariffs
cost now top a billion dollars a months. And constant threats of more and
higher tariffs are rattling investors. For now, there is a March 1st
deadline to reach a trade agreement.
Closer to home, a reworked NAFTA brought an agreement with Canada and
Mexico. But just look around, debt issues hang over Italy`s new
government. Brexit is messier than ever in the U.K. And the U.S.
relationship with Saudi Arabia, murky, following the death of Jamal
Oil prices hit a four-year high this fall before dropping more than 30
percent in weeks. And the stock market path is bumpy. Up in September,
down by November, and then up a bit, and down in December.
Tech investors fear government regulations to appease concerns about
privacy and data safety that might crimp growth. Overall, this year`s
earnings are stellar, up more than 20 percent. But was that a one-time
high induced by tax cuts. Next year`s forecasts are still up but by less
than 10 percent.
And the list goes on. Will a Democratic majority in the House change or
hinder the president`s agenda? If growth is slowing, will the Fed ease off
on interest rate hikes? In housing, sales and construction are slowing
down. While mortgage rates topping 5 percent for a while are up.
Employment, still strong. And consumers are spending. Just ask Macy`s
(NYSE:M) McDonald`s (NYSE:MCD) and the auto makers. But is this economy in
2018 as good as it gets?
HERERA: Some say 2018 was a turning point for the market. Volatility
gripped Wall Street early in the year and it made a triumphant return in
the final few weeks.
Bob Pisani takes a look at the market highs and lows.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was a rollercoaster
year with several 10 percent swings in the market. Here`s the six most
important stories of 2018.
Number six, the tax cuts and the market boost. Earnings grew 24 percent in
2018, half due to tax cuts. It`s the best growth since 2010, but the
markets sniffed out global slowing late in the year. Stocks come down 10
percent in the fourth quarter.
Number five, it`s the return of cash. You know, suddenly, you could get a
2 percent on a bank certificate of deposit. For the first time since 2008,
cash and short-term treasuries outperformed a 6040 stock bond portfolio.
Cash is up 2 percent this year. The stock bond portfolio is down about 2
Number four, the big coin bust. Bitcoin popped out near $20,000 in
December of last year and it`s closing out the year near $3,400. What did
it combination of endless reports of thefts and break-ins, combined with an
SEC that has adamantly refused to approve a bitcoin ETF.
Number three, the interest rate spike that never happened. Short-term
interest rates rose for most of the year, but longer term rates did not.
Ten-year treasury yields are about where they were in February. Those
betting rates would rise across the board were surprised when inflation
remained relatively subdued and concerns about the slowing economy kept
long term rates down.
Number two, China trade and tariffs. Everyone agrees the U.S. should stand
up to China on intellectual property thefts, but the market are saying it
does not like tariffs as a way to force change in behavior from China.
And the number one story for 2018, my opinion, the return of volatility.
In 2017, the S&P closed up or down 1 percent or more only eight times. In
2018, the S&P closed down or up 1 percent on 57 occasions. Twenty-six of
those were down, 31 were up. Wow!
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
HERERA: The Federal Reserve and its interest rate-raising campaign was the
focus for investors for much of the year. And it caused a lot of anxiety.
Steve Liesman has been covering the central bank for us and the economy,
and he joins us tonight from Washington.
Great to see you, Steve.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Good to be here,
HERERA: Anxiety I think is one word for it but also volatility is another
word, not only in the stock market but in the bond market. Correct?
LIESMAN: That`s right. And I had hair when they had those 18 up or down 1
percent moves and I lost it with the 57. I mean, you had days you would go
in and it would be up 300 points and end down 400. So, there was not only
day to day but intraday volatility.
As the market swung wildly, I think one of the big stories this year, Sue,
are the two halves of it. I can`t remember a year where we had such
buoyant growth up above 3 percent. Remember, we hit an history 3.7 percent
low unemployment rate, lowest since 1969.
We`re doing 200,000 jobs a month regularly, which is fantastic because
remember we were only supposed to add 100,000 by population growth. So,
really strong. And I can`t remember a year where there was such good
economic numbers that created and ended the year with such incredible
pessimism about the next one.
