Transcript: Nightly Business Report – December 26, 2018

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

Scene finally shows up Wall Street in a big way. Stocks had one of their
best days in a decade. The question is, can investors breathe easy now?

And money moves. With volatility back, some expert advice on what you need
to do with your portfolio as the New Year approaches.

All that and more for this NIGHTLY BUSINESS REPORT tonight. It`s
Wednesday, December the 26th.

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

Well, that was interesting. Following the worst Christmas Eve ever for the
Dow and the S&P 500 on Monday, stocks staged a powerful rebound today, and
made this the best day after Christmas ever. In fact, an all-time record
day with the Dow posting its biggest one-day point gain ever and the best
days for stocks in nearly a decade.

Here are the final numbers, the Dow surged by 1, 086 points or 5 percent to
close at 22,878. The Nasdaq jumped nearly 6 percent or 361 points, and the
S&P 500 rose 116. That was good for a 5 percent gain.

One more stat for you: today`s percentage gains were the best for the major
indexes since March of 2009.

Bob Pisani has more on today`s rally.


impressive rebound on this day after Christmas. In fact, it was the best
post-Christmas rally for the Dow and S&P in 45 years. The Dow surging more
than 1,000 points, closing right around the highs of the day, the best
showing since March 2009. Tech heavy Nasdaq, best post-Christmas rally
ever, helped by the FAANG names Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL),
Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOG) parent company Alphabet. All
were up 6 to 9 percent apiece, believe it or not.

The markets got an early lift from comments from Council of Economic
Advisers chairman Kevin Hassett who told NBC News that despite President
Trump`s harsh criticism of Federal Reserve Chair Jay Powell, Powell`s job
was 100 percent safe.

Elsewhere, retail stocks like Macy`s and Ross stores were also sharply in
the green after a very strong holiday shopping season. Now, keep in mind,
the Dow and S&P 500 are still on pace for the worst December losses since
the Great Depression.

There wasn`t a lot of volume behind this buying today. It signals to me
more seller exhaustion than buying enthusiasm. Regardless, it might be
tough to ball a market bottom yet but it`s a good start.

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


GRIFFETH: Well, it was also a big day in the oil pits where domestic crude
had its best day in two years. The U.S. benchmark WTI closed up nearly 9
percent, back above $46 a barrel. And that surge helped push energy stocks
higher. Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), Marathon Oil
(NYSE:MRO) and Hess (NYSE:HES) were among the big names leading that group
higher today. But despite, the surge oil prices are still more than 40
percent below their most recent high back on October 3rd.

And as Bob Pisani mentioned earlier, Fed Chairman Jerome Powell got a vote
of confidence from the White House and that added to some of the day`s
bullish sentiment on Wall Street.

But as Steve Liesman tells you now, the president`s issues with the Fed may
actually go beyond its chairman.


economic adviser affirming to reporters Wednesday the president does not
intend to fire Federal Reserve Chairman Jerome Powell.

REPORTER: Is the Fed chairman`s job safe?


REPORTER: One hundred percent, the Fed chairman`s job is not in jeopardy
by this president?

HASSETT: Absolutely, that`s right, yes.

LIESMAN: Questions arose after numerous weekend reports that President
Trump angry at the Fed for raising rates have been asking advisers if he
has the power to fire Federal Reserve Chairman Jerome Powell. Trump
nominated Powell to the post in 2017.

On Christmas Day, the president continued his battle with the Fed, though
perhaps softened his attacks up a bit.

think it will straighten. They`re raising interest rates too fast because
I think the economy is so good. But I think that they will get it pretty

LIESMAN: The president`s criticism of Powell and reports of the potential
firing have been among the factors underpinning the recent market selloff.
After that overall instability and the president`s administration, a trade
war, a government shutdown and fears of the Fed that will raise rates too
much in the face of a weakening economy. One problem for President Trump
is that his problem is technically not just with the Fed Chairman Jerome
Powell. Of the five members of the Federal Reserve`s board of governors,
four were nominated by President Trump and all approved by the Senate, all
voted for the rate hike in December.

Perhaps comments from CEA chair Hassett and the president`s own remarks
marked a beginning of the truce between the administration and the Fed. If
so, the many worries behind the result selloff, markets can at least cross
one off their list.



GRIFFETH: And on day five of the partial government shutdown, the
president is doubling down. He said today that he is ready to wait it out
and the shutdown could impact some of the economic data that Wall Street
relies on.

Ylan Mui takes a look at that part.


could last all the way into the New Year. President Trump`s spoke to
reporters making a surprise visit to the troops in Iraq where he doubled
down on his pledge that he made on Christmas Day. He said no money for the
border wall, no government spending bill.

REPORTER: How long do you think the shutdown will last, Mr. President?

TRUMP: Whatever it takes. I mean, we`re going to have a wall. We`re
going to have safety. We need safety for our country.

MUI: This is a partial shutdown. It affects about 25 percent of the
government. About 800,000 federal workers aren`t getting a paycheck right
now. And about half of them still have to show up for work anyway.

The shutdown will have an impact on when some of Wall Street`s favorite
data points are released. New home sales and a report on international
trade and retail won`t be released this week. Data on construction
spending set to come out next week could also be affected.

However, the Labor Department is not part of the shutdown. That means the
job support is still on for January 4th.

Presumptive House Speaker Nancy Pelosi says she will hold on a vote on the
bill to reopen the government once Democrats take control of the lower
chamber next week, but the Senate has to pass it. And the president would
have to sign it. So, for now, the impasse continues.

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


GRIFFETH: Certainly, there has been no shortage of volatility in the
markets this month. I mean, that`s for sure. The question is, who or what
is to blame for all of the dramatic market swings? Humor machine?

Today, “The Wall Street Journal” in this article said that computerized
trading is playing a growing role in volatility.

And joining us tonight to talk about it is Greg Zuckerman. He`s one of the
co-authors of that article.

And also with us is Kenny Polcari, who spent more than 30 years on the
floor of the New York Stock Exchange. He`s one of those humans. He`s now
managing principle at Buchard Joseph Asset Management.

Good to see you both. Thanks for joining us tonight.

Hey, Greg. You know, certainly, the volatility has increased by some
estimates 85 percent of all stock trading is now done by computers or, you
know, in some variation like that. Some people think that`s a good thing.
Some people think that`s a bad thing.

What your article seems to suggest is it`s simply just a thing, right?

people sort of misinterpreted our piece to be bashing the quants. They
trade frequently. Give liquidity to the market. But also add a certain
level of volatility.

To me I argue that they — there are trends in the market, fundamental
trends and they accentuate them. So, they make things a little bit. They
push things in one direction, could be up in the last few years and could
be down as well. So, don`t point the finger necessarily at the quants and
at these algos as they call them. But they are responsible for some of the
volatility going on out there.

GRIFFETH: Kenny, I read your Twitter feed. As I said, you`re one of those
humans. You spent all that time on the trading floor. You`re not a fan of
computerized trading. Why?

today is a perfect example. They close the market up a thousand, almost
1,100 points on the Dow. That wasn`t just the humans buying. It was all
driven by algorithms and high frequency.

But, look, I get it. Technology is here to stay. I`m not bashing
computers. But what I`m trying to say is, to Greg`s point, it amplifies
the moves. The momentum guys jump on and then the algos pre-programmed
with a set of input data that they have to respond.

As the market moves higher, the algos get more aggressive. The sell site
sees it happening, so the sell site cancels inline offers and moves the
offers higher and it forces the algos to reach and reach and reach. And
you get a day like today where the market is up 1,100 points on the Dow.

GRIFFETH: Now, Greg, I know one thing that Kenny — a point he`s made
repeatedly on Twitter that these need to be regulated more. Is the SEC up
on the computerized trading?