HERERA: And language mattered much more this year than it has in the past.
It seems as though investors were parsing those Fed statements much more
than they used to.
LIESMAN: I think that`s right. And I think they`re especially, Sue,
parsing the words of the new Fed chairman. It`s well to remember, Jay
Powell who has been a governor for a lot of years, only took over at the
chairmanship at the beginning of 2018.
And then in October, I think he stumbled. He made a mistake. He said we
are a long way from neutral. This was Jay Powell trying to talk to the lay
audience, not financial markets.
And markets pretty much freaked out about that when he said a long way from
neutral. He had to come back a month later with his vice chairman as well
and say, no, no, no we are just below the broad range of neutral rates.
And that kind of calmed the markets down.
But as happened last week, this idea that the Fed still wants to raise
rates is still a matter of abiding concern and a source of volatility for
HERERA: We will see what the New Year brings. Thanks, Steve, as always.
HERERA: Steve Liesman in Washington.
Well, trade and tariffs once viewed at dry topics for investors became a
focal point that triggered waves of market volatility and this was the year
that brought trade wars. And they became a reality.
Ylan Mui has more.
YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The White House
celebrating several new deals. Among the trade winds, the U.S. began
negotiations with Japan and European Union. There is a new free trade
agreement with South Korea and a new deal pending with Canada and Mexico.
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: It`s my honor to announce
that we have successfully completed negotiations on a brand-new deal to
terminate and replace NAFTA.
MUI: That agreement is designed to encourage car companies to pay their
workers more and make more of their vehicles in North America. U.S.
farmers get more access to Canada`s dairy market and pharmaceutical
companies get more protections for certain kinds of new drugs. Still, the
deal needs to be approved by Congress.
President Trump is threatening to cancel NAFTA if they don`t act fast. But
Democrats are skeptical.
REP. NANCY PELOSI (D), MINORITY LEADER: What isn`t in it yet is enough
enforcement reassurance regarding workers. There has not been a law passed
in Mexico in terms of wages and working conditions in Mexico.
MUI: Meanwhile, Wall Street is focused on trade wars. Tariffs on foreign
steel and aluminum, also on $250 billion worth of Chinese products. About
half of what we import from them.
At the G20 summit in Argentina, President Trump and Chinese President Xi
Jinping agreed to work on issues like intellectual property theft and
forced technology transfers. They called a truce on tariffs during those
talks and White House trade adviser Peter Navarro urge investors to be
PETER NAVARRO, WHITE HOUSE TRADE ADVISOR: We have negotiations with the
Chinese that there is much talk about. What I would urge people to do on
Wall Street is rather than follow in day to day and get all excited and go
up and down on rumors is to let the process take its course.
MUI: The deadline for reaching a deal is March 1st and investors are
hoping for a New Year`s resolution.
For NIGHTLY BUSINESS REPORT, I`m Ylan Mui, in Washington.
HERERA: Phil Blancato joins us now to talk more about the moments that
define the economy and the markets this year. He is a CEO of Ladenburg
Thalmann Asset Management.
Nice to have you here. Happy holidays.
PHILIP BLANCATO, CEO, LADENBURG THALMANN ASSET MANAGEMENT: And to you,
HERERA: The market was disappointing for you because you had high
expectations going in.
HERERA: Perhaps rightfully so, the economy was firing on all cylinders.
What do you think happened?
BLANCATO: You know, the sentiment changed. In your earlier statement, you
said the component changes, Chairman Powell`s point about a long way from
neutral. And you look at the underlying economy.
And it was still very strong. But for the first time we saw small little
crack that is got everyone real nervous. Now, in my opinion, the economy
is still robust. It`s still really power-packed (ph).
The chairman said it. You look at underlying unemployment market it`s
really strong. He is not saying that they`re backing off any time soon. I
support what he said. But in 2018, what happened towards was the sentiment
No one wanted to be the last one in the party when the cops showed up.
They wanted to be out sooner.
HERERA: Also, we hadn`t seen volatility like this in a long time. Do you
anticipate that continuing in the New Year? Or does the market turn a new
BLANCATO: It`s funny I`m still in the camp I think when sentiment drives
the volatility. Volatility has gone back to average. This is normal to
see the VIX likes this.