ZUCKERMAN: I don`t think anyone is. I think things dramatically in the
last few years, just over the course of the last few years. That said, I
don`t think anyone was calling for regulation of the markets over the last
five six years when quants quite frankly became the kings of Wall Street.

You no longer have sort of the Peter Lynch whose wife comes home and like
certain brands of hosiery and then he goes by the stock, which is what he
did with legs and made a fortune. You`ve got these quants that push up the
market for many years now. It`s something that`s pushing things down.

POLCARI: But, Great, that`s exactly the point, right? That`s exactly the
point, is that you got these computers making these decisions based on a
set of input data without really understanding, you know, what the word
means, what this intonation means, what the sentences really mean. The
smart logic read sentences picking out positive or negative words and then
they create action or buy or sell, and it accentuates and amplifies moves,
which is then it takes the common — you know, the average investor, the
retail investor, the American out there that`s sitting and scratching and
going, how does this happen?

It gives them a sense of concern, right? They`re concerned about how can
the market do this? How can we have these moves like this?


POLCARI: Look, in the last week, we were down 1,500 points in three days.

ZUCKERMAN: Kenny, I would disagree there. I don`t think there is that
many investors doing that as you say seeing a word in trading on it. A lot
of these programs, these models are really doing what the old fashioned
investors used to do to do, buy, let`s say, a low P/E and selling high one.
Those kinds of things, these kinds of inputs.

POLCARI: I agree with you. But do you think the market up 1,100 points or
down 600 points the day before Christmas or 500 points the Thursday before
is a normal move?

The human beings never moved the market like that. I`m not saying what
it`s doing are wrong, but I`m saying is it`s the amplification of the move
and certainly, when the market goes up, everybody pats themselves on the
back. Look how great I am. When they go down, they`re all having a
nervous breakdown.

GRIFFETH: All right.

POLCARI: I`m in the business people ask me all weekend, oh my god, oh my
god, what do I do, what do I do? You have to try to calm them down.

GRIFFETH: Last word, Greg.

ZUCKERMAN: I don`t disagree it amplifies things. But let`s remember,
there have been panics since the Buttonwood Treaty. Trading started there.
`87 was all kind of manmade. You can argue there`s some models there too.

POLCARI: I lived it.

ZUCKERMAN: There you go.

And we got crushed in things for no real good economic reasons in `87, so I
don`t think we can kind of look back to the good old days when guys were on
the floor and things were that much better.

GRIFFETH: I got to go, Kenny, I know you want to keep the conversation
going. I`m out of time of this time. But I feel like I`ve been sitting
around the Christmas dinner table tonight. That`s for sure.

Kenny Polcari with Butcher Joseph Asset Management, and Greg Zuckerman with
“The Wall Street Journal”, thank you both tonight.

ZUCKERMAN: Great seeing you.


GRIFFETH: One piece of housing data out today. Home price growth was flat
in October. The so-called S&P Core Logic Case-Shiller index which measures
home prices in major markets across the country rose 5.5 percent year over
year in October. And that was unchanged from the September reading by the
way. The slowdown in price growth is actually seen as a positive for home

We have a follow-up now on a story that we first reported on several years
ago, the former chief executive of Insys therapeutics has now agreed to
plead guilty to taking part in a kickback scheme to bribe doctors who
prescribe its powerful opioid medication. Prosecutors say that Michael
Babich, who resigned as the drugmaker CEO back in 2015, he was scheduled to
go on trial next month but instead, he`s now agreed to plead guilty to
conspiracy and mail fraud charges.

Coming up, the next wave.


Christmas. And for a lot of shoppers, that means hitting the mall.
Billions of dollars are expected to be spent today on December 26th. It`s
expected to be one of the ten biggest shopping days of the year, spending
gift cards, returning those unwanted gifts on Christmas. We`re going to
talk all about it when NIGHTLY BUSINESS REPORT returns.