HERERA: Yes, absolutely.
BLANCATO: We got lulled into this never lasting upward grinding market.
So, this is kind of normal to me. A lot of this is going back to averages.
So for me, I still see January as an opportunity. I`m still a buyer of
stocks. I still think equities now actually cheaper than they`ve been in a
So, when the underpinnings of the economy specifically the consumer are
this strong, you got to be a buyer. So, I think the volatility comes out a
bit, not a lot. We were staying elevated for a while because the sentiment
doesn`t change that much but the January opportunity when the data comes
out about earnings and GDP, I think is a chance to make the money back.
HERERA: What sectors do you think will benefit, given the — let`s say the
environment stays the same as it did in 2018. We do have valuations at
much more, quote/unquote, normal levels. What areas do you think might
BLANCATO: Consider we are moving to a later stage — only because
inflation and interest rates are going higher. Usually, utilities are a
place to hide out. So, that`s a safe haven for some folks who want to be
I still think financials and technology both offer opportunity. Why
financials are hammered. In a rising rate environment, they usually do
well. Later in the year financials are there. Tech has sold off a bet and
tech because of the demographic make up, it`s hard not to be in the space.
HERERA: On that, happy holidays. Thanks so much, Phil.
BLANCATO: Thank you.
HERERA: And perhaps one of the biggest changes this year, came in November
with the midterm elections.
Eamon Javers is at the White House tonight for us.
Good to see you as always, Eamon.
EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Yes. Hi, Sue. Merry
HERERA: Merry Christmas to you as well. Lots of changes came with the
results of the mid-terms elections. Some of it has to do with the tax
laws. Some of it has to do with the basically health care, because we are
going to have a change in the House.
JAVERS: Yes, absolutely. The president leading up to November was
predicting there would be a red wave despite pundits suggesting a blue
wave. In the end, we didn`t really get a wave in either direction. But
Democrats made significant pickups in the House of Representatives and they
were able to snatch control of the House of Representatives away from the
That means that Nancy Pelosi will be the speaker of the House, we expect
next year and we expect Paul Ryan is retiring and going home. So, that`s a
big change. And it`s going to affect this Trump presidency for the last
It`s going to put Democrats in charge of committees on Capitol Hill that
have subpoena power, meaning they can fire up investigations into all sorts
of aspects of the way that the president has been conducting business here
at the 1,600 Pennsylvania avenue. That`s going to make things very, very
difficult for the president in terms of the investigations, let alone
probably a near total impossibility of passing any legislation out of the
House of Representatives that the president wants to seize it.
HERERA: You know, one of the things that the Democrats have said that they
want to do when they take over the House is take a look at some of the caps
that were put on state and local deductions. What do you think the odds
are that they might be successful with that?
JAVERS: I think they might look at that. And the question is whether
there is Republican interest in going along with that and where the
president ultimately comes down. You know, the president was talking
before the election about in idea of Pennsylvania 10 percent tax cut that
he and Republicans were going to pursue after the election. That sounds
like it`s not going to happen.
Instead, I think you`re going to see treasury and other officials here sort
of on the defensive. One of the things I think you can expect Democrats
are going after right away is the president`s tax returns. I think the
White House and the administration will defend that and try not to release
those but ultimately they may be forced to do that. And that kind of a
tense atmosphere is going to make it very difficult for run of the mill
HERERA: Eamon Javers at the White House. Eamon, thank you so much.
JAVERS: You bet.
HERERA: And still ahead, the year the housing market went from hot to
HERERA: The holiday season is traditionally the slowest time of year for
the housing market. But as Diana Olick tells us, the slowdown this year
was particularly sharp.
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: At a Sunday open house
in Los Angeles.
UNIDENTIFIED FEMALE: I like this.
OLICK: The few buyers who came out were hoping for a holiday gift.
JOHN GABOUDIAN, POTENTIAL BUYER: I read an article online right around
Christmas. It`s a good time to buy a home. There is less homes on the
market, and less people looking for homes.
OLICK: But John Gaboudian still can`t find anything affordable.