GRIFFETH: MasterCard (NYSE:MA) spending poll says that retail sales
excluding autos topped 5 percent between November 1st and Christmas Eve.
FedEx (NYSE:FDX) and UPS had already said they expected record volume this
holiday season. And today, we found out how the major shippers did.

Frank Holland has the shipping score card.


Christmas is essentially the Super Bowl for the three major shippers. And
today, we had the holiday delivery report card, grades given based on on-
time delivery. The Post Office getting the highest marks at 99 percent,
with UPS and FedEx (NYSE:FDX) really just behind. Anything above 95
percent is considered excellent.

Overall, the shippers saw their best on time rates since 2013. We also a
record amount of e-commerce deliveries, 2.5 billion total. This year,
there were 32 days between Thanksgiving and Christmas, the highest numbers
of days possible. And during the lead up to Christmas, including
Thanksgiving Week, Black Friday and Cyber Monday, UPS had the best on time
performance with a 98 percent success rate.

This included returns and exchanges from people doing holiday shopping for
themselves. UPS and FedEx (NYSE:FDX) are now gearing up for that second
wave of returns that begin today and continue into the New Year.



GRIFFETH: And that next wave that Frank mentioned did start today. Eric
Chemi has been tracking that action from Woodbridge, New Jersey.


CHEMI: While many people think the retail shopping season ends on the
night before Christmas, millions of shoppers can`t wait for the day after
Christmas to buy everything on their wish list. December 26 is so popular
in fact that ShopperTrak is projecting it to be the eight biggest retail
day of 2018.

Three of the biggest reasons for post Christmas shopping with big
discounts, spending gift cards and returning or exchanging unwanted
presents. Taking advantage of discounts after Christmas is a textbook move
for many savvy shoppers. Clearance sales abound here at the Woodbridge
Center Mall in Woodbridge, New Jersey.

UNIDENTIFIED FEMALE: My daughter got a lot of money in gift certificates.
We know the day after Christmas is great day to go shopping for sales.

UNIDENTIFIED MALE: Well, I do some Christmas shopping with my dad. Every
year, we come the day after. He just gives us money and we splurge.

UNIDENTIFIED FEMALE: I had to return a coat and I was dreading it because
I thought the lines would be awful. But it`s been great.

UNIDENTIFIED FEMALE: Down here to spend give cards for the kids.

CHEMI: And for shoppers who received gift cards on Christmas Day, this is
a great day to spend them off. But not everybody remembers to use those
safeguards, letting them disappear in a closet or drawer. CEB Tower Group
(NASDAQ:TWGP) estimates $1 billion in value in unspent gift cards every
single year.

More laws around the country have removed gift card expiration dates, which
can often take away the urgency to spend them the money.

Even though the stock market has taken a dive recently, many retail data
points have showed recent strength from companies like UPS and Amazon
(NASDAQ:AMZN). And just on Wednesday, MasterCard (NYSE:MA) said this
holiday season is the best it`s been in six years.

For NIGHTLY BUSINESS REPORT, I`m Eric Chemi in Woodbridge, New Jersey.


GRIFFETH: Roku is crowned as a top pick at Needham and that`s where we
begin tonight`s “Market Focus”.

Needham named the device maker as a top pick for 2019 due to the company`s
revenue growth, margin expansion, pricing power and overall strength in a
growing market. The firm reiterated its buy rating on the stock with $45
price target. Roku shares popped more than 11 percent in today`s rally to

Last week, we told you the drugmaker Perrigo (NASDAQ:PRGO) was given the
surprise tax bill just shy of $2 billion. That was an amount that Perrigo
(NASDAQ:PRGO) said it would appeal. Well, the news shaved off about 30
percent of the stock last week. Some of that was recovered today as the
Friday deadline for Perrigo (NASDAQ:PRGO) to appeal the decision gets
closer. Shares rose 11.5 percent today to $40.70.