GABOUDIAN: We are just trying to find something newer, bigger, better,
without remodeling our home. And it looks like we might just end up
remodeling our home.
OLICK: And that is the tale unfolding across the nation. Housing was
superhot at the start of this year, with bidding wars the norm but prices
overheated and then mortgage rates jumped adding insult to injury. Housing
went from hot to not.
DAVID FOGG, KELLER WILLIAMS REALTY: Clearly, the exuberance that made them
pay really unrealistic prices at the end of last year and the first part of
this year seems to be gone.
OLICK: The average rate on the 30-year fixed started to rise in January
but then leveled off for much of the summer, only to jump again in
September and then cross the 5 percent mark in November. Home prices have
slowly responded still higher than a year ago but the gains are shrinking.
In California, more sellers are cutting prices as inventory rises.
DAVID EDELSTEIN, POTENTIAL BUYER: It seems the price on this house to me –
– I`m not an expert but it does seem low.
OLICK: Unfortunately, home builders are not stepping up as much as hoped.
Housing starts are now at lowest level in over a year. And builders
continue to put up more expensive homes while so much of the demand is at
the entry level.
JOHN BURNS, JOHN BURNS REAL ESTATE CONSULTING: They just can`t get down to
the lowest price points. And part of it is intentional on their part is
they don`t want to go to the most outlying areas where they can get to the
price points because that`s just a risky place to be the next time there is
OLICK: And for existing home sellers, they now have to realize the sky is
no longer the limit.
FOGG: In a normal market, it takes several weeks or even a month or two to
sell your home. In a normal market, you get one or two offers not 10 or
20. And in a normal market, you don`t sell your home for $100,000,
$200,000 or $300,000 over list price.
OLICK: In other words, housing is now in a new normal.
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.
HERERA: The health care sector saw some changes in 2018 from mergers to
treatments to policy. We`re joined now by Dr. Amit Phull, who`s the vice
president of strategy and insights at Doximity.
Nice to have you here doctor, welcome.
DR. AMIT PHULL, DOXIMITY STRATEGY & INSIGHTS VICE PRESIDENT: Thank you for
having me, Sue. Nice to meet you.
HERERA: You say one of the number one defining moments in health care was
the awarding of the Nobel Price and it had to do basically with immuno
Why was that such a watershed event?
PHULL: So, it`s been many years in the making, but this new treatment
modality actually has the capability of transforming how we treat many of
the deadliest disease sees that currently afflict our society. I believe
we are at the tip of the iceberg frankly in terms of what may come out of
what is now recognized as a Nobel Prize winning bit of research.
HERERA: Does it also kind of green-light those companies that maybe wanted
to go into that particular area and they now see it perhaps as more
lucrative or certainly more hopeful?
PHULL: Absolutely. I think we are right at the beginning, frankly, to see
how this plays itself out in the pharmaceutical industry. And the life
sciences industry will have a lot of movement in this space moving forward.
And as in kind of therapy modality begins to be proven out over time, I
imagine that that activity will just increase.
HERERA: I also was fascinated and I think you mentioned this as well, big
tech really made some inroads in various different ways into the health
PHULL: Yes, definitely. I mean, if you look at Apple (NASDAQ:AAPL),
Google (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN) as some of the main
representatives of big tech, Apple (NASDAQ:AAPL) actually had an FDA
approval for a device that can monitor heart rate and be utilized in health
care and pretty close to real time. Google (NASDAQ:GOOG), of course, will
touch on has made some interesting moves with regards to artificial
intelligence and be able to scan folks` retinas.
And Amazon (NASDAQ:AMZN) has made some interesting acquisitions,
particularly with PillPack being added to the Amazon (NASDAQ:AMZN) family,
in much the way that Amazon (NASDAQ:AMZN) Prime has changed the way a lot
of us interact with shipping and products being sent to us in the near
future, leveraging Amazon`s platform and delivery network, we might have a
different relationship with prescription medication.
HERERA: I think there`s going to be a lot of changes.
Thirdly, you list artificial intelligence as one major factor. Google
(NASDAQ:GOOG) comes to mind with a retinal scan. But what else are you
watching this year?