Wedbush Securities said that it expects demand for Tesla`s Model 3 vehicle
to continue to rev higher. And analysts at the financial firm said
consumer interest surrounding the car will likely be strong next year and
beyond. And that means it is less likely that the automaker will have to
raise capital in the near term. And investors like that. They sent shares
of Tesla higher by 10 percent today to $326.09.

And Blue Apron and Weightwatchers, they`re partnering now on meal kits for
2019. Blue Apron says that this partnership will mean it can stabilize and
hopefully grow its subscriber base without spending as much money on
advertising and promotions. Blue Apron shares jumped 14 percent to 79
cents a share. That`s right, just 79 cents. Weight watchers meanwhile
rose about 5.5 percent today to $42.35.

Well, for the first time in its 50-year history, IMAX has pulled in a
billion dollars worldwide at the box office. But the big screen theater
chain owner also recently announced it`s shutting down its virtual reality
locations and writing off VR content investments. But it`s still betting
on virtual reality location based entertainment centers to bring VR to the

And Julia Boorstin has more on that for us.


didn`t take off the way many had hoped, as consumers proved reluctant to
invest hundreds of dollars in headsets. Even IMAX is shuttering seven
virtual reality centers around the world.

But that`s not stopping the push to make virtual reality or VR main stream,
and end up in a mall near you. According to one estimate, the category is
expected to grow to the $12 billion within five years. Dreamscape is
opening locations in five cities around the country, including this one in
Los Angeles. For $20, visitors don a headset backpack and to hand and feet
sensors to enter one of three virtual worlds for a 20-minute experience.

BRUCE VAUGHN, DREAMSCAPE CEO: We believe location based VR is the tip of
the spear as it were for the entire VR industry, and we`ll get people
exposed to how unique this medium can be and also, those of us who create
it, we`re learning the capability as well.

BOORSTIN: Dreamscape is backed by theater chains AMC and IMAX, as well as
Fox, Warner Brothers, Viacom (NYSE:VIA) and MGM. The studios are strategic
partners, looking to expand their brands into new dimensions, while the
theater chains explore bringing these virtual experiences into lobbies of
Cineplex as they adapt to declining movie ticket sales.

Dreamscape is part of a larger trend. Spaces backed by Comcast
(NASDAQ:CMCSA) (NYSE:CCS) ventures launched a multisensory “Terminator
Salvation” VR attraction, at one of the Southern (NYSE:SO) California`s
biggest mall. Disney (NYSE:DIS) invested through its incubator problem in
the void which will have 17 location based VR destinations by year end, all
featuring a virtual “Star Wars” experience.

Veteran Hollywood producer Walter Parkes behind hit franchises such as “Men
in Black” cofounded Dreamscape to take premium Hollywood content into a new
format and to adapt to changes in the industry.

WALTER PARKES, DREAMSCAPE CO-FOUNDER: There are many reasons for people
not to go to movies at theater. The ability to stream at home, how
extraordinary the television and sound is. So, they`re very anxious not
only to see VR succeed in and of itself but also to create more energy
around places like this that sort of support the communal aspect of film

BOORSTIN: But the jury is still out on whether consumers will want to
spend hundreds of dollars on headsets or even $20 for an immersive
experience at a mall.

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


GRIFFETH: Up next, portfolio tips from a financial planner as you ring in
the New Year.


GRIFFETH: So as another year winds down, now may be a good time to start
considering changes to your portfolio in the New Year. And joining us
tonight for a strategy session is Tony Drake. He`s CEO of wealth
management firm Drake and Associates.

Tony, thanks for joining us tonight.


GRIFFETH: First of all, can you blame anybody who may be a little hesitant
to put money to work in a market like we`re seeing these days.

DRAKE: Boy, the volatility has been unbelievable. I mean, today, we saw
obviously incredible pop with the MasterCard (NYSE:MA) data coming out,
maybe the best shopping season in six years. But it`s scary for the
average folks at home investing and looking at their 401(k) balances.