PHULL: So, if you think about the immunotherapy on the curative, or
treatment end, artificial intelligence specifically some of the work Google
(NASDAQ:GOOG) is doing with retinal scans actually will make some headway
in the preventative end of the spectrum. They`ve begun to perfect
technology that can actually augment or empower positions to more
accurately diagnose diseases, like diabetic retinopathy and fairly
accurately predict cardiovascular disease risk. Enhancements on this
technology in the near future will make a profound impact I think in
HERERA: All right. And we are also going to watch Berkshire Hathaway
(NYSE:BRK.A), JPMorgan (NYSE:JPM) and Amazon (NASDAQ:AMZN) getting
together. Who knows what that bring?
HERERA: Dr. Amit Phull, thank you so much.
PHULL: Thank you for having me.
HERERA: Well, can social media be trusted with your data? That question
came up time and time again this year as the social media industry came
under fire from Congress and regulators pretty much around the world.
Julia Boorstin has the details.
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Concerns about the
dangerous of social media platforms exploded in March, with revelations
that political data firm Cambridge Analytica accessed the private
information of Facebook (NASDAQ:FB) users, ultimately affecting 87 million
Sheryl Sandberg admitting to Facebook`s mistakes in an interview on CNBC.
SHERYL SANDBERG, FACEBOOK COO: We have the responsibility to build great
products. We have the responsibility to treat people`s data carefully. We
have the responsibility to disclose to people when problems occurred.
BOORSTIN: Sandberg`s apology didn`t stave off congressional scrutiny.
Facebook (NASDAQ:FB) CEO Mark Zuckerberg was called to testify on Capitol
Hill in April where he said regulation is inevitable.
MARK ZUCKERBERG, CEO, FACEBOOK: I`m not the type of person mo thinks that
all regulation is bad. So I think the internet is becoming increasingly
important in people`s lives. And I think we need to have a full
conversation about what is the right regulation, not whether it should be
or shouldn`t be.
BOORSTIN: Facebook (NASDAQ:FB) came under attack for both privacy scandals
and for revelations of inauthentic manipulative behavior on its platform,
pulling down hundreds of pages tied to Russia and Iran. In September,
Facebook (NASDAQ:FB) COO Sheryl Sandberg, along with Twitter`s CEO Jack
Dorsey were called to testify before Congress. Amid growing talk of
regulation to protect user data, prevent manipulation and monitor bias on
SEN. MARK WARNER (D), VIRGINIA: The era of the Wild West in social media
is coming to an end. Where we go from here though is an open question.
BOORSTIN: Sandberg and Dorsey focused on Facebook (NASDAQ:FB) and
Twitter`s investment in technology and employees to improve their
JACK DORSEY, TWITTER CEO: We have been investing in artificial
intelligence and machine learning models to again recognize the patterns of
behavior, because we believe this is where the greatest leverage will come
BOORSTIN: But Congress headed into the holidays with more concerns. After
a slow drip of negative headlines about Facebook`s mismanagement, two
reports for the Senate Intelligence Committee last week show Russian
attempts to sow discord on social media, both before and after the 2016
election, saying Twitter, Facebook (NASDAQ:FB) and Google (NASDAQ:GOOG) did
the bare minimum to cooperate with the Senate Intelligence Committee`s
For NIGHTLY BUSINESS REPORT, Julia Boorstin in Los Angeles.
HERERA: Coming up, the correspondent story that kept investors guessing
for most of the year.
HERERA: One of the biggest corporate stories focused on Amazon
(NASDAQ:AMZN) and where it would set up its second headquarters. More than
200 cities bid for the project which promised jobs and capital investment.
Amazon (NASDAQ:AMZN) made cuts to the list all year. And then in November,
the winner and in this case winners, were announced.
Scott Cohn filed this story.
SCOTT COHN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The competition was
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
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 capital 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
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
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.
For NIGHTLY BUSINESS REPORT, I`m Scott Cohn.
HERERA: Thanks for joining us for in special edition of NIGHTLY BUSINESS
REPORT. Merry Christmas. We`ll see you tomorrow.
Nightly Business Report transcripts and video are available on-line post
broadcast at http://nbr.com. 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.