GRIFFETH: Let`s start broadly first. Next year, can we the — stocks
versus bonds. Who do you think performs better necessarily?

DRAKE: You know, we`re definitely seeing a move to the bond sector,
although I still think there are some equity sectors that look well. The
financial sector with a couple of interest rate rises. You know, the
potential steepening of the yield curve could be really attractive in
particular, high dividend paying financial sector items.

GRIFFETH: What about — on the bond side, especially if we talk about
treasuries. Shorter term bonds, longer term bonds, what do you think?

DRAKE: I like the shorter term duration bonds if you buy them
individually. There are some really attractive bond ETFs that are managed.
Those managers are maintaining those shorter durations. Pretty low
internal costs, they can be a great alternative to cash.

GRIFFETH: By the way, on the equity side, I noted that you like utilities
for next year. If you like the financials because rates are going higher
next year, that`s not good for utilities, is it?

DRAKE: No, there are certainly a couple of different moves there. But
utilities of things — the volatility really continues at the level it had
been, you know, those perform really nice in those economies that are just
struggling along. There are great utilities out there that again some
great dividends, help to offset the short-term volatility on the equity

GRIFFETH: Real estate, we have a slowing of the housing market here. But
yet real estate investment trusts have done well still. Is that a good
place for income still? What do you think for 2019?

DRAKE: Yes, the REITs can be a great place if you don`t need liquidity.
They pay off some nice dividends. You know, if you`re looking for short-
term investment in residential real estate, I think that slowing we are
seeing could turn to negative next year and could really cause some
problems. Homes are a great thing to buy if you buy long-term. But short-
term investment, I`d stay away from residential real estate.

GRIFFETH: Cash, plenty of money managers lately have been saying because
of the volatility, because of the declines we have seen in the market,
maybe cash is a more attractive investment vehicle. What do with the cash?
Where do you stash that in the meantime?

DRAKE: You know, it`s really about having that plan and what stage you are
in the investment planning. If you are close to retirement, in retirement.
But we are seeing some rising rates in mutual funds, money market mutual

Again, those short-term duration bonds could be a great alternative.
Interesting we see some data out of economists with fixed indexed annuities
as alternate to cash long-term. So, there are a couple of option there,
but you always want to when you jump out and panic, you know, with this
volatility I think it`s easy to panic for folks.

And, you know, imagine in the airplane, you feel the volatility, you don`t
head for the exit. You got to rid it out. You need to have a plan. Cash
might be part of that plan, but make sure it`s an overall picture.

GRIFFETH: And quickly, before we go, gold, do you like it? I mean, it`s
usually talked about as a perennial percentage in a portfolio of some kind.
But if inflation is going to start to rise, what do you think about gold?

DRAKE: You know, gold is a tricky area. Obviously, there is some
volatility in the metals as well. I like it as alternative for a small
portion of the portfolio. But I think there are better opportunities for
cash in the portfolios nowadays.

GRIFFETH: All right. And you think we see volatility continue in 2019?
He asked naively.

DRAKE: Yes. I mean, how could we not almost? I mean, I think the chances
of 3 percent GDP, 25 percent earnings is just tough to maintain.


DRAKE: As that reduces, you know, the benefits from the tax cuts and you
know, the — the fear over the tariffs. It`s tough. Companies need to
know, 10 percent, 25 percent? What`s it going to be? They need certainty.

GRIFFETH: Tony Drake with Drake and Associates, thanks for joining us
tonight. Appreciate it.

DRAKE: Thanks, Bill.

GRIFFETH: Before we go, a final look at a record day on Wall Street.
Biggest one-day point gain ever for the industrial average, almost a 6
percent gain for the Nasdaq, the S&P up 5 percent. What a day.

That is it for NIGHTLY BUSINESS REPORT. Thanks for joining us, everybody.
I`m Bill Griffeth. Have a great evening. See you tomorrow.


